ERP - Environmental Risk Professionals

CERCLA Operator Liabilities

Tenant operations may include storing and using chemicals, generating wastewater, or releasing toxic or hazardous air emissions, which could cause on-site or off-site contamination, third-party injury claims, or natural resource damages. A property manager may be considered an “operator” under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (Superfund) with only minor involvement in the environmental activities of a tenant. Superfund laws are joint and several, and property managers could be independently liable for cleanup or third-party claims related to contamination resulting from tenant operations.

Meth and Cannabis Structural Contamination

Tenants may perform operations, such as illegally manufacturing methamphetamine or growing cannabis. The hazardous chemicals used and produced to make methamphetamine can seep into floors, ceilings, walls, and ductwork. Indoor cannabis cultivation requires elevated humidity and warm temperatures. These conditions could lead to mold growth, bodily injury, or cleanup claims. If a property manager is responsible for screening, approving, or monitoring tenants, they could incur liability for cleanup and third-party claims related to tenant operations.

Equipment Fluid Leaks and Spills

Various equipment, such as emergency generators, hydraulic elevators, and boilers, may be at the property. Properties may also have containers or tanks on-site storing fuels, oils, hydraulic fluids, water treatment chemicals, and other chemicals used in equipment or for building operations and maintenance. Leaks or spills of chemicals, fuels, fluids, etc., from vehicles, equipment, containers, or storage tanks can contaminate soils and groundwater or collect in stormwater run-off, resulting in liability for the property manager. Malfunctioning building equipment or improperly ventilated equipment can also produce carbon monoxide emissions, injuring third parties and resulting in liability for the property manager.

Pesticides

Pesticides, herbicides, fertilizers, and insecticides may be applied at a property for landscape maintenance. Property managers who are responsible or hire third parties to perform this service could incur cleanup liability due to overuse, misapplication, or spills of these chemicals. They also could be sued for bodily injury if these chemicals harm third parties.

Mold

Mold or bacterial growth within a building can occur from inadequate or improperly functioning ventilation systems and moisture intrusion due to storms, flooding, leaking water from pipes, sprinklers, and HVAC systems, and spillage of irrigation water. Mold growth in buildings can require cleanup or result in third-party bodily injury or property damage claims for the property manager.

Legionella

Legionella is a bacterium that causes a form of potentially fatal pneumonia. Legionella can thrive in water-containing systems like misters, heaters, air conditioning systems, plumbing, and water features. Poorly maintained systems and inadequate corrosion control or sanitation can result in Legionella growth and dispersal through mist and airborne droplets. Exposure can lead to illness and result in bodily injury claims. If a property manager is responsible for maintaining water-containing systems, they could be liable for claims related to legionella.

Sick Building Syndrome

Sick Building Syndrome refers to a situation where building inhabitants suffer from health problems that occur and are aggravated while in a building. It is often attributed to poor design or maintenance of a building’s ventilation system. Exposures that can contribute to an unhealthy indoor environment include mold, bacteria, formaldehyde, nitrous dioxide, carbon monoxide, radon, pesticides, pollen and viruses, and various volatile organic compounds.

Asbestos

Older buildings may contain asbestos or lead-based paint (LBP). Asbestos-containing material (ACM) may be present in insulation, ceiling tile, wallboard, roofing, flooring, and mastic. Surfaces may be painted with LBP. Tort claims may result from accidental disturbance during maintenance activities or alleged exposure during renovation, construction, or interior remodeling. Property managers can incur liability if they are responsible for hiring, managing, or overseeing contractors performing these activities.

Pool Chemicals

Pool chemicals are highly concentrated and typically very reactive and can harm third parties or contaminate drinking water sources or surface waters. A property manager responsible for pool maintenance or who hires a third party to perform pool maintenance can incur liability due to misuse, over-application, improper storage, and spills or leaks of pool treatment chemicals.

Waste Management

Property managers may arrange for the disposal of wastes associated with a building they manage. Wastes classified as hazardous or requiring special handling may include restaurant grease, used oil and antifreeze, lead-acid batteries, fluorescent bulbs, lead-based paint debris, asbestos-containing materials, and pesticide waste. Improperly segregated and disposed of wastes can result in regulatory fines or lead to cleanup and environmental tort liability for the manager.

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

Defense of third-party claims

First-party emergency response costs

Both sudden and gradual pollution conditions

Mold, bacteria, Legionella, and more

Aboveground and underground storage tanks

Civil fines and penalties, where allowed by state law

Business interruption resulting from pollution conditions

First and third-party transportation pollution liability

Loading and unloading

Illicit abandonment

Non-owned disposal sites

Asbestos and lead

Natural resource damage

Claims Scenarios & Examples

A property management company had broad responsibilities for managing property, including ensuring compliance with applicable laws and regulations where a dry cleaner was operating. The property management company notified the dry cleaner of the Environmental Protection Agency’s (EPA’s) reporting requirements related to tetrachloroethylene and requested evidence that reporting had been completed. The dry cleaner had contaminated the Site with chlorinated volatile organic compounds. EPA considered the property management company an “operator” under Superfund and, therefore, a responsible party in the cleanup of the property.

Mold growth occurred throughout an apartment building after the renovation of its heating, ventilation, and air conditioning (HVAC) system was performed by a contractor. Over one hundred building residents sued the building owner, property manager, and contractor for $3.8 million for bodily injury and property damage related to the mold.

A water heater for a commercial building had a leaking flue pipe that released carbon monoxide into the basement. A restaurant tenant in the building used the basement to store its supplies. One of its employees went into the basement to retrieve some supplies and died due to carbon monoxide poisoning. The deceased’s family sued the building owner, who, in turn, sued the property manager, alleging that the manager was liable because they did not adequately maintain the heater.

A property management company maintained an apartment complex’s pool and hot tub facilities. An outbreak of legionella occurred that sickened several people. Testing identified elevated levels of legionella in one of the hot tubs. The property management company was sued for bodily injury.

A tenant had operated an illegal methamphetamine manufacturing operation within a multi-tenant commercial building for close to a year before a property management company discovered the operation. Unfortunately, vapors and residues of methamphetamine were detected throughout the space. The property manager had to pay a contractor more than $50,000 to clean the property so it could be safely occupied.

A child suffered an asthma attack and could not breathe, resulting in brain injury from lack of oxygen. The child lived in an apartment with a serious mold infestation that the property manager had not addressed, despite months of complaints by the child’s family. The property manager was sued, and the suit was settled for $9 million.

A large commercial building with heating oil storage tanks and boilers was required to have an air pollution permit. The city sued the property management company for violating air pollution regulations, seeking past permit fees and civil penalties of $10,000 per day of violation.

A property management company was responsible for inspecting and maintaining a heating oil tank in the basement of an apartment building. The heating tank failed, spilling approximately 1,800 gallons of heating oil. The oil flowed into a floor drain, which discharged into a storm basin. Extensive cleanup was required.

Two children suffered seizures and other neurological problems shortly after they moved into an apartment. It was discovered that the apartment complex manager had used a pesticide incorrectly. It was supposed to be placed into cracks and crevices but was applied to baseboards and sprayed on carpets. The family sued the management company, and a jury awarded them $23.5 million.

Property Types

Property Managers

Environmental Exposures May Include