Question of the Month: What is the least expensive way to transfer environmental liability for uncontrollable exposures? by Howard Tollin

Howard Tollin, SterlingRisk Environmental Services

There are many environmental laws in place to control exposure to toxic chemicals. However, chemicals that were in frequent use decades ago remain as contaminants in our soil, air, and water, along with the chemicals we use and rely upon in our day-to-day lives. We can’t control what migrates onto our property from those who may be less conscientious of the environment and the law. Additionally, accidents happen; we can’t always control what migrates off of our property, either.

Perchloroethylene (perc), a hazardous solvent used by most dry cleaners, can travel as a vapor through elevator shafts and air vents and migrate onto neighboring properties. More importantly, perc persists in soil and groundwater for a long time; even if all dry cleaners responsibly shift to safer chemicals, we must still deal with historic impacts.  The chemical is harmful to the immune, reproductive, and central nervous systems, can cause permanent liver damage, and has been linked to increased rates of kidney cancer in neighborhoods with a lot of dry cleaning shops–a clear basis for being sued.

Dioxane is another likely carcinogen able to cause kidney damage, liver damage, and respiratory problems. The chemical is a byproduct of and can be found in many personal care products, such as deodorants, shampoos, toothpastes and mouthwashes. (https://www.organicconsumers.org/news/natural-consumer-products-found-contaminated-cancer-causing-14-dioxane-groundbreaking-analysis). Like perc, dioxane has also been found to have migrated into people’s homes. The solvent is highly water-soluble, does not readily bind to soils, easily leaches into groundwater, and it is resistant to naturally occurring biodegradation processes. Due to these properties, a dioxane plume may extend over a wider area and have a further downgradient than its associated solvent plume, beyond the control of those responsible for the pollution. Vapor intrusion is a real problem in areas with dioxane-contaminated groundwater, and has been the subject of many claims and lawsuits.

There are many other chemicals which can migrate onto or off of our properties and subject us to suit. Perfluorononanoic acid (PFNA), a chemical used in making plastics; perfluorooctanoic acid (PFOA), used to manufacture products such as Teflon and Gore-Tex; and perfluorooctane sulfonate (PFOS), which was a key ingredient in ScotchGuard and is commonly found in fire extinguishing foams, microwave popcorn wrappers, and other consumer and industrial products; have also been the subject of multiple claims and lawsuits upon their discovery in drinking water. PFNA is linked to kidney disease and cancers in rodents, and the New Jersey Water Quality Institute concluded the chemical has adverse effects on humans as well. Likewise, PFNA, PFOA, and PFOS are linked to endocrine, immune, and reproductive damage in humans.

Environmental conditions can harm property owners not only by way of claims and cleanup costs–but for as  long as the condition persists–business may be interrupted. General liability and property policies provide business interruption coverage only when there is a covered event and those policies have pollution exclusions. Under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and analogous state laws, owners and operators, both present and former, are potentially responsible parties, and liable for cleanup costs. If the corporation doesn’t have sufficient funds to cover cleanup costs, the corporate veil may be pierced under state law and the shareholders, officers, or directors may be personally liable. In addition, operators are considered individuals under the law, and are subject to suit even without corporate veil piercing.

As you can never really know or control what’s migrating onto your property or off of it, insuring against environmental risks is one of the wisest business decisions you can make. Environmental insurance is available to provide owners and managers of residential and commercial real estate with essential, affirmative pollution liability coverage for mold, lead, and asbestos. There are policies that address contamination migrating onto or from your property, as well as all associated liability and business income interruption loss. Programs such as SterlingRisk’s GREEN Program brings the cost of insuring against uncontrollable environmental risks to as low as $750 per property, making environmental insurance the least expensive way to protect yourself against that which you cannot control.

Howard Tollin, J.D., is the executive vice president and president, environmental at SterlingRisk Environmental Services, a member of the SterlingRisk Group of Companies, Woodbury, N.Y.