Two recent Supreme Court decisions and new developments from the EPA this year have the potential to significantly impact commercial and residential developments and responsibilities. The results of these decisions challenge the provisions of the Clean Water Act; set clarification on insurance companies’ obligations; and change several regulations around stormwater practices.
In Sackettv. EPA, (decided March 21, 2012), the United States Supreme Court considered whether a person may challenge a compliance order issued by the EPA under the Clean Water Act.
The Sacketts received a compliance order from the EPA, which stated that their residential lot contained navigable waters and that the construction project the Sacketts were undertaking on their lot violated the Clean Water Act.
The Sacketts sought declaratory and injunctive relief from the Federal District Court, arguing that they were entitled to judicial review of the EPA’s determination prior to being forced to obey the compliance order. The District Court ruled that the Sacketts could not challenge the order. The Ninth Circuit Court of Appeals affirmed, concluding that the Clean Water Act precluded pre-enforcement judicial review of compliance orders issued under the Clean Water Act. The Supreme Court reversed the lower courts, and ruled that the Sacketts may bring an action for declaratory and injunctive relief under the Administrative Procedure Act to challenge the EPA’s issuance of the compliance order, before being forced to obey the order.
The decision is of potentially widerange significance and calls into question the general rule against pre-enforcement challenges and orders under other environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).
In Travelers Casualty & Surety Co. v. Providence Washington Insurance Co., 1st Cir., No. 11-2193 (decided July 11, 2012), the First Circuit Court of Appeals ruled that an insurer had a duty to defend its insured if the property damageat issue “potentially” occurred during the coverage period.
In this case, New England Container Co. (NECC) was insured by Travelers insurance company from 1969 to 1982, and Providence insurance company from 1982 to 1985. When NECC was sued for allegedly discharging waste at a site from 1952 until the 1970s, NECC tendered the litigation to Travelers and Providence. While Travelers defended NECC under a reservation of rights, Providence refused. As a result, Travelers sued Providence. The district court ruled in favor of Providence because the district court believed that the alleged property damage occurred before the commencement of Providence’s policy period. The First Circuit reversed, and held that looking only to the timing of the alleged polluting activities was too narrow of a focus. Instead, consideration should be given to the timing of the property damage.
A fair reading of the complaint against NECC gave rise to the possibility that pollution released before the policy period might have caused later damage to surrounding land and waterways. The First Circuit indicated that it was confident that a temporal overlap between the policy period and active business operations during which the alleged damage occurred was not necessary. While the case was decided under Rhode Island law, it should have implications elsewhere.
New Stormwater Regulations from the EPA
In the past year, the EPA has developed several stormwater regulations that have the potential to affect a wide range of businesses. The EPA’s decisions include a new construction general permit to regulate stormwater discharge; a template for builders to help them write their stormwater control plans; and a “notice of intent” to revise stormwater regulations to exempt discharges from logging roads.
The EPA has also set new requirements for stormwater discharges at construction sites, including a requirement that the topsoil at construction sites be preserved “unless infeasible.” This new requirement has potential negative consequences for development at construction sites because the topsoil is typically removed from property being developed as a result of its inability to provide a solid base for roads and buildings. Additionally, the regulation is not clear on what it means to “preserve” topsoil. It is reasonable to assume the EPA will remain active in this area. SKO is monitoring these developments from the EPA. If you have any questions or concerns about these changes and how they may affect your business, SKO is glad to discuss them further with you.
By Samuel D. Hinkle IV and Adam T. Goebel