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Environmental Risk Assessment Prevents Negative Liability
Not conducting a proper environmental risk assessment could lead to liability under the Comprehensive Environmental Response Compensation Liability Act (CERCLA) and other environmental laws.
What are the potential negative effects of not conducting a thorough environmental risk assessment?
 

John Ingram, Vice President, ESIS, ACE
The purpose of conducting environmental due diligence prior to acquiring any property is to determine whether the property presents a liability risk. A thorough environmental investigation is particularly necessary if there is evidence that the property has ever been used for industrial purposes, or if there is any reason to think that contamination exists. Additionally, new landowners may be held liable under a variety of environmental laws. Liability under the Comprehensive Environmental Response Compensation Liability Act (CERCLA) is described as both strict joint and several, and it can be imposed on a current owner or operator of a facility or property, regardless of whether they played any role in causing the contamination. The remediation liability and associated defense and administrative costs can be considerable, resulting in decreased market value of the asset, as well as costs associated with investigation and cleanup.

Additional liability may arise as a result of natural resources damages, such as contamination of a water source, from property liens, or environmental liens that assume higher priority than other security interests. Land use restrictions or other deed restrictions may also affect a property. By conducting a thorough environmental due diligence investigation in accordance with the American Society of Testing Materials (ASTM) Standard, complying with the U.S. EPA All Appropriate Inquiries Standard (AAI) prior to acquisition, the new owner may be able to avoid exposure to liability in the first place and/or may be in a stronger position to negotiate an indemnification or purchase price adjustment.
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