Facts
Bartoline manufactured adhesives and filled and packed
hydrocarbons, such as white spirit and turpentine. In May 2003,
following a fire at its premises, chemicals and fire fighting foam
heavily contaminated two nearby watercourses, their beds and banks.
Acting under the Water Resources Act 1991, the Environment
Agency carried out emergency work and sought to recover the cost
from Bartoline. It also served notices under the Act requiring
Bartoline to carry out further work to reduce contamination and
prevent pollution.
The issue was whether Bartoline could claim on its public
liability policy, both for its liability to pay the Agency's costs
and for the cost of complying with the notices.
The policy provided an indemnity ''against legal liability for
damages'' for accidental injury, accidental loss of or damage to
property and nuisance, trespass to land or goods or interference
with any easement or right.
Were these clean-up costs "damages" under the policy?
Judgment
The judge found they were not.
The Environment Agency was acting in the public interest to
prevent or mitigate the effects of pollution on the environment.
Its claim was for a debt - the recovery of costs incurred under the
Water Resources Act.
Such a claim was completely different in nature from any claims
that might arise from private individuals for compensation for loss
and damage resulting from an unlawful interference with their
private rights and interests.
Under the Act, the Agency did not have to show it had suffered
any loss, nor did it have to prove negligence or breach of duty.
Liability to repay costs incurred in the exercise of its powers
would arise whether or not there were any grounds for private
claims for damages against the polluter.
Damages in English law, on the other hand, are generally awarded
because there has been a breach of duty or obligation, whether that
duty is imposed by contract, by general law or legislation.
The essential purpose of a public liability policy is to provide
an indemnity against such liability – hence the choice of the word
"damages". This policy made that even clearer by using the
word in the context of accidental damage to property, nuisance,
trespass and so on.
As for Bartoline's own costs, in the absence of an express term
in the policy, there was no general duty on Bartoline to take steps
to prevent or minimise loss that might fall to its insurers.
Consequently, it was difficult to see how Bartoline could pass the
costs of complying with the works notices on to them.
Commentary
In reaching his conclusion, the judge followed the Court of
Appeal's decision in Yorkshire Water Services v Sun Alliance
[1997].
In that case, sludge escaped from the insured's sewage plant,
contaminating a river. The insured carried out works to prevent
further damage and claimed under its public liability policy, which
provided an indemnity against legal liability for damages.
The Court of Appeal held the costs were not covered. The term
"damages" implied a sum payable because of some breach of a duty or
obligation. Sums paid to avert or lessen potential liability were
not sums the insured was legally liable to pay as damages. The
peril insured against was legal liability for damages, not an event
which might give rise to legal liability.
The Yorkshire Water case also confirmed the principle (followed
by the judge in Bartoline) that (outside the realm of marine
insurance), an insured has no duty to take reasonable steps to
prevent or minimise a loss unless the policy says so expressly.
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