Tips for Any Business: New York’s Oil Spill Law

Even those readers who spend summers sailing Chautauqua Lake, or those setting out for more distant ports, might not be familiar with Article 12 of the Navigation Law. This law really has nothing to do with sailing or navigating New York’s waterways, but it can be a vitally important liability concern for anyone operating a business.

Article 12 was enacted in 1977, about the same time as Superfund was created on the state and national scene. Superfund establishes a continuing fund of money to pay for environmental remediation caused by certain hazardous pollutants. Remediation of spills into soil and water can be a lengthy and expensive process, necessitating an independent funding source to keep projects underway. What makes Article 12 a topic that every businessperson should be aware of is the type of pollutant. The Superfund legislation covers various exotic and dangerous chemicals, but exempts petroleum based pollution. Article 12 of the Navigation Law is known as the “oil spill law” but really it covers any release of petroleum products. Cases have been brought in New York courts concerning underground fuel tanks, leaks from household furnaces, and spillage from overfilling on a mobile home kerosene tank, to name but three examples.

Some readers may see connections between this law and your business operations, but for others the connection is much more diffuse. To combat endless finger pointing and litigation between potentially responsible parties, the Navigation Law Ã?§181 is uses the simple maxim of “strict liability.” If you fit within the statutory definition of “discharger,” you’re responsible for the cleanup bill. Discharger is a broad category which encompasses most property owners, tenants and certain businesses having contact with the property. The State can bring suit against anyone held to be a “discharger” under the law to recoup cleanup expenses. Faultless owners, even though “dischargers,” are able seek compensation from those that caused or contributed to the pollution, but ownership is enough to be on the hook when the bill comes due.

The leading case interpreting the oil spill law, State v. Green, 96 NY2d 403 (2001), concerned a leak from an external fuel tank at a mobile home park. The park owner was held liable for cleanup costs. According to the state’s highest court, the Court of Appeals, a landowner could be held liable even where the owner had no fault or knowledge of the discharge. An owner was liable in cases, such as Green, where the owner had (1) control over the activities occurring on the land and (2) reason to believe petroleum products would be used. Only in cases involving a “midnight dumper” or an “out of control oil truck,” to cite two examples cited from the case, would a landowner escape liability.

Further, aside from landowners, other parties have been held to be dischargers by virtue of being the contractor that installed underground petroleum storage tanks (Huntington Hospital v. Anron Heating and Air Conditioning, 250 AD2d 814 (2d Dept, 1998)) or a home heating oil company whose worker overfilled fuel tanks (Snyder v. Jessie, 145 Misc2d 293 (1989) (string cite omitted). In short, anyone with an active role using petroleum products or controlling those that use petroleum products may be held liable. In the Fourth Department, the Appellate Division had held that liability is “based on conduct, not status” and that simply being landowner is insufficient to establish liability. (Whitesell v. Walchli, 237 AD2d 953 (4th Dept, 1997)). However, this case dealt with facts that are not likely to be often repeated, where the party appealing his “discharger” status was a 4% partner in an endeavor and had no active role. Since this decision, the rule of State v. Green indicates that, while status alone is still insufficient, the rule is very broad as to what sorts of conduct can establish liability.

Like many other risks that are part of doing business, potential liability for petroleum leaks should be an active consideration in planning and risk management. Some basic ideas are set out below, but your own experience in business should dictate what steps to take and which professionals, from your attorney to your furnace repairperson, should be consulted in your individual case.

� Owners and renters should both make sure that leases and rental agreements establish contractual responsibility for petroleum use. Instead of seeking contribution or indemnity following a lawsuit, parties can specify by contract the rights each should have in case of such an unforeseen occurrence.

� Similarly, parties should be proactive in checking to make sure that their insurance coverage contains at least some consideration for pollution-related mishaps.

� Regular checkups, inspections and tests of some petroleum storage equipment are required by law. In every case, though, owners and operators should inspect machinery and storage tanks for leaks or problems. Even better is to have a professional inspection and cleaning on a regular basis.

� In case of a spill, contact the Department of Environmental Conservation spill hotline immediately. Many business owners have ignored problems, planning never to sell, only to have liability crop up years later when the problem had spread beyond the borders of the property.

� Similarly, anyone buying property or a business should be aware of the title. A title search is a necessity in buying property, but one should also be aware of the environmental history of the property and any land uses which may have created an oil spill situation.

These tips are only a start on the due diligence and risk management a business or property owner should consider. Cleaning up oil spills can be a time consuming and costly process and foresight and prevention are key in preventing Article 12 liability.

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