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.
A council has been accused of a "major administrative cock-up" after failing to make an insurance claim for up to £1m.