Environmental Coverage in Real Estate Transactions: Reframing Environmental Uncertainty Through Risk Transfer
Author: Alex Brown, Senior Vice President, EPIC Environmental Practice Group
Environmental risk is one of the few transactional exposures capable of creating significant cost and disruption long after a deal closes. Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, commonly known as the federal Superfund law), liability is strict, can be imposed retroactively, and can be applied jointly and severally. As a result, a current property owner can be compelled to assume the full cost of remediating contamination caused by a prior operator decades earlier, regardless of fault or knowledge.
The statutory defenses that transactional parties commonly rely upon, including the Innocent Landowner defense and the Bona Fide Prospective Purchaser (BFPP) protection, are valuable but narrow: they address CERCLA liability itself, not the broader universe of common-law and state-law claims that can arise from environmental conditions. Contractual indemnities from sellers, while a common transactional tool, are only as reliable as the seller’s future solvency. Regulatory closures can be reopened, and the universe of regulated substances continues to expand, as illustrated by the designation of two PFAS compounds as CERCLA hazardous substances in 2024.
Environmental insurance offers a practical and increasingly essential solution: it converts unknown, potentially unlimited exposure into a manageable, structured cost. In today’s market, characterized by ample insurer capacity and competitive pricing, the opportunity to secure meaningful coverage is as strong as it has been in years.
Download the full white paper to learn how environmental insurance can protect investments, remove obstacles to closing, and preserve long-term asset value.
