Public Liability Insurance: Cover For Environmental Clean Up Costs

The case of Bartoline v Royal & Sun Alliance provides clarification of the legal meaning of the term "damages" in the context of insurance policies.

Facts

Pollutants entered two watercourses as a consequence of a fire at Bartoline's premises. The Environment Agency used its statutory powers under the Water Resources Act 1991 to carry out emergency clean-up works to the watercourses, and sought to recover the cost of these works from Bartoline under the same statute. In addition, it served a works notice on Bartoline, obliging it to undertake certain clean-up works itself.

Bartoline made a claim under its public liability (PL) policy for its liability for the expenses incurred by the Environment Agency. Royal and Sun Alliance (RSA), Bartoline's PL insurers, refused indemnity, stating that the expenses incurred did not fall within the scope of the insuring clause in the PL policy, which provided coverage for "legal liability for damages in respect of Ödamage to propertyÖ nuisance trespass to land or interference with any easement right of air light water or way".

Bartoline disagreed, and brought a claim against them for breach of contract. Amongst other things, they argued for a wide definition of damages, claiming that had they not complied with the works notice, there was a likelihood that they would have received claims for damages from third parties, and that their compliance had therefore reduced the chances of such claims being brought, and any damages the Insurers would have had to pay out in this situation.

Issue

The judge considered whether, on a true construction of the PL policy, the liability of Bartoline to the Environment Agency, and the costs incurred of carrying out works pursuant to the works notice, were capable of constituting a legal liability for damages.

Decision

The liability to repay expenses incurred by the Environment Agency and the liability to pay damages in tort were described by the judge as "different animals". A liability to compensate or reimburse another party that arises through statute is not a liability for damages but operates as a debt. By contrast, a liability that arises through a tortious act gives the right to recover damages by way of compensation for loss and damage. The "core" meaning of the word "damages" in English law "involves pecuniary recompense given by law to a person for the actionable wrong that another has done him". Bartoline's liability to the Environment Agency was statutory...

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