LiabilityFeedback

Third party (or private) liability is an important insurance issue. In addition to liability risks that insurance can help reduce, a redeveloper (and perhaps other associated financial stakeholders) may obtain through federal and state government officials an appropriate releases from possible liability. Such releases or clarifications may be incorporated into PPAs, CNTSs, no further action letters, and comfort letters. The documents likely will be tailored to the facts about the specific site and will likely be contingent upon adherence by the redeveloper to certain conditions or commitments.

Accordingly, such documents may provide some legal comfort to those involved in revitalization, but they may not always be available on acceptable terms; they are not uniform from site to site or state to state and may provide protection only against possible liability to the federal or state agencies that co-sign the agreement.

If an individual involved in the revitalization was in some way legally liable for the original contamination at the site, that individual could enter into a CERCLA settlement with EPA which can provide protection against claims by third parties for further financial contributions towards cleanup of the site.

New statutory provisions insulate financial institutions from liability unless they become active managers of the property in which they hold a security interest. This statutory protection should help to alleviate certain concerns that lenders have had about potential liability under CERCLA.

There are distinct elements to liability risks, starting with parties that want to file suit for action or for damages, and continuing into their right to do so, which may be limited by private agreements or public policy and law, and ending with the likelihood of their success in their suit.

However, one type of third-party liability poses a special concern. No legal mechanism exists at present (at either the federal or state level) to totally insulate the redeveloper, its financial backers, or other major participants in the revitalization of potentially contaminated sites from possible liability to a third party who claims to have been injured by contaminants that originate from the site. Such an injured third party may exercise legal rights under CERCLA or applicable state law to seek damages or another remedy against the redeveloper. Some states limit access to the state courts for third-party liability claims based on site conditions after the completion of a state-approved mitigation, entered into specifically to avoid this type of liability. Financial stakeholders in revitalization projects can decrease liability risks through:

Insurance coverage also is commercially available to cover third-party environmental damage claims and expenses resulting from such claims.