Landowners who know their properties are contaminated may be liable for damages, even if they didn’t contribute directly to the pollution, according to a recent appellate decision. In JDN Properties, LLC v. VanMeter Enterprises, Inc., the Indiana Court of Appeals reversed summary judgment for the seller and remanded the case for trial on the buyer’s claim for damages under Indiana’s Environmental Liability Act. Under the Act, a person may recover removal or remediation costs involving hazardous substances or petroleum against a person that “caused or contributed to the release”.

The court recognized that the Act does not permit claims against landlords “who by all counts …were not involved in the alleged release of hazardous substances and had no knowledge of the release.” But a landlord who knows of pollution on the property may be liable. “We conclude that a landlord who has knowledge that a tenant’s use of land is causing environmental contamination, but does nothing to halt or remediate such contamination and goes on to sell that property to a third party without disclosing the property’s condition, may fairly be said to ‘share responsibility’ for or contribute to such contamination.”

The implications of this decision are most likely to fall on property owners with commercial or industrial tenants, such as dry-cleaners or manufacturers that use hazardous substances in their operations. But residential landlords also may be on the hook. As just one example, a residential property owner could face liability under the Act if a tenant is using his apartment as a meth lab. The costs to remediate environmental contamination can be substantial, potentially running in the tens (or even hundreds) of thousands of dollars.

You should consult with legal counsel about potential liability under the Act. Knowledgeable counsel can also assess whether existing insurance coverage, such as a   conventional CGL (commercial general liability) policy, will cover the costs of defending and indemnifying against any such claims.

This article originally appeared in INSites magazine, a publication of the Indiana Apartment Association (IAA). The article is re-published on Taft’s web site with permission from the IAA.