By now, most people assume that environmental legislation is based solely on the theory that the “polluter pays”, but few people think about what happens when an executor, attorney or trustee steps into the shoes of a former “polluter”. How does the law treat such personal representatives and could they face liability even if they did not cause or contribute to the mess?
Of course the short answer is, “it depends”, but the fact that they could face this type of liability at all just might be a shock to most personal representatives. Under some provincial and federal environmental regimes, the tough “polluter pays” legislation also extends the liability net to include: “persons responsible” who can include a successor, assignee, executor, administrator, receiver, receiver manager or trustee of the owner of a contaminant or contaminated property, regardless of whether the person responsible caused or contributed to the contamination themselves.
The obligations that come with being designated as a person responsible under environmental laws can include being subject to orders to identify, monitor and assess the contamination onsite and develop and implement a plan to clean up the contamination; all of which can be costly endeavours. Worse yet, failing to meet the obligations as a person responsible can lead to fines, and in some jurisdictions, even jail time for a breach of environmental laws.
However, although the liability net is broad at the outset and does extend beyond polluters, most jurisdictions have recognized some limited protectionfor administrators, attorneys, trustees and other personal representatives, provided that these parties do not:
- exercise care, management or control over the site, activities resulting in the contamination, or the contamination itself;
- act in a reckless or grossly negligent manner in dealing with the contamination or the contaminated property; or
- cause or further contribute to the contamination themselves.
The wording of the protection from liability varies from jurisdiction to jurisdiction, so it is important to understand what activities of a personal representative are, and more importantly, are not protected. It is also important to remember that the protections from liability in some jurisdictions simply put an upper limit in place on the value of the liability to no more than the costs of the assets administered by the personal representative. Some jurisdictions allow the personal representative to except their reasonable administration fees from these limits, while others do not. In addition, it should be noted that regulatory limitations may not protect against civil liability to third parties (such as adjacent landowners) affected by the contamination or regulatory responsibility for contamination that has migrated off-site. It should also be noted that the practice of personal representatives obtaining court orders that further limit their liability (beyond statutory limits) have recently been called into question unless the relevant environmental regulator has been given notice of the limitation and has agreed to its terms.
Clearly, environmental liability can be a potential nightmare for personal representatives, attorneys and other fiduciaries. An executor or administrator might be aware of the potential risks when agreeing to take on the estate of a deceased who owned or operated a dry-cleaning or gas station business but may not be as aware of these issues in other situations. Environmental risks on farm properties, for example, can include:
- improper storage and disposal of some very toxic (even banned) pesticides and herbicides such as DDT; rat poison; and arsenic;
- underground and above ground fuel storage without containment;
- leaking/unlined manure lagoons;
- contamination and/or special waste disposal costs associated with “bone yards” of old farm implements/equipment;
- the presence of unidentified hazardous wastes (e.g. stockpiling PCB containing electrical transformers, asbestos containing materials, and others); and
- contamination associated with“vermin” (such as hanta virus from deer mouse droppings) and mould which require remediation before sale.
So what should a prudent individual or corporate trustee contemplating acting as a personal representative or other fiduciary do? Truly the only way to assess the environmental risks on any given property is to know as much as possible about the history of the property and about the activities of the deceased or incapable person with respect to their use of the property before accepting the position. In addition, not“intermeddling” (i.e. taking steps that could be characterized as exercising“care, management or control” over the property or otherwise holding oneself out as the representative) before deciding whether or not to renounce the appointment can be critical. Knowing how the environmental laws in your jurisdiction treat personal representatives is also essential to assessing the risk of environmental liability in any given situation.
If a decision is taken to act as personal representative or other fiduciary, a myriad of other challenges can arise with respect to the estate administration. A sampling of these challenges includes:
- Whether or not to continue an existing business as a question of risk management;
- Obtaining insurance coverage for contaminated lands (although more insurance products have become available in recent years, this type of insurance may be quite costly);
- Challenges in selling contaminated land which can include, in addition to obvious concerns, the ability of prospective purchasers to obtain financing;
- Sale documentation may need to be varied to provide additional protection for the vendor personal representative;
- Beneficiaries may choose to decline the gift; and
- Careful record-keeping to demonstrate that the personal representative took reasonable steps to respond to the situation can be extremely valuable protection later on.
For the individual planning his or her estate, consideration of any potential environmental issues can be very helpful, including inserting appropriate clauses in the Will (or other relevant document) which can be of assistance to the personal representative if any environmental issues should arise. Such a clause might allow the personal representative to expend as much of the estate as required for investigation and remediation. The individual might decide to obtain additional life insurance to address any such concerns. As well, the individual can accumulate historical information and documentation which may be of assistance in the future.
Although potential environmental liability may not be a concern for most estates, where it does arise it can pose an unexpected challenge and considerable costs for the unwary. As noted above, knowing the property and the laws in your jurisdiction are essential, but these laws are complex and vary from jurisdiction to jurisdiction. To address your particular situation, please contact one of our private client services or environmental lawyers.