Emerging litigation liabilities

The UK litigation landscape is rapidly evolving. New categories of liability are emerging that present material challenges for risk managers and insurers, whilst landmark court decisions reshape the boundaries of insurance coverage. From environmental contamination claims which draw comparisons to asbestos, to the mass adoption of AI and automated technologies presenting a new risk landscape, the shifting sands of litigation liabilities force an agile approach.

Meanwhile, courts continue to act as the ultimate arbiter, interpreting existing legal frameworks in light of these social, cultural and economic transformations. Two recent examples include the Supreme Court’s landmark judgment on furlough payments under business interruption policies and the High Court’s ruling on post-Grenfell building safety claims. This article examines these emerging litigation liabilities so that the industry can be proactive, rather than reactive, to these significant changes.

Environmental contamination claims

Environmental contamination claims are an increasingly prominent feature of the litigation landscape. Where industrial activity, chemical discharge or waste management causes harm to land, water or human health, those impacted may pursue civil claims against the polluter responsible. Two relatively recent UK Supreme Court decisions helped to pave the pathway for claimants. The cases of Jalla v Shell and Manchester Ship Canal v United Utilities affirmed that common law rights such as nuisance and trespass remain available for environmental contamination and are not excluded by statutory regimes.

Of the various categories of environmental contamination generating concern, PFAS stands out as a significant litigation risk. PFAS is the name given to a group of man-made chemicals used in a variety of industrial and manufacturing settings which do not break down, hence the colloquialism “forever chemicals”. According to the Government’s recent PFAS Plan publication, PFAS has been detected in approximately 80% of surface water samples, around 50% of groundwater samples, and all fish samples tested through government monitoring programmes. The ubiquity of its use in product and industrial services, coupled with the sheer level of contamination across the UK and the potential extent of human exposure, is cause for alarm.

In fact, the UK’s first PFAS-related claim has already come and gone. In 2024, a claim was brought on behalf of residents of Bentham against Angus Fire Limited, a factory that produced PFAS-containing firefighting foam between 1976 and 2024. In September 2025, the claim settled for an undisclosed amount and without an admission of liability. Whilst this was the first of its kind, it is highly unlikely to be the last. Indeed, the scale of environmental contamination litigation is already escalating.

In late September 2025, an application was made in the High Court on behalf of approximately 4,000 claimants against Avara Foods and Welsh Water for negligence, public and private nuisance, and trespass in connection with the pollution of the rivers Wye, Lugg and Usk. Damages are being sought for the impact of the river pollution on business, recreation, tourism and property value. The claim represents the UK’s largest ever environmental lawsuit, in terms of the size of the claimant class, the geographical area involved and amount of damages claimed. If successful, this claim could open the floodgates for further environmental contamination legal action.

Insurance coverage disputes: building safety and business interruption

As previously prefaced, it is often the role of the courts to determine how emerging risks should be dealt with under the existing legal framework. Two significant decisions in the past six months demonstrate precisely that, reshaping insurers’ liability exposures in different but equally important ways.

The Grenfell Tower tragedy of 2017 fundamentally transformed the UK’s approach to building fire safety. The subsequent inquiry, remediation program and legislative reform, including the enactment of the Building Safety Act 2022, has spotlighted the issues of combustible cladding and fire safety defects. For the insurance sector, this has translated into a growing volume of claims under housing warranty and latent defect policies, with some insurers declining cover on the basis that building safety defects are not an “imminent” threat under the specific policy wording. However, the recent High Court decision of Vivid Housing Limited v Allianz Global Corporate & Specialty SE suggests that approach may be increasingly difficult to sustain.

The case involved a dispute over building safety defects in a block of 82 flats in Portsmouth insured under a housing warranty policy. The claimant building owner alleged five defects, including combustible cladding, missing or defective cavity barriers and building debris, and claimed under the policy that these defects created the threat of imminent destruction or physical damage to the premises. The claimant’s Insurer, Allianz, denied policy cover on the basis that the alleged defects did not fall within the scope of the policy and applied for a summary judgment. The Court refused Allianz’s application, finding that the risk of fire is constant and that a reasonable observer could conclude that there was a sufficiently serious prospect of fire to engage the clause.

The Court rejected Allianz’s argument that there was no evidence that destruction or damage was “imminent”. The decision broadens the interpretation of “imminent”, emphasising a judicial willingness to construe wording in favour of policy-holders seeking to remediate unsafe buildings. The case exemplifies the post-Grenfell litigation landscape, in which there is heightened scrutiny of building safety, an increased public awareness of fire risks, and a growing appetite for policyholders to pursue claims.

If the Vivid case exemplifies the post-Grenfell litigation landscape, the second major decision of recent months represents the culmination of the post-Covid legal reckoning. The Covid-19 pandemic triggered an unprecedented wave of business interruption claims, and a question arose as to whether government furlough payments could be deducted from the sums payable by insurers under business interruption policies. On 22 April 2026, the UK Supreme Court answered this lingering question in its unanimous judgment in Bath Racecourse Company Ltd & Ors v Liberty Mutual Insurance Europe SE & Ors. The Court held that furlough payments received under the Coronavirus Job Retention Scheme must be deducted from sums payable by insurers under business interruption policies.

The Court held that savings clauses refer to whether expenses are reduced as a matter of economic reality, not legal mechanics. The Court’s framework for third-party payments establishes a principle of broad relevance, as governments increasingly deploy emergency financial support in response to pandemics, natural disasters and other crises. With an estimated £1 billion in deductions at stake across the market, this is welcome news for insurers’ reserves.

Growth of artificial intelligence and automation

The third emerging risk area cuts across multiple sectors and is developing with speed. Artificial Intelligence (AI) is no longer a theoretical concern for the insurance market, it is generating regulatory scrutiny, an evolving legal framework and a broad spectrum of potential civil liabilities.

The regulatory landscape regarding AI implementation is beginning to take shape. In January 2025, the Government released its AI Opportunities Action Plan, which recognises the prospect for AI to contribute to the UK’s economic development. There has been a steady uptick in AI-adoption across the financial services sector, leaving some to question how this rapid rise will be managed by the regulator, and whether the current FCA regulations remain fit-for-purpose.

The FCA maintains that senior managers must understand and control AI-related risks within their areas of responsibility, and that a lack of understanding is no defence to accountability for consumer harm. Furthermore, the spectrum of potential civil claims arising from AI use is broad, spanning contract disputes, data protection breaches, negligence claims, intellectual property infringement and defamation.

Whilst the legal and regulatory position is still solidifying, autonomous vehicles offer a compelling real-world example of how these risks are already materialising. Waymo has announced plans to launch a pilot robotaxi service in London, which will potentially be operational as early as September 2026. However, the full regulatory framework for autonomous vehicles will not be in place until 2027, creating a significant gap. This gap presents uncertainty for insurers regarding how claims arising from trial vehicle accidents will be pursued. It also raises more practical questions for the existing claims infrastructure – as these claims are likely to involve multiple potential defendants, multi-policy exposure across auto and product liability coverage, and technological investigations into vehicle data.