Aon Environmental Services Group
On December 30, 2013, the Environmental Protection Agency (EPA) issued its final rule officially recognizing that the newly published ASTM E1527-13 “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process” is compliant with the All Appropriate Inquiries Rule (AAI) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). As such, parties seeking liability relief under CERCLA’s landowner liability protections (bona fide prospective purchasers, contiguous property owners, or innocent landowners) as well as recipients of brownfields grants for conducting site assessments will be considered to have met the standards and practices for all appropriate inquiries using the new standard. Although the EPA does not require a party to use the new standard, and to be clear, the final rule does not replace the current reference to ASTM E1527-05 in the AAI, the EPA “applauds the additional rigor and clarity” provided in the revised standard and “strongly encourages” environmental professionals and prospective purchasers to use the updated standard when conducting all appropriate inquiries.
The revised ASTM E1527-13 provides clarifications and additional guidance for the environmental assessment of commercial and industrial properties and the determination of whether there are recognized environmental conditions or conditions indicative of releases or threatened releases of hazardous substances at a property. Notably, the updated standard:
According to the EPA, the revised standard should reduce confusion on how to conduct a thorough AAI investigation and provide prospective purchasers with a better basis for making informed decisions regarding potential future uses of a property and obtaining protection from CERCLA liability. That being said, compliance with the AAI will not shield a purchaser from potential liability for third party toxic tort claims. Although indemnification from the seller may provide a potential avenue of protection, such indemnities are often limited in time and dollar and are dependent upon the continued solvency of the seller. Environmental liability insurance is another avenue of protection. Today, there is robust environmental insurance marketplace – and coverage can be structured to protect against liability for bodily injury, property damage and cleanup costs from historic as well as new pollution conditions. So, while the revised AAI standard provides valuable insight to a prospective purchaser, a more thorough risk management strategy should include consideration of additional risk mitigation tools such as environmental liability insurance in addition to possible indemnification from the seller.