Superfund

September 24, 2013

PRP letter triggered coverage–but delay precludes claim against insurers

Source: http://www.lexology.com, September 18, 2013
By: Amy B. Briggs, David B. Killalea , Stephen T. Raptis, Robert H. Shulman and Susan P. White, Manatt Phelps & Phillips LLP

A letter sent by the EPA in 2001 pursuant to CERCLA warning Land O’Lakes that it could be a potentially responsible party (“PRP”) for cleanup of an old refinery site triggered Land O’Lakes’ insurers’ duty to defend, the Eighth Circuit Court of Appeals recently held. This is consistent with the majority rule nationally, and typically is the position advocated by policyholders. In the case of Land O’Lakes, however, this unfortunately meant that the statute of limitations applicable to breach of contract had run as a result of Land O’Lakes’ seven-year delay in challenging its insurers’ denials of coverage.

In 2001 the EPA sent a Special Notice Letter (or “PRP Letter”) to notify Land O’Lakes that the agency considered Land O’Lakes to be a PRP under CERCLA for an oil refinery acquired by Land O’Lakes and later declared a Superfund site. The PRP Letter demanded that Land O’Lakes reimburse the EPA for $8.9 million that it had spent cleaning up the site, and encouraged Land O’Lakes to enter into negotiations with the EPA regarding additional cleanup.

Land O’Lakes denied any responsibility, arguing that a prior owner of the refinery site legally was responsible for the costs. But Land O’Lakes notified two of its insurers, Employers Mutual Liability Insurance Company of Wausau and The Travelers Indemnity Company, about the PRP Letter and requested coverage under historical CGL policies they had issued to Land O’Lakes. Both insurers declined to defend Land O’Lakes.…

August 30, 2013

Insurers don't have to pay for Land O'Lakes environmental cleanup: Court

Source: http://www.businessinsurance.com, August 29, 2013
By: Judy Greenwald

Units of Liberty Mutual Holding Co. Inc. and Travelers Cos. Inc. initially breached their duty to Land O’Lakes Inc. for failing to provide defense coverage for an environmental cleanup, but Minnesota’s statute of limitation bars the agricultural cooperative from pursuing litigation on the issue, an appellate court ruled Thursday.

Midland Cooperatives Inc. owned an oil refinery in Cushing, Okla., from 1943 until 1977, according to the ruling in Land O’Lakes Inc. v. Employers Insurance Co. of Wausau et al. by the 8th U.S. Circuit Court of Appeals in St. Louis.

In 1977, the facility was sold to Hudson Oil Refinery Co., which abandoned the refinery in 1982 and went bankrupt in 1984. Arden Hills, Minn.-based Land O’ Lakes acquired Midland in 1982, including the now-dormant refinery, according to the ruling.

In July 1999, the U.S. Environmental Protection Agency designated the refinery as a Superfund site under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980.

In January 2001, the EPA sent Land O’Lakes a special notice letter informing it that it was considered a “potentially responsible party” under CERCLA and thus potentially liable for cleanup costs at the site.

Land O’Lakes responded to the letter by asserting Hudson Oil, not Midland, caused any contamination at the refinery site, but nevertheless notified Wausau, a unit of Boston-based Liberty Mutual and Hartford, Conn.-based Travelers Indemnity Co. of the EPA’s claims and sought defense and indemnification. Both insurers denied coverage.

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August 13, 2013

Lenders beware: foreclosures may lead to unexpected environmental liabilities

Source: http://www.lexology.com, August 12, 2013
By: David M. Governo, Bryna Rosen Misiura and Melissa L. Tarab , Governo Law Firm LLC

In our current economy, foreclosures still remain a common concern for commercial property owners and lending institutions. While property seizure is intended to protect secured lenders by giving them the opportunity to sell the property and recoup their investment, this protection may be both a blessing and a curse if not handled carefully. Properties contaminated with hazardous materials can significantly complicate the foreclosure process. Often, the intricacies of federal and state environmental laws create additional liabilities for lenders if they get too involved in site operations.

The U.S. Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) affords protection to secured lenders from environmental liability provided that the lenders meet certain criteria. The Act’s definition of “owner or operator” does not include “a person that is a lender that did not participate in the management of” the property prior to foreclosure and provides several factors in assessing such participation. A lender participates in the management of the property if, while the borrower is still in possession (i.e., prior to foreclosure), the lender:

  • Exercises decisionmaking control over the environmental compliance…such that the person has undertaken responsibility for the hazardous substance…or
  • Exercises control at a level comparable to that of a manager…such that the person has assumed or manifested responsibility—
    • For the overall management… encompassing day-to-day decisionmaking with respect to environmental compliance; or
    • Over all or substantially all of the operational functions…other than the function of environmental compliance.
August 6, 2013

MO Superfund Site to Be Cleaned Up

Read here about an old carburetor factory in St. Louis that has been approved for a $30 million clean up.

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July 17, 2013

Taking a Closer Look at Environmental Insurance

Source: http://www.globest.com, July 16, 2013
By: S. Ira Grossman

In a recent blog post I discussed how a comprehensive Phase I Environmental Site Assessment (ESA) and the Bona Fide Prospective Purchaser (BFPP) liability protection can help to protect you from acquisition environmental risk. Today I’ll look at Environmental Insurance, and how it can help cover the cost of remediation if an environmental hazard is found at your site.

Prior to the mid-1980s General Liability Insurance, the most common type of commercial risk insurance, made no mention of environmental damages. Then in the wake of the environmental movement and numerous regulations, insurers began to write environmental exclusions into the General Liability Policies, which led to the emergence of a new tool to manage environmental risk: environmental insurance.

Regulations Creating Liability

In 1972 the Clean Water Act was established. This law established the goals of eliminating releases of high amounts of toxic substances into water by 1985.

Two years earlier, Congress passed amendments that strengthened the scope of the 1967 Air Quality Act with new regulations such as national air quality standards and statutory deadlines for compliance.

In 1976, the Resource Conservation and Recovery Act (RCRA) was enacted. It is now most widely known for the regulations promulgated under RCRA that set standards for the treatment, storage and disposal of hazardous waste in the United States.…

June 24, 2013

A company can be held liable as an owner under CERCLA even though it does not own the property where the contamination is located

Source: http://www.lexology.com, June 17, 2013
By: Gerard M. Giordano, Cole Schotz Meisel Forman & Leonard PA

In EPEC Polymers, Inc. v. NL Industries Inc., Civ. Action No. 12-3842 (D.N.J. May 24, 2013), defendant NL Industries Inc. owned property on one side of the Raritan River, where it produced and discharged waste to the river. Plaintiff EPEC Polymers, Inc. owned property on the opposite side of the river. The U.S. Army Corps of Engineer had dredged the river and the dredging spoils had been placed on EPEC’s property. These dredged spoils contained, in part, NL’s waste. EPEC spent over $2 million investigating the contamination on its property.

EPEC sued NL under several statutory and common law theories of recovery seeking to recoup its cleanup costs from NL. One of EPEC’s claim was that under CERCLA’s owner/operator liability section, NL was liable. That provision imposes liability on any person who owned or operated the facility at the time of the disposal of a hazardous substance.

NL argued that it cannot be held liable as an owner/operator because it did not own the site at which the cleanup is being conducted. Specifically, NL stated that its property “is not the facility at which hazardous waste came to be located or where EPEC allegedly has incurred ‘response costs’ for which it now seeks recovery under CERCLA.” Therefore, NL reasoned that it could not be held liable as an owner or operator of the facility under CERCLA’s owner/operator liability provision.

The Court rejected this argument and broadly interpreted the definition of facility holding that NL’s property is the “facility” for the purposes of owner/operator liability. Thus, NL can be held liable as an owner/operator under CERCLA even though it did not own or operate the property at which the contamination is being remedied. The Court also held that NL can be liable as an arranger under CERCLA’s liability provisions for having arranged for the dumping of its hazardous waste into the river.

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June 20, 2013

What to do when you are issued a CERCLA injunction to perform a $1.5 billion cleanup — Lower Fox River superfund update

Source: http://www.lexology.comJune 12, 2013
By: Robert S. Sanoff, Foley Hoag LLP

In a 78 page decision in the Lower Fox River Superfund case issued last month, the federal court issued an injunction against NCR Corp. and three other PRPs requiring them to perform a $1.5 billion remedy. No company ever wants to receive such an injunction and NCR sought to soften the impact of that injunction by proposing that it would share the costs of performing the remedy on an interim per capita basis with the three other PRPs. When those three other PRPs declined, NCR requested that the court order the PRPs to each pay a 25% per capita share along with NCR.

The court declined NCR’s request on the ground that only the United States, on whose behalf the injunction had been issued, had standing to request enforcement of the injunction. The court indicated that it would only reach the issue of allocating the injunction costs among the defendants if the United States sought to enforce the injunction. While the court’s ‘s decision might suggest that it was inviting NCR not to perform in order to pressure the United States into seeking to enforce the injunction, the court went on to note that the position of the three other PRPs was not surprising given that in a related CERCLA contribution proceeding the court had previously ruled that NCR should pay the full future costs of the remedy at the site.

Given that $1.5 billion is at stake, it’s hard to believe that there won’t be additional challenges to the current litigation results.…

May 31, 2013

Secured Creditor Exemption Falls Short

Source: Great American Environmental Division, May 2013

A large Financial Institution (FI) entered into a settlement agreement where the FI agreed to reimburse the USEPA for $1.28 million in removal costs incurred at a former wood processing facility. The FI was the successor to the trustee who had held title to the property while the wood treating operations had resulted in releases of hazardous substances. Although the secured creditor exemption of CERCLA provides liability limitations, it does not extend to a fiduciary who negligently causes or contributes to a release. Given the length of time that the spills occurred, the risks posed by the contamination and that the hank had been notified by the USEPA about the contamination, it is possible the bank could have been exposed to potential contribution actions by other responsible parties. In an effort to limit their exposure to additional third-party claims, the FI entered into the settlement agreement with the USEPA which encompassed covenant not to sue and contribution protection.…

May 28, 2013

Owner of Paper Mill Site Agains Superfund Listing

Read here about the owners of a former paper mill site in Montana who are against designating the area as a Superfund site.…

April 26, 2013

Developer liable to clean up pre-existing contamination for failing to exercise “appropriate care”

Source: http://www.lexology.com, April 10, 2013
By: Honigman Miller Schwartz and Cohn LLP

A buyer of contaminated property was held to have lost its ability to claim to be a non-liable “bona fide prospective purchaser” under CERCLA because it failed to act appropriately with respect to hazardous substances it found on the site. As a result, the buyer was held responsible for cleanup costs.

From 1884 to 1972, fertilizer production on a 43 acre parcel of land in Charleston, SC caused releases of arsenic, lead and other hazardous substances into the soil. In 2003, Ashley II of Charleston, Inc. (Ashley) bought a 27.62 acre portion of the property to include it in a mixed-use project. After Ashley incurred response costs, it sued PCS Nitrogen, Inc. (PCS), as an alleged corporate successor to a company that had caused some of the contamination. PCS counterclaimed against Ashley and brought third-party contribution actions against others currently or formerly associated with the property.…