Washington Court Addresses Contractual Allocation of Environmental Cleanup Liability

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Parties who want to shift or limit their liability for environmental cleanup would do well to heed the latest Washington Court of Appeals ruling, which found that an expired contractual indemnity agreement was insufficient to preclude later liability for cleanup costs under the Washington Model Toxics Control Act (“MTCA").

In Hulbert v. Port of Everett, the Port acquired the defendants’ property, which had a lengthy history of industrial uses dating back to the early 1920s. Both parties to the transaction knew that the property likely had environmental issues. The sellers agreed to indemnify the Port against liability arising from the presence of hazardous substances, but only for three years after the date of sale. The parties established an escrow account funded with a portion of the sellers’ proceeds from the purchase price and used it to pay for investigation and cleanup costs related to an environmental issue identified prior to closing. After the cleanup was completed, the sellers received the remainder of the escrow funds, and the Port did not require the sellers to perform any additional cleanup during the three-year period after closing.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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