Prosecutions under the Environmental Liability Directive (ELD) are rare or non-existent in many EU member states and potential buyers of environmental insurance remain ‘in the dark’ over the benefits of such cover and how the regime affects their operations. That is according to the widely reported findings of a recent study by the European Commission on the implementation efficiency of the ELD.
The conclusions of the study beg the question of whether this limited activity reflects a dysfunctional lack of enforcement by the authorities or demonstrates the effectiveness of environmental management systems. Whilst it is impossible to say accurately either way, and in fact it is most probably a case of both, a few points I think worth noting are:
- The EC report states that there have been no ELD cases in France, i.e. environmental incidents that triggered the legislation enforcement threshold. However, the study still presented two serious incidents that could have qualified as ELD cases but for various reasons didn’t.
- For the last three years, most insurers in Europe stopped presenting North American claims illustrations for marketing purposes and started using their own claims experience.
- A major European carrier recently acknowledged that its environmental insurance branch paid more than 30 million euros in covered claims over the last five years.
What these points demonstrate is that there are pollution incidents occurring and whilst the statistics from the study tell one story, the millions of Euros in environmental claims settlements, including third-party damages, first party clean-up and statutory remediation expenses tell another, more costly story.
Be prepared, not preoccupied
As highlighted in the study, competent authorities seem for the moment to prefer using the older and more familiar regulatory regime to address remediation requirements after a pollution event. For the time being then, European operators have to live with the uncertainty of whether the new environmental regulatory regime will apply or not when faced with a pollution incident.
Either way, operators potentially have to pay, or defend themselves, against the outcomes of a statutory claim. It is for that reason that operators should assess their environmental risks, the adequacy of their financial protection and understand how it would respond in anticipation, rather than remaining preoccupied by the legal intricacies of the ELD.