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Environmental Due Diligence Boot Camp
 
 
Lesson 2:   When Due Diligence Really Isn't 
 
 

 

 
There’s a common misconception that merely obtaining an environmental assessment report meets the requirement of exercising due diligence.  It’s not.

 

In the early days, none of us really had any idea of what should be included in an environmental assessment, and as a result, there were a lot of incomplete, inaccurate, and just plain outrageously-poor assessment reports generated.  And when some of these properties were later found to be contaminated, the new owners held up the assessment reports they had paid for and claimed protection from cleanup cost liability under the innocent land-owner defense.

 

What evolved in case law from these types of situations, during the latter half of the 1980s, and the early 1990s, is the concept that due diligence is fulfilled only if the assessment correctly identifies (within the limits of reasonable inquiry) the actual environmental quality of the property. 

 

 

In other words, if an environmental assessment is of poor quality and fails to reasonably determine that a property is likely to have been impacted by environmental contamination, then, for CERCLA-based statutory liability:

 

  • “all appropriate inquiries” were not completed,  
  • the requirement for due diligence was not fulfilled, and, 
  • the innocent land-owner defense can not be invoked. 

 

 

To satisfy due diligence in regards to other types of liability, the environmental assessment should also correctly determine whether the subject property has non-released hazardous substances located on it, and/or if there are other environmental conditions or hazards on the property which represent a significant health, safety, or

ecological risk.

 

  

This is important because what it says is:

 

A poor-quality environmental assessment is just as bad as no assessment at all. 

 

 

In either case, bad assessment or no assessment, you’re going to lose your only defense against being held responsible for the cost of dealing with any contamination or other environmental hazard that is located on your property.

 

 

This is why, for every transaction, it is essential that you get the best-quality environmental assessment you can, from most-competent person that is available in your geographical area. 

  

 
 
 

                                                                                                                                                                                             

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POSTED:  17 December 2010