Managing Unexpected Costs and Coverage Pitfalls of Environmental Exposures

Brian Dove

April 29, 2016

Originally Posted in National Real Estate Investor

From condominiums to office buildings to mixed-use properties, the dramatic increase in claims triggered by environmental incidents is affecting real estate properties of all types. Unexpected clean-up costs, regulatory fines and penalties, third party lawsuits, rental income loss, devalued properties and reputational damage are the direct causes of financial loss.

Clean-up costs of pollution events in particular have increased drastically in recent decades. For example, the cost to remediate 126,000 polluted groundwater sites monitored by the U.S. federal government—due to contaminants from underground storage tanks, military installations and industrial facilities—could range from $110 billion to $127 billion.

In addition, as environmental legislation and case law continue to change rapidly, real estate companies are finding it even more difficult to stay abreast of the environmental risk landscape. As a consequence, today’s real estate companies have urgent need for comprehensive environmental risk management that fully addresses their complex and evolving exposures.

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Vapor Intrusion Due Diligence and the Landlord/Tenant Relationship

Nelson Mullins Riley & Scarborough LLP
Scott Hitch, Jack Smith, Bernard F. Hawkins, Jr., Weston Adams, Rory Carlisle and Jeanne N. Guest

May 5, 2016

The potential for soil and groundwater contamination to migrate through soil gas (“vapor intrusion”) into interior building spaces is increasingly becoming a critical component of environmental due diligence in real estate transactions, remediation of brownfield sites, and in development of infill areas.

The term “vapor intrusion” refers to contaminated soil or groundwater chemicals that evaporate through the air into a building above. Volatile organic compounds from soil and groundwater releases may vaporize or volatilize, becoming a gas that can find its way into buildings through cracks in the foundation, through openings where plumbing or utilities come into the building, along utility corridors or from sumps designed to keep groundwater from ponding in basements.

Common sources of vapor-forming chemicals include gas stations, dry cleaners and industrial facilities that use chlorinated solvents. In some cases, vapor intrusion may contribute to illness, odors or, rarely, explosion. If vapor intrusion results in high concentrations of hazardous chemicals in indoor air, building occupants breathing in the chemicals may experience headaches, short-term memory lapses, or other symptoms. There is a growing body of scientific research regarding the health risk of long-term exposure to hazardous chemicals in indoor air.

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EPA Proposes New General Permit Regulating Stormwater Discharges From Construction Activities

Dykema PLLC
Thomas B. Alleman, John A. Ferroli, Grant P. Gilezan, Mark D. Jacobs, Todd C. Schebor and Keith A. Shuley

Building contractors and developers should be aware of the U.S. EPA’s newly proposed National Pollution Discharge Elimination System (NPDES) general permit regulating stormwater discharges from construction activities. The draft 2017 Construction General Permit (CGP) is proposed to replace the 2012 version, which is set to expire on February 16, 2017. Like the 2012 version, the 2017 draft permit generally applies to construction site operators disturbing one or more acres of land (or less than one acre, but part of a larger common plan or development).

The proposed draft permit makes the following noteworthy changes to the 2012 permit:

  1. Prohibits hazardous substances, such as paint or caulk containing polychlorinated biphenyls (PCBs), from authorized non-stormwater discharges of external building washdown waters;
  2. Requires permittees to include the U.S. EPA’s contact information in the public notices that are already required to be posted in a prominent location near construction sites;
  3. Requires permittees to cover or use another method of temporary stabilization for inactive soil stockpiles and land clearing debris piles where the piles will be unused for 14 or more days (the 2012 CGP only requires coverage “where practicable”);
  4. Requires permittees to keep waste container lids closed (or provide some other secure cover where containers do not have lids);
  5. For demolition of structures with at least 10,000 square feet of floor space built or renovated before 1980, requires permittees to implement controls to minimize the exposure of PCB-containing building materials to precipitation and stormwater; and
  6. Requires permittees to state on their Notice of Intent (NOI) form the type of construction activities that will be involved.

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Ninth Circuit Affirms CERCLA 104(e) Information Request Triggers Insurer’s Duty to Defend

Manko Gold Katcher & Fox
Diana A. Silva

May 12, 2016

As part of EPA’s investigation of a Superfund site, EPA typically issues a 104(e) information request to any person or entity that EPA believes to have information regarding release of hazardous substances at the site, including those that may be considered to be PRPs charged with the ultimate cleanup of the site. Responding to a 104(e) request often requires the recipient to provide detailed responses regarding historical and current industrial operations, and can often set the stage for settlement negotiations with EPA and other PRPs regarding funding the investigation and remediation of the Superfund site. In an unpublished non-precedential opinion filed yesterday, the United States Court of Appeals for the Ninth Circuit ruled that receipt of a 104(e) information request for a Superfund site triggers an insurer’s duty to defend a policyholder for attorneys’ fees and related costs associated with responding to the request.

In January 2008, Ash Grove Cement Company received a 104(e) information request regarding contamination at the Portland Harbor Superfund Site, a 12-mile sediment cleanup project along the Willamette River in Portland Oregon. Ash Grove tendered a claim to its insurance providers, seeking coverage for defense costs incurred in responding to EPA’s information request. The insurers denied Ash Grove’s claim on the basis that the insurance policies at issue limited coverage to “suits” related to “property damage,” and that EPA’s information request was neither a “suit” nor contained any allegations of “property damage” for which Ash Grove could be potentially liable.

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