New pollution controls could prove hazardous for property owners, professional advisers and their insurers. Awareness of environmental concerns has increased steadily in recent years – the government first reflected and now probably leads public opinion, with the introduction of ever tougher legislation. The trend is clearly towards comprehensive, strict liability.
The common law has always had elements of strict liability for causing environmental damage, such as the tort of nuisance and the rule in Rylands v Fletcher. But cases brought under recent legislative provisions show that courts are imposing a heavy burden on “innocent” polluters.
Liability has been found where vandals opened the tap on a tank allowing diesel to flow into a river (Environment Agency v Empress Car Co); where an escape of noxious fluid was caused by the bursting of a pipe seal which was manufactured by a third party (Environment Agency v Brock); and where a storm caused an overflow from ponds at the Atomic Weapons Research Establishment into adjacent marshlands, which then became radioactive (Blue Circle v MoD).
The Environmental Protection Act 1990 (EPA), as amended by the Environment Act 1995, has now brought in a new era of controls on pollution and damage to the environment. The European Commission is following suit and has produced its own White Paper on “Environmental Liability”, suggesting an EU-wide strict liability regime for polluters. Insurers are lobbying against this and have recently gained some support for their position in the European Parliament.
New duties
For insurers one of the most significant developments has been the EPA's contaminated land regime, which came into force on April 1, 2000. Local authorities now have a duty to identify contaminated land and serve notices – on the “appropriate persons” – requiring the contamination to be “remediated”.
The “polluter pays” principle underlies the legislation, usually meaning that remediation must be carried out by the person who caused the contamination. But if that person cannot be found, the current owners or occupiers will be responsible.
Once the local autho-rity has identified land as contaminated, it must notify the Environment Agency, the owners and occupiers, and those who caused the contamination. The authority must then decide what remediation is required and, in the absence of agreement, serve a remediation notice.
The “appropriate persons” must then remediate the land, or pay the authority to do it. The costs can be high: in Urban Regeneration Agency v Mott MacDonald the clean-up costs reached £18.5m.
The new regime applies to land regardless of when the contamination was caused, and so will have a bearing on any transaction involving land. Clearly the owners of factories and industrial sites, which contaminate land, are potentially liable to remediate the contamination. But property developers and others who purchase land are also potentially liable, despite having had nothing to do with the contamination. Commercial transactions usually have environmental liability transfer clauses, leaving the seller of the land responsible for any clean-up costs, or at least an indemnity in favour of the purchaser.
Standard property damage insurance policies cover a number of specified risks, but these do not generally include spillages or general pollution. A few insurers do now provide products to cover these risks, either for the clean-up costs of a particular site for a set period of years, or stop-loss cover to cap the overall clean-up costs for a site.
But as well as land owners, professional advisers are also at risk under the new regime: surveyors or environmental consultants, for instance, who negligently fail to detect the contamination of a site before their clients purchase the land.
The clients may be surprised to receive a remediation notice shortly after becoming the owners, if the original polluter cannot be traced, and even more surprised to be faced with clean-up costs running into millions of pounds. If the client's own public liability policy excludes pollution cover, the professional indemnity insurers of the professional advisers might ultimately have to foot the bill.
Even where the contamination is detected before the purchase, surveyors and other professional advisers may be required to assess the extent of the contamination and clean-up that is needed. Similarly, valuers will have to value the land, taking into account the contamination and clean-up costs. Failure to assess these accurately – not always an easy task in a still developing area – might mean a future claim from the clients, if the clean-up bills prove to be higher than expected.
Remediation of the contamination will often mean collecting and disposing safely of chemicals and other contaminants found there. It was negligent advice on this that led to the large claim in the Mott MacDonald case.
Implications
Clearly the new regime is very significant for professionals advising clients who own, occupy or otherwise deal with land which is, or may be, contaminated. They must be aware of the implications of the new regime and how it affects their clients.
The professionals, and of course their clients, will be keen to make sure that the professionals' indemnity cover extends to claims resulting from advice on contaminated land and pollution. A further consideration is whether the cover is adequate, as claims for clean-up costs could run into the millions.
When the issuing of remediation notices by local authorities starts to become more common, many owners and occupiers of contaminated land will be faced with clean-up costs. Their public liability policies might not cover the costs.
If their professional advisers have failed to advise them properly in relation to their potential liability under the new regime, they will undoubtedly seek to pass these substantial costs on to the advisers.
