By Ursula Knowles, Assistant Vice President, Information Development
One of the reasons (among many) that those of us in the environmental insurance industry have told clients they should purchase this type of coverage is that they may suffer the consequences of releases coming from neighboring facilities through no fault of their own. They may have pollutants come onto their site via surface water runoff, through movement by groundwater, or dispersal through the air. In some instances if the source of the pollutants is identified readily, there may be some relief for landowners in the vicinity of the source facility, but typically not until time and money has been spent in litigation. In other instances, that is not the case and you may never be able to recoup environmental cleanup costs stemming from your neighbor’s property.
A recent Supreme Court decision illustrates why purchasing environmental coverage should be a priority for entities. Even if there is no hazardous waste on the site, environmental activities are innocuous (ex. trash removal or printer ink cartridge recycling, for example), and there are no underground storage tanks, there still could be an environmental impact from a nearby property.
The case involved the refusal of a court to hear an appeal filed by a developer in the vicinity of the World Trade Center. After the buildings came down, the developer was renovating their building, and was notified by the Environmental Protection Agency that the “interstitial spaces of the building might contain finely-ground substances from the World Trade Center, including concrete, asbestos, silicon, fiberglass, benzene, lead, and mercury.” In order for the developer to obtain a permit to continue renovation activities at the building, they were required to remediate these substances. In turn, the developer sought to recoup their cleanup costs from the leaseholders/management companies of the destroyed World Trade Center and the two airline companies whose planes were flown into the World Trade Center. The developers sought relief for damages under the Comprehensive Environmental Reclamation, Compensation and Liability Act (CERCLA). The court initially dismissed the complaint based on the following reasons:
- – The 6 year statute of limitations had expired.
- – A release had not occurred as defined by previous case law (Goodrich Corp v Town of Middlebury).
- – The materials that constituted the building structure and contents were not “solid waste or hazardous waste” as defined under 42 of the U.S.C. 9603(3).
- – The attacks were an “act of war” and as such are a defense under CERCLA.
In the fall of 2014, the developer tried to have the original decision overturned by the U.S. Supreme Court, but the court refused. This is an extremely high profile case, and highlights the fact that it is not what you do that may cause you to incur environmental cleanup costs or business interruption expenses. It may be an unexpected event that happens at your neighbor’s property.
Information for this article was obtained from the following sources: