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Common Environmental Claims Examples for Real Estate Owners - June 2012

When most people think of environmental damage the first thing that comes to mind is Erin Brockovich and evil energy companies dumping waste into a river.

While cases similar to the dramatized plot in Erin Brockovich do exist, there are many un-intentional situations that can lead to a catastrophic loss for real estate owners. 

Consider some of the following actual claim scenarios:

Example #1
The storage tank for a building owners backup generator slowly leaks over a multi-year period and the fuel spills into a drainage ditch, contaminating the building owners property and the adjacent site.  Total clean up costs exceed $1,000,000 

Example #2 
A property owner expanding their facility hires a paving contractor who sprays an oil-based binding layer on crushed aggregate planning to complete the asphalt parking and drive area the next day.  A heavy overnight rain causes the binding layer to run off into groundwater supply contaminating residential wells.  Total clean up costs exceed $500,000  

Example #3
Tenants of a large office building continually complained of odd odors.  The tenant decided to hire there own investigator and discovered Legionella in the HVAC system and parts of the plumbing.  Several building occupants alleged Legionellosis disease aka Legion Fever.  The building owner settled with several of the occupants and incurred costs for complete HVAC and plumbing system detoxification.  Total bodily injury and clean up costs exceeded $750,000

Example #4
A building owner leased space to a dry cleaning facility.  PCE was detected on-site, in the groundwater and at an adjacent shopping center.  The building owner was required to remediate the contaminated soil and groundwater with total costs of $460,000

Example #5
A property owner had a tenant who began to smell a pungent odor and heard noises in the walls.  The property owner called an exterminator who discovered an exterior wall housing a colony of thousands of bats.  The Health Department determined the property was uninhabitable because of poor air quality resulting from the ammonia in bat guano.  The bats could not be exterminated because they are a protected species.  The building owner sustained a substantial loss of rental income and diminution in property value.  The owner eventually constructed bat houses to entice the bats to leave.

Example #6
The tenant of a property owner complained of dust conditions in their suite from tenant improvement operations being conducted at adjacent suites.  The tenant took dust samplings which revealed the dust was laden with heavy metals (aresenic, cadmium, chromium and lead).  The building owner was forced to hire an environmental contractor/consultant to investigate and remdiate the dust increasing the tenant improvement costs by $100,000.

This is just a small sampling of actual claim examples faced by Real Estate owners. 

The largest environmental claims do stem from the improper storage and disposal of pollutants by manufacturing tenants.  Claim examples were not provided for this exposure, but just imagine if you leased the facility or land to the energy company in the Erin Brockovich dramatization!