Night Of The Corporate Zombies – How Undead Corporations Can Help Fund Oregon’s Environmental Cleanup

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Tonkon Torp LLP

We all know that corporations and limited liability companies can die. In actuality, they are dissolved and given time to wind up their affairs, but the point is that after five years following proper notice to potential creditors and other claimants, they effectively become “dead and buried.” As such, they are no longer subject to suit (see ORS 60.644 and 63.644). However, the operations of several such dead and buried companies have been found to have contributed contaminates to Superfund sites such as Portland Harbor. This has created complications when it comes to assigning liability.

Companies still operating that caused contamination decades ago likely had general commercial liability insurance policies at the time of contamination – policies that did not exclude claims for damages from pollution. Therefore, when government agencies or private parties today make claims against such companies for the cost of environmental cleanup, the companies tender defense and indemnity to the insurers that issued them the decades-old policies.

If, however, a claim for cleanup costs is made against a dead and buried company, the claim is barred and the contaminating facility becomes an orphan. If the contaminating facility has no current owner, or the current owner is protected from liability by agreement or by statute, then taxpayers or other parties to the cleanup have to absorb the clean up costs that would otherwise be attributable to the orphan site.

This funding gap, resulting from orphans of the dead and buried has become the mother of invention for a novel remedy – the corporate zombie! Creative lawyers have argued that in order to gain access to a broader set of insurance policies, the dead and buried should become undead. These efforts have led to Delaware and other states creating procedures for granting claimants access to the environmental policies of defunct companies.

Now, the Oregon legislature has passed HB 2377, which will cause dead and buried corporations that once had insurance coverage for pollution to rise again 90 days after adjournment sine die—at least for the limited purpose of satisfying environmental liability claims covered by such insurance. Come this Fall, there will be a very real zombie squad helping to clean up Portland Harbor and other contaminated sites throughout Oregon.

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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