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Construction Insurance Bulletin


By June 1, 2008No Comments

In 1980, Congress passed The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) to address the issue of cleaning up hazardous substances at inactive or abandoned sites. The law is sometimes referred to as the “Superfund” because the cleanup program it established includes a Trust Fund used by the EPA and other agencies to clean up hazardous waste sites when the original polluter cannot be identified. CERCLA also requires the immediate reporting of any releases of hazardous substances at a construction site if the amount released meets or exceeds the level designated by the law as a reportable quantity.

The Emergency Planning and Community Right-to-Know Act (EPCRA), originated from CERCLA. This law requires the use of emergency planning, and provides citizens, local governments, and local response authorities with information regarding the potential hazards in their community. Before beginning the bidding process, the owner or developer needs to research the history of the construction site to find out if there was any hazardous substance use or disposal at the site. This review will give contractors a better understanding of potential risks and liabilities.

There is the likelihood that your project will be subject to Superfund or EPCRA requirements if hazardous substances are discovered during construction activities such as grading, digging or demolition. If your site was previously used for industrial or commercial activities that might have created hazardous substances, or there is the possibility that waste was disposed at the site, you should test the soil, surface water, and groundwater before beginning.

To determine if your construction site is subject to EPCRA emergency planning requirements, you need to determine if it meets both of the following criteria:

  • An extremely hazardous substance or any substance regulated by your state or local authority is stored on site.
  • A substance above the designated Threshold Planning Quantity is stored on site. The quantity varies by substance.

As for responsibility for meeting CERCLA requirements, if hazardous substances are discovered during construction, the contractor or subcontractor who first discovers it is responsible for notifying the general contractor, developer or owner. Because the hazardous substance was at the site before construction began, the developer or owner is responsible for seeing that the hazardous substances are handled and disposed of properly.

However, if you excavate or spread soils containing a hazardous substance, you might be responsible under CERCLA as an operator, arranger, or transporter:

  • You may be an operator if you spread soil that contains a hazardous substance on the land.
  • You may be an arranger if you dispose of a hazardous substance or arrange to have it removed from the construction site.
  • You may be a transporter if you move hazardous substance from one location to another.

If there is a hazardous substance release above the reportable quantity for CERCLA, you must immediately notify the National Response Center at 1-800-424-8802 and your State Emergency Response Commissions (SERC) and Local Emergency Planning Committees (LEPC). If there is an extremely hazardous substance release above the reportable quantity for EPCRA, you must immediately notify your SERC/LEPC. If no notification occurs, the owner, contractor and subcontractor may all be held responsible.

The penalties for non-compliance are stringent. EPA has the power to impose administrative, civil, and criminal sanctions on a property owner and/or contractor. Administrative penalties and civil penalties can reach $32,500 per violation per day. In addition to fines, you might need to cover legal fees. If legal action is taken against your construction site, you could also be the recipient of increased scrutiny by regulatory agencies at all the construction sites that you operate. Contact us. We can help you to identify and examine important developments in regulations.