On 26 April 2022, the Supreme Court issued an interesting ruling (Case No. T 3193-21) establishing that strict liability for damages under Chapter 32 of the Environmental Code applies to damage occurring in connection with drilling work for geothermal heating.
A company carried out drilling work for geothermal heating on a property. When the drilling was going on, pressure occurred in an old borehole on a neighbouring property. It caused soil and clay to spray up and dirty the façade of a building on the property and also destroyed a barbecue. The neighbour suffering the damage was compensated by their insurance company for the damage occurring, which amounted to approximately SEK 90,000. The insurance company then filed a claim for recovery against the company carrying out the drilling work pursuant to the provisions on environmental damage in Chapter 32 of the Environmental Code. The company contested the claim, stating that the damage did not occur as a result of a disturbance covered by strict liability for damages in accordance with Chapter 32 of the Environmental Code.
A brief note on the provisions on environmental damage in chapter 32. Of the environmental code
In accordance with Chapter 32 of the Environmental Code, damages must be paid for property damage caused to a property by a company. The starting point is strict liability for damages, which means that the person causing the damage is not required to have acted with intent or negligently. Damage that was not caused intentionally or due to negligence is only compensated if the disturbance that caused the damage should not reasonably be tolerated taking into account the circumstances at the location or its general occurrence under comparable circumstances.
The disturbances covered by the provisions on environmental damage are listed in Chapter 32, section 3, paragraphs 1–8 of the Environmental Code. Disturbances that may give rise to liability for compensation include pollution of water areas, contamination of groundwater, change in groundwater level and air pollution, which also includes troublesome harmless odours, soil pollution, noise, tremors and other similar disturbances. “Other similar disturbances” are not defined in the provision but may include disturbances such as cordoning-off of streets, spoilage of the landscape, discomfort to animals, sparks and bright lights.
The assessment in the case in question
The question to be considered by Högsta domstolen (HD) [the Supreme Court] in the case was whether the drilling work that caused the damage occurred through another similar disturbance.
The Supreme Court found that drilling for geothermal heating constitutes an environmentally hazardous activity (cf. Chapter 9, Section 1 of the Environmental Code). Since pressure changes can be equated with disturbances, as specified in Chapter 32, Section 3 of the Environmental Code, and are to be expected when work is being carried out, they must therefore be equated with other similar disturbances in accordance with Chapter 32, Section 3, paragraph 8 of the Environmental Code.
In its reasoning that the disturbance could be equated to other similar disturbances, the Supreme Court reviews previous case law on the question of what may be considered as disturbances contemplated in paragraph 8. In order for it to be a question of another similar disturbance, it must, according to the Supreme Court, be a question of nuisance that gives rise to a harmful impact on the surroundings that may be temporary, permanent or recur regularly. One common feature of the case law referred to by the Supreme Court is that the person causing damage was engaged in an activity that entailed a risk of damage to nearby properties and that the causes of damage were considered to be something that the operators had reason to expect (NJA [Nytt Juridiskt Arkiv – New Juridical Archive] 1991 p. 720, NJA 1997 p. 468, NJA 2001 p. 368 and NJA 2007 p. 633).
Finally, the High Court considered that an older borehole in the vicinity was not such a peculiar circumstance that the damage would not be considered as an expected consequence of the work carried out. That means that strict liability for the damages existed, which meant that the company carrying out the drilling work was forced to reimburse the insurance company for the compensation paid out.
Because the provisions on environmental damage contained in Chapter 32 of the Environmental Code are strict, i.e. they apply regardless of intent or negligence, there are advantages for an injured party in basing a claim for compensation on these provisions instead of the provisions of general tort law. There is also a relaxation of proof in the application of Chapter 32 of the Environmental Code which means that the injured party only needs to show that there is very likely to be a causal connection between the disturbance and the damage caused. The Supreme Court’s ruling can be added to previous rulings that show when a disturbance can be considered to be “another similar disturbance”.
Because drilling for geothermal heating is a common activity, it is important for the companies engaged in activities of this kind to ensure that the company’s insurance cover includes strict liability for damages. It is also important for a property owner who orders drilling for geothermal heating to be aware that the strict liability is joint and several, i.e. that the property owner can also be held liable for any damage. When ordering work that may be covered by the provisions on environmental damage, the parties should enter into an agreement governing how the cost of any liability for compensation is to be distributed and ensure that insurance cover exists to cover that liability.