Environmental liabilities can be incurred by a wide range of entities involved in the production, handling, ownership, or distribution of hazardous substances. This includes manufacturers, producers, property owners, distributors, and workplace operators. Often hinging on theories of negligence, failure to warn, or strict liability, these claims can expose companies to significant cleanup costs and personal injury damages. They can also lead to protracted toxic tort litigation.

Given the high stakes, environmental due diligence is essential to uncover potential liabilities before they escalate into regulatory enforcement actions or legal claims. By identifying potential contamination, assessing risk, and implementing proactive strategies early, companies can not only limit statutory and regulatory exposure but also reduce the likelihood of costly toxic tort litigation.

What is Environmental Due Diligence?

Environmental due diligence is conducted to identify liabilities under federal statutes, such as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), as well as applicable state laws governing environmental cleanup and water protection. However, the scope of risk assessment goes beyond regulatory exposure, statutory compliance, and potential agency enforcement actions. Environmental conditions such as groundwater or soil contamination, industrial emissions, asbestos exposure, and PFAs often form the basis of toxic tort claims. Early identification and assessment of these risks through environmental due diligence can reduce the likelihood of high-stakes litigation.

Comprehensive environmental due diligence typically involves the following:

• Phase I Environmental Site Assessment (ESA): A Phase I ESA review identifies Potential Environmental Conditions (PECs) and Recognized Environmental Conditions (RECs). This phase generally includes a historic property review, regulatory database searches, site inspections, and interviews with knowledgeable parties.
• Phase II investigations and sampling: If issues are identified during Phase I, a Phase II investigation involves testing soil, groundwater, and soil gas to confirm contamination, assessing its extent, identifying potential exposure pathways, and evaluating toxic tort risk.
• Regulatory and compliance review: Environmental due diligence also involves evaluating compliance with federal, state, and local laws. Permits, violation history, reporting obligations, waste management practices, and air and water discharge standards for industrial activities should be assessed.
• Remediation planning: If contamination is found, a company should work to develop remediation strategies that meet environmental standards.
• Contractual risk allocation: Environmental liabilities should be addressed contractually in asset purchase agreements, leases, and other transactional documents. Careful drafting of indemnification provisions, representations, and warranties can establish clear responsibility for remediation if contamination is identified and limit a company’s exposure.

When risks are not identified early, companies can face community-wide exposure claims, class action lawsuits, and mass tort litigation. While plaintiffs’ counsel will typically argue that a defendant “knew or should have known” of contamination, inadequate due diligence documentation can make such allegations far more challenging to rebut.

How Companies Can Manage Risk with Environmental Due Diligence

In today’s regulatory and legal landscape, environmental risk management is key to preventing toxic tort litigation. A comprehensive environmental due diligence program, a well-documented investigation, and early strategic action can dramatically limit exposure. In the event litigation does arise, a thoroughly documented due diligence record often becomes a fundamental element of the defense.

If contamination is identified, a company should implement a proactive mitigation strategy that includes remediation planning, ongoing monitoring, insurance coverage analysis, and strategic risk communication planning. Not only can these measures help reduce regulatory penalties, but they can also minimize the risk of litigation by demonstrating diligence, transparency, and responsible corporate conduct.

Importantly, environmental due diligence can create a strong record of what a company knew regarding any potential contamination and environmental risks, when it acquired that knowledge, and how it responded. While defendants in toxic tort actions commonly attempt to frame an environmental condition as the result of indifference, concealment, or delayed action, a well-documented environmental due diligence process can demonstrate that the company investigated potential risks, acted reasonably, and applied the necessary safeguards. Such records can be crucial in motion practice, settlement negotiations, and at trial.

Contact an Experienced Toxic Tort Attorney

For companies facing environmental uncertainty or defending against toxic tort claims, it’s critical to retain knowledgeable counsel who can help assess risk, coordinate technical experts, and create a solid defense strategy. Offering aggressive defense for businesses involved in toxic tort claims, Cosmich is committed to helping our clients protect their companies and bottom lines. With coast-to-coast offices, our attorneys are equipped to handle complex matters involving multiple claimants across jurisdictions. Contact us to schedule a consultation to learn more about our capabilities.