Property Types

Property Developers

Property development, or real estate development, is a process that involves a wide range of activities, from the renovation and resale of existing buildings to the purchase and improvement of vacant, undeveloped land and the subsequent sale of developed properties or parcels to others. Property development involves many potential environmental hazards and pollution risks for the property owner and the contractors working at the site. Releases of contaminants at a site could enter storm drains, on-site drywells, and sewer systems, leading to third-party claims for property damage. Sites with buildings present may receive third-party claims for bodily injury from mold or other pollutants and the accidental disturbance of asbestos and lead-based paint during renovation or demolition of the building.

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Environmental Exposures May Include

Historical Land Use and Strict Liability
Abandoned Legacy Tenant Waste
Heavy Equipment and Refueling Tank Leaks
Soil Erosion
Radon Gas
Asbestos
Waste Management
Mold
Toxic Smoke
Illicit Abandonment
Landfill Contaminant Off-Site Migration

Historical Land Use and Strict Liability

Prior land use, such as manufacturing, industrial facilities, gas stations, and dry cleaners, could have contaminated soil and groundwater with heavy metals, chemicals, and petroleum products at the site. Aboveground storage tanks (ASTs) and subsurface structures, including underground storage tanks (USTs), may have also operated on the site or get discovered during property development. Pollutants could migrate and enter drywells and storm drains, damage sewer systems and contaminate soils and groundwater on the site and neighboring properties. Since pollution laws fall under the doctrine of Strict Liability, no negligence standard is required, and the property developer may be held responsible for addressing cleanup or remediation of the property, even without prior knowledge.

Abandoned Legacy Tenant Waste

Property developers may be held responsible for any contamination or cleanup of pollutants from previous activities. A release of hazardous materials could have resulted from improper storage, containment breaches, and leaks or spills of materials. Previous occupants may also leave behind hazardous materials.

Heavy Equipment and Refueling Tank Leaks

Heavy equipment and portable refueling tanks may be brought to the property. Release of fuels, lubricants, oils, and chemicals resulting from accidental spills or leaks, or vandalism can discharge pollutants into the soil and groundwater and require cleanup.

Soil Erosion

During excavating and grading work, there could be a large proportion of bare ground and exposed earth that leaves soil highly vulnerable to erosion by wind and water. Improper erosion control can lead to surface run-off of silt and sediment, impairing the proper functioning of stormwater drainage systems, causing ecological damage to streams and rivers, and causing adjacent property damage.

Radon Gas

Radon gas could be discovered during site development and may require mitigation to remove it. Radon gas is the second leading cause of lung cancer in humans. Radon gas could be discovered in newly constructed homes or buildings on the developed property. Construction techniques must help mitigate the radon in new structures, including homes, apartments, or office buildings.

Asbestos

Existing buildings could be contaminated with asbestos-containing material (ACM) or lead. ACM may be present in older buildings in duct insulation, piping, furnaces, boilers, tanks, and fireproofing insulation. ACM may also be present in ceilings, walls, flooring tile, and mastic. Lead could be present in paint or water pipes and solder used during the construction of the buildings Tort claims may result from accidental disturbance during demolition, renovation, construction, or interior remodeling.

Waste Management

Wastes collected from the site or generated during development operations could be hazardous. Improperly segregated and disposed of wastes can result in regulatory fines or lead to cleanup and environmental tort liability.

Mold

Mold may be present in buildings from moisture intrusion due to storms and flooding or from leaking water pipes, sprinklers, and HVAC systems. Mold could also develop in HVAC systems, such as air handling units, coils, and ductwork, or from improper building ventilation or humidity management of climate-controlled storage while the building was in use.

Toxic Smoke

A fire at the buildings on a site could emit toxic fumes and smoke from the materials stored in the buildings or due to a mix of materials that occurs due to the fire. Firefighting solutions such as water and foam could create contaminated run-off that spreads to nearby storm drains or properties, resulting in environmental cleanup and tort liability.

Illicit Abandonment

Illicit abandonment is the illegal dumping of pollutants on a property by a third party. It can become the property owner’s burden for cleanup and third-party bodily injury or property damage if law enforcement cannot locate the originator of the waste.

Landfill Contaminant Off-Site Migration

Although unlikely, a situation may occur where the property may have been an abandoned landfill. Contaminants from landfills can potentially migrate off-site and contaminate neighboring properties, causing third-party property damage and third-party bodily injury claims against the developer.

Environmental Pollution Liability Can Provide Coverage For

On-site cleanup of new and pre-existing pollution conditions

Off-site cleanup of new and pre-existing pollution conditions

Third-party claims for bodily injury and property damage

Third-party claims for clean up

Both sudden and gradual pollution conditions

Aboveground and underground storage tanks

Mold, bacteria, viruses, legionella, and more

Civil fines and punitive damages, where allowed by state law

Business interruption resulting from pollution conditions

First and third-party transportation pollution liability

Loading and unloading

Defense costs for third-party claims

Silt and sedimentation

Illicit abandonment

Natural resource damage

Diminution in value

Non-owned disposal sites

Claims Scenarios & Examples

Tenants of an upscale apartment complex noticed mold in the bathrooms only a few years after the apartment was constructed. Over the next few months, more and more units and buildings experienced similar problems. After the investigation, it was found that construction defects in the plumbing and HVAC systems caused water intrusion and moisture to build up, which led to extensive mold growth. The property owner faced $2 million in costs between litigation, loss of rent, clean up, and lawsuit settlements.
During the development of a residential community, a contractor’s method of controlling soil erosion failed, resulting in excessive soil run-off into a local creek. Additionally, the erosion control method resulted in elevated levels of phosphates in the run-off that caused excessive algae growth. A lawsuit was filed against the development owner and contractor, claiming they violated the Clean Water Act and State Laws. The development owner then sued the general contractor for breach of contract.
During a housing development project, it was discovered the land was previously a hazardous waste landfill, and the soil was contaminated. The discovery resulted in a project delay as the state required an environmental assessment of the soil. Testing was done on the property, and hazardous waste, including chemical solvents, was removed. Additional concerns for the groundwater were brought up as well. The property developer had to pay for the chemical waste removal.
Contaminated groundwater was found on a previously undeveloped property during excavation and dewatering. Contaminated soils were also discovered at the site. It was determined that the contamination originated and migrated from a nearby manufacturing facility several years before the development project. State regulatory authorities required the developer to collect, test, and treat groundwater pumped out during excavation. Due to these discoveries, there were construction delays and additional expenses totaling over $1 million for the developer.
Residents discovered their homes had been built on contaminated soil, significantly dropping their home values. The current and former residents sued the developer for the diminution in value and health problems that the residents were experiencing, including asthma, cancer, and congenital disabilities. The developer agreed to pay out $7.2 million to the residents as part of the settlement.
A property developer demolished an old smoke stack as part of a redevelopment project. The demolition of the smoke stack caused thick dust to fill the air and settle around surrounding homes. A class-action lawsuit was filed against the developer by neighbors for distress, nuisance, and property damage caused by their failure to contain the hazardous dust. In addition, the residents sued the developer to clean up the impacted homes and businesses, pay for temporary housing and perform testing and monitoring for pollutants.
A property developer created a mixed-use retail center with restaurants, retail stores, and condominiums by converting an older building. Several months after moving in, residents complained of headaches, nausea, and other illnesses. Investigations found the source to be vapor intrusion from polluted groundwater that migrated from a leaking underground storage tank at the gas station next door. The entire building had to be shut down to mitigate the vapor intrusion. The developer was out hundreds of thousands of dollars from lost income, living expenses for the displaced residents, cleanup and property improvement costs, and bodily injury expenses for those alleging illness from the vapor exposure.
A real estate development firm purchased farmland and planned to build a mall. They hired a consultant to perform a Phase I ESA, who did not find any environmental concerns with the property. However, when work on the mall started, 100 drums of pesticides and herbicides were found buried. These chemicals contaminated the soil, and the farm had to pay for the removal. The disposal and remediation of the land cost over $750,000.

Final Consideration

Your business can be faced with the cost to defend itself against allegations or legal action from pollution related events, regardless if you are fault or not. Having the proper insurance coverage in place will help fund the expenses incurred to investigate or defend against a claim or suit and provide you with environmental claims handling expertise.

This environmental risk overview offers a general understanding of potential risks and may not reflect all risks associated with your business. Environmental Risk Professionals has compiled this overview for informational purposes only. This overview does not constitute legal opinion or advice, nor does it establish a consultant-client relationship. This overview is not intended to guide project parties in interpreting specific contracts or resolving disputes; such decisions may require consultation with counsel and depend on various factors. © 2025 Environmental Risk Professionals, LLC

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