Environmental Issues - How Should the Executor Respond?

• Pages: 333
• Publication year: 2021

Connecticut Bar Journal Volume 68.

68 CBJ 333. ENVIRONMENTAL ISSUES - HOW SHOULD THE EXECUTOR RESPOND?

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ENVIRONMENTAL ISSUES - HOW SHOULD THE EXECUTOR RESPOND

By LINDA J. McDOWELL*

This article discusses environmental concerns of which an executor should be aware and provides suggestions for how an executor(fn1) should respond to those issues. It begins with a brief discussion of major environmental laws, focusing on the liability and available defenses under broad-reaching federal legislation. Next, it addresses how the environmental laws apply to executors, comparing the traditional estate and probate law concerning title and liability to current federal environmental laws. Last, it suggests steps an executor can take concerning environmental problems, both before accepting the fiduciary position and after qualifying. The purpose of this article is to raise executors' levels of consciousness concerning their responsibilities, where potential or actual environmental problems exist.

1. THE ENVIRONMENTAL LAWS A

In General

The underlying policy of environmental laws is to provide federal and state agencies with power to identify contaminated sites or pollution events, to clean up and correct those sites and events, to recover costs related to such identification and clean up, and, where appropriate, to charge penalties. In addition, the laws are intended to impose liability on those parties who are able to correct the contamination or pollution and to remedy any existing violations; in effect, to place liability on "the deep pocket."

There are several agencies involved.(fn2) The two most significant ones from the Connecticut executor's point of view are the federal Environmental Protection Agency ("EPA") and the Connecticut Department of Environmental Protection ("DEP").

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There are many federal environmental laws.(fn3) The most significant is the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), which was later amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA").(fn4) Together these laws are known as "Superfund." The latter is a trust fund established to pay for initial clean-up costs.(fn5)

Further, the State of Connecticut has its own environmental statutes and regulations(fn6) These state laws have additional requirements of which an executor should be aware, which may be even stricter than the federal environmental laws.

This article will focus on CERCLA, because it is one of the most broadly applied of the federal and state laws and the one which will have the most impact on executors.

B. Liability Under CERCLA

CERCLA imposes liability for costs of removal, remedial and/or abatement actions(fn7) on parties who fall into one or more of the following four categories:(fn8)

1. The current owner or operator of the property on which the contamination occurs, but excluding parties who hold an indicia of ownership primarily to protect a security interest in the property and who do not participate in the management of the property;(fn9)
2. The owner and operator of the property at the time the hazardous substance was disposed of or the contamination was released;

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3. The party who arranged for disposal or treatment of the hazardous substance; and
4. The party who accepted the hazardous substance

Once one or more of these parties, known as "potentially responsible parties," are found liable under CERCLA, they are responsible for (i) clean up expenses; (ii) response costs, which include the expenses to assess and evaluate damages to the environment and natural resources and/or to the health of workers in the community, and to determinate the procedures required for the clean-up, as well as court and legal costs; (iii) any fines for failure to comply with orders; and (iv) criminal fines, where there has been knowledge of the violation.(fn10)

CERCLA is contrary to traditional tort law because it imposes strict (without fault) joint and several personal liability. In addition, this liability is retroactive and can be applied to events which occurred prior to (i)the enactment of CERCLA and/or (ii)the owner's acquisition of the property.(fn11) The law does allow, however, one strictly liable party to sue another for contribution,(fn12) but finding such a similarly liable party who has funds may not always be feasible.

C. CERCLA's Broad Scope

The legislative purpose of CERCLA was to establish a wide scope for its application. This underlying intent is evidenced by the broad definitions given to many of its terms. For example, 11 person" includes an individual, firm, corporation, association, partnership, joint venture, commercial entity, etc.(fn13) A "release" or "discharge" includes any spilling, leaking, emitting, leaching, dumping, as well as abandonment of barrels or other containers."(fn14) it should be noted, however, that "hazardous substance" is a term of art, the definition of which includes any substance which has been defined as hazardous (excluding most petroleum products) under all other federal environmental laws.(fn15)

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Federal agencies have aggressively applied CERCLA. For example, under the statutory definition of liable parties, owners of secured interests are specifically excluded in the statutory definition of "current owner or operator." This exception, however, has not stopped the federal agencies from imposing CERCLA liability on holders of such interests. For 'example, in United States v. Maryland Bank & Trust Company,(fn16) the court held a mortgagee bank responsible for prior property contaminations caused by the mortgagor, because the bank had become the owner of the property through foreclosure proceedings. The court determined that as a result of the foreclosure, the bank no longer qualified under the secured creditor exception.(fn17) Because federal agencies continued to undermine this secured creditor exception," the EPA in 1992 issued a final rule to provide clarification of how this exclusion should be applied.(fn18)

In addition, the corporate veil has been successfully pierced in several cases, where corporate shareholders and/or officers have been held personally liable for the corporation's violations of the federal environmental laws.(fn19) In these cases, however, the

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individuals personally had been involved in the corporation's decisions concerning hazardous substances and in carrying out those corporate decisions.

Federal agencies and the courts also have allowed the current owners of property to recover costs from prior owners of that property.(fn20) The courts frequently have rejected any defense by such prior owners, based on the presence of an "as is" clause in the sales contract.(fn21)

The courts appear to allow this bold application of CERCLA by federal agencies so that "deep pockets" can be found to help pay the clean-up costs. An executor should be aware that this broad and aggressive application of the law is accepted in the court systems, and therefore should know the statutory defenses available under CERCLA.

D. Defenses Under CERCLA

CERCLA provides potentially responsible parties with specific statutory defenses. These defenses are only available, however, if the defendant can establish that the release or threat of release of a hazardous substance and the resulting damages were caused solely by one or more of the statutorily defined defenses.(fn22) These defenses are as follows:

1. The "Act of God Defense" requires that an extreme and

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unforeseeable event be the sole cause of the violation. It is not often used, however, because it is difficult to establish that any 13such act was the sole cause of the environmental problem.(fn23)

2. The "Act of War Defense" also is seldom used but may be available if a defendant can establish that an act of war was the sole cause of the environmental problem.(fn24)

3. The "Third-Party Defense" has several variations. The first is "the innocent landowner defense," which requires that the contamination was due solely to an act or omission of a third party who was not an employee or agent of the defendant. The defendant must be able to establish (i) that there was no direct or indirect relationship (including a contractual relationship) between the defendant and the party responsible for the environmental violation, and (ii) that the defendant exercised due care as to the hazardous substance and took precautions against foreseeable acts or omissions of any non-agent/non-

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employee third party. (fn25)

The second variation is "the innocent purchaser defense," which allows the contractual relationship to exist between the defendant-purchaser and a seller who is responsible for the environmental violation. The defendant-purchaser, however, must establish (i)that at the time of the purchase, he had made inquiries which were reasonable, appropriate and consistent with good commercial or customary practices, as to the condition of the property, past owners of the property and past uses of the property,(fn26) (ii) that he was unaware that the property was contaminated, and (iii) that his actions have not contributed to the contamination.(fn27)

The last variation is the "bequest or inheritance defense," which the defendant may use if he can establish that he was unaware that his inherited property was contaminated and that he had made a reasonable inquiry as to the nature of that property. The federal courts appear to allow a minimal standard for the required "reasonable inquiry," where individuals are the

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defendants.(fn28) Although no cases have been found where the defendant-legatee using this defense was an institution or corporation, in such situations the courts may not be so lenient concerning the standard for "reasonable...