Thanet District Council (TDC) was court ordered to lift a ban on live animal exports through the Port of Ramsgate.
It paid more than £5m in compensation to traders but has not submitted an insurance claim to retrieve any money.
Campaigners said taxpayers had been left to foot the bill as the council missed the deadline.
Ian Driver, a community campaigner and former councillor, said the figures had only just come to light after a Freedom of Information request.
Mr Driver, said: "So there you have it: a major administrative cock-up by TDC means that taxpayers have been forced to foot a £5.1 million bill some, if not all, of which would have been covered by insurance payments had the claim been submitted in time. But it wasn't."
TDC said the maximum payment under the policy was £1m.
A spokesman said: "The legal claims against the council have all been settled and accounted for in previous year's budgets."
TDC banned live animal exports in 2012 after the deaths of more than 40 sheep.
The decision was overturned by the High Court in 2014 after a long legal battle.
Mr Justice Birss said the council was liable to pay damages to three companies affected by the ban.
Two sheep drowned at Ramsgate in September 2012 and 44 had to be destroyed as they were sick and lame.
The animals were put down after the lorry carrying them was stopped at Ramsgate by animal health inspectors.
In a separate incident, a loading area floor also collapsed while sheep were taken off a lorry carrying 548 animals.
Six fell in the water, with four rescued by RSPCA officers while two animals drowned.
The live animal export trade resumed through Ramsgate in July 2015.

The A&E unit at Telford's Princess Royal Hospital could be downgraded, leaving the Royal Shrewsbury as the only hospital in the county to offer emergency and critical care.
Women and children's services would also be moved to Shrewsbury, despite a Â£28m centre opening in Telford in 2014.
The proposals have been made by the NHS 'Future Fit' board.
More updates on this and other stories in Shropshire
Urgent care centres would be based at both sites, which Shrewsbury and Telford Hospital NHS Trust said would attend to the majority of patients who are currently seen at A&E.
These "preferred options" will be considered by Telford and Wrekin Clinical Commissioning Group (CCG) and Shropshire CCG, who will formally decide if a public consultation can begin.
The board is also recommending three other options be put forward for public consultation.
No formal decisions will be made until at least Summer 2017, Telford and Wrekin CCG said.
The NHS Future Fit programme was launched in 2014 to review the health system across Shropshire, Telford and Wrekin and mid-Wales and is set to finish in spring 2017.
Princess Royal Hospital in Telford:
Royal Shrewsbury Hospital:
There has been criticism of the plans to move women's and children's services from Telford.
Shaun Davies, leader of Telford & Wrekin Council, described the announcement as "a total farce that is being railroaded through" and said he opposed the idea of downgrading Telford's A&E department.
"If there is to be only one, then it makes sense from a financial and clinical perspective to locate it at Princess Royal Hospital; in the area where there is a growing population."
A council has been accused of a "major administrative cock-up" after failing to make an insurance claim for up to £1m.
[NEXT_CONCEPT]
Shropshire could have one emergency and trauma department under recommendations being put forward by NHS bosses.