When a regulator charges a company director personally under environmental legislation, the instinct is to reach for the directors and officers (D&O) policy. For most Australian businesses, what they find there will not help.
"Your standard D&O policy excludes defence for the directors or officers of the company under any environmental statute," said Anthony Saunders (pictured), partnership director for EnviroSure at Gow-Gates Insurance Australasia.
About five years ago, Saunders took steps to change this and added extensions.
"I went through all my D&O policies and then upgraded them to include directors' and officers' liability insurance responding to environmental," he said. "Unless the D&O policy has an extension in it to include environmental liability, you've got a problem."
Saunders' characterisation is consistent with published legal analysis of the Australian market. MinterEllison, in its analysis of climate-related liability risks, states that most D&O policies contain pollution exclusions, which may exclude claims arising out of, based upon or attributable to, or in any way involving directly or indirectly, pollutants. The firm notes that some policies include write-backs to the exclusion, or provide extensions for shareholder pollution claims and standalone defence costs and that these are often sub-limited.
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A sub-limited write-back is not equivalent cover. It caps defence costs at a fraction of the policy limit, and the difference is not apparent at placement.
Extensions do exist. MinterEllison cites Zurich's D&O liability policy as containing an environmental violation extension, providing cover to an insured person or the company in relation to financial loss arising from an environmental proceeding made against that insured.
The position, then, is not that environmental cover is unavailable. It is that the default setting runs the other way, and the extension has to be asked for.
Enforcement has hardened. The Environment Protection Legislation Amendment (Stronger Regulation and Penalties) Act 2024 commenced in New South Wales in April 2024. According to the NSW Environment Protection Authority, it doubled maximum penalties for the most serious offences to $10 million for companies and $2 million for individuals and increased penalties for certain asbestos-related offences to $4 million for companies and $1 million for individuals.
In December 2024 the EPA commenced prosecutions arising from its asbestos-in-mulch investigation, which it described as the largest in its history. According to the authority, 102 alleged offences were charged against three companies and one individual, relating to 26 sites. Over 300 sites were inspected during the investigation and 79 were identified as having used contaminated mulch. One of the five categories of charge was an executive liability offence alleged against Arnold Vitocco, as sole director of VE Resource Recovery, in relation to that company's alleged licence breach.
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Smaller matters follow the same shape. The EPA reported in March 2025 that Adam O'Brien, sole director of Rubbish King, was found guilty in the Land and Environment Court on three charges of supplying false or misleading information about the disposal of asbestos waste and fined $90,000. Law firm Colin Biggers & Paisley, in its review of New South Wales waste and resources decisions for 2025, reported that construction company He Co and its director were each fined $100,000 in the Parramatta Local Court for providing false information during an EPA investigation into illegal asbestos dumping, which it described as among the largest fines secured for that offence.
A fine of that size is probably survivable. The defence costs accumulated over a prosecution that may run for years often are not and it is defence costs that the exclusion reaches.
Insurance Business has previously reported on the same structural problem in workplace health and safety prosecutions, where James Ritchie, practice leader for workplace and enterprise risk management at Bellrock Advisory, identified the absence of an explicit defence cost carve-back as the point at which a policy stops responding. Pollution exclusions present the equivalent issue in sectors handling hazardous materials.
Saunders sees the gap as both a client exposure and a commercial opening. He said he regards adding the extension as the responsible course and also as a way for brokers selling D&O cover to earn a few more dollars.
