On 5 April 2022, the European Commission adopted a proposal to revise the Industrial Emissions Directive (IED)¹ as part of the European Green Deal and the European Union’s (EU’s) aim for zero pollution, net zero carbon emissions, a toxic-free environment, and the circular economy.

The revised IED, when it is adopted, will increase in the number of businesses – currently over 50,000 – in the energy, metals, minerals, chemical and waste management industries subject to the IED. The revision will add new categories to the IED such as ‘giga-factories’ for electro-mobility batteries, and mines for industrial minerals and metals including rare earth metals (but not coal or aggregate quarries). The number of large farms – currently about 20,000 – subject to the IED will also be increased to include cattle farms in addition to poultry and pig farms.

The IED is not the only environmental permitting legislation in the EU. Many Member States have extensive environmental permitting legislation that applies to businesses far beyond those subject to the IED. The national legislation requires tens of thousands of businesses to make declarations to competent authorities, or to have registrations, or permits/authorisations depending on the level of risk posed by their operations. Conditions in these, especially in permits and authorisations, generally require businesses to remediate pollution caused by their operations.

The continued extension of the environmental permitting legislation raises the need for more businesses to have insurance to protect themselves from environmental liabilities arising from their operations. In addition, liability for preventing or remediating environmental damage under the Environmental Liability Directive (ELD)² extends the need beyond businesses subject to the IED and other environmental permitting legislation.

The issue thus arises as to whether businesses subject to the above legislation are able to purchase insurance for claims for bodily injury and property damage caused by their operations, the costs of remediating environmental damage, and related costs.

The answer depends on the size and location of individual businesses. Large businesses with operations and/or sites in many countries in Europe (and beyond) usually have no problem purchasing policies that provide cover for the above risks as well as business interruption, remediating pollution caused in the transport of their products and waste, loss of reputation, and many other related risks. Similarly, large businesses with sites and/or operations in countries such as France, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain and the UK generally also have no problems in purchasing such policies.

The situation is, however, different in some European countries. For example, cover provided by environmental insurance policies in Bulgaria, Croatia, Cyprus, Estonia, Greece, Hungary, Latvia, Lithuania, Malta and Romania tends to be limited, even when it is available.  

In contrast to the scarcity of environmental insurance policies in some countries, environmental extensions to general liability policies are widely available in many European countries. Again, however, cover provided by them tends to be limited, with the notable exceptions of Austria and Germany where the extensions were specifically designed to provide cover for environmental risks including ELD liabilities. The extensions do not, of course, provide cover for the costs of remediating pollution on an insured’s site; that is not their purpose. If such cover is required, a business must purchase an environmental insurance policy (if feasible) or an environmental extension to a property policy, with the caveat that such extensions are available in only a few – mostly Nordic – countries. Also, like environmental extensions to general liability policies, the extensions tend to be limited in scope.

Many extensions to general liability policies provide cover only for claims for bodily injury and property damage and, in some cases, the costs of remediating off-site land/soil pollution from a sudden and accidental incident on an insured’s site. Even when remediation costs are covered, some extensions require a claim for bodily injury or property damage to have been made against the insured in order for cover for remediation costs to be available. Further, even  when environmental extensions are available, the limits of liability for them tend to be low. In addition, some extensions require the insured to report a pollution incident within a specific period of time after it occurs and also requires the incident to begin and end within a specified period of time.

Whilst the availability of environmental extensions to general liability policies across the entire EU is slowly increasing, the scope of the vast majority of them has not increased in recent years. As environmental liabilities increase, it is therefore crucial for businesses to understand the extent of cover provided by them when they purchase the extensions instead of discovering that they do not provide adequate cover when environmental damage occurs.

1 - Proposal for a Directive on industrial emissions (integrated pollution prevention and control); https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52022PC0156R%2802%29&qid=1651130627889

2 - Directive 2004/35/CE on environmental liability with regard to the prevention and remedying of environmental damage; https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32004L0035