Underground Tank Owners Beware.

Underground storage tanks (USTs) remain an important tool for many businesses, but the owners of USTs should be aware that they face significant liability exposure from a variety of sources should leaks occur. In addition to remediation costs and statutory fines and penalties, the largest potential

exposure for a leaking UST owner is tort liability brought on by a claim on behalf of an affected third-party landowner. There are numerous legal theories that have been used to hold property owners liable for pollution arising from leaking USTs, This article will provide a broad analysis of three theories with the intent of providing UST owners with concepts for limiting exposure. It is important for the reader to recognize that the law in this area is not consistent on a state by state basis. Therefore, prior to implementing any risk control strategies, a more focused assessment of the appropriate jurisdiction's law is necessary.

The primary tort theories that have been applied to find liability on the part of UST owners are: negligence; strict liability--abnormally dangerous activities; and nuisance. By considering the critical elements of each theory, the UST owner can be in a better position to avoid future exposure.

Negligence

A successful negligence case must prove four elements:

* the UST owner owed a duty to the plaintiff;

* the UST owner breached that duty;

* the breach caused harm to the plaintiff; and

* the resultant harm caused damages to the plaintiff.

Although there are numerous defenses to a negligence claim, this article will focus on how the UST owner can best avoid litigation. In the typical negligence case, it is often alleged that a UST leak led to the pollution of a neighbor's groundwater or soil. Courts have been willing to find the existence of a duty and a coinciding breach of that duty where the UST owner failed to install the UST in a reasonable manner, failed to regularly inspect the UST for leaks, or once the UST was known to be leaking, failed to properly remedy the problem.

In one particular case involving a service station, a duty and breach was found when the station owner failed to take precautions to avoid or contain leaks even though there was an unexplained monetary loss from gasoline sales [South Cent. Bell Tel. v. Gaines Petroleum, 499So.2d 521 (La. App. 2dCir. 1986)]. Essentially, that decision indicated that it was unreasonable for a service station owner not to at least investigate the possibility of a leak upon realizing that profits were down for the sale of supposedly the same quantity of gasoline as previous months.

In another case, a breach of a duty not to impair a neighbor's ownership rights has also been found when an oil company's USTs leaked and the company delayed in remedying the problem, allowing oil to reach and contaminate neighboring groundwater supplies [Exxon v. Yarema, 516 A.2d 990 (Md. App. 1986) cert. der,. 522 A.2d 392].

These examples demonstrate, in part, that it is in the UST owner's interest to create and retain a documentary record for both the installation and maintenance of USTs. By doing so the UST owner will be equipped with hard evidence documenting reasonable use of the USTs. Even if it is late in the game, and the USTs have been in the ground for years, the prudent UST owner will begin a pattern of taking reasonable steps to regularly inspect the UST for leaks and sample the soils and groundwater around the UST. Relatively little effort and cost are required to conduct these tests, particularly when compared with a potential jury verdict. If documentation efforts reveal signs of a leak, it will always be in the UST owner's interest to act quickly and effectively to stop the spread of contaminants.

One less obvious way to detect leakage is through inventory control. Whatever goes into a tank is documented, and whatever goes out of a tank is metered. A discrepancy between these two numbers may indicate a possible leak. Other ways to detect leaks include well samples taken from around the UST and measurements of gas vapors near the tank.

Strict Liability

A UST owner may be found liable for damage caused by leaks even in the absence of negligence. Strict liability is commonly known as liability without fault. It is typically used to hold sellers of defective products liable for damages caused to consumers. In addition, strict liability also can be applied to hold property owners liable for undertaking inherently dangerous activities on their property, such as handling explosives. A property owner may be held liable when he or she damages a neighbor by conducting an excessively dangerous activity that is not characteristic of the ordinary use of that properry The advantage to making a strict liability claim from a plaintiff's perspective is that there is no need to prove negligence on the part of the UST owner.

In one case, an oil company was found strictly liable when leaks from its UST caused sewer line damage. The Court held that parties storing gasoline in USTs for economic profit should be liable for harm to persons or property caused by leaks, even in the absence of negligence [Northglenn v. Chevron USA, 519 F. Supp. 515 (D. Colo. 1981)].

In another case, in which a UST was placed in close proximity to a residential well, the Court held that the mere location of the UST constituted a dangerous activity that warranted the imposition of strict liability for damages associated with the leak [Yommer v. McKenzie, 257 A.2d 138 (Md. 1969)]. In the latter case, which involved a service station, the Court indicated that operating a service station was not of itself an inherently dangerous activity, but placing the UST in close proximity to neighboring residences did involve a high degree of risk of harm.

From these cases we can extrapolate a number of factors that a court will consider in assessing whether to apply strict liability in the context of an UST leak. In evaluating whether an activity is abnormally dangerous, the court will look for:

* the existence of a high degree of risk of some harm to the person or property of others;

* the likelihood that resulting harm will be significant;

* the inability to eliminate the risk of harm through the exercise of reasonable care;

* the extent to which the activity is not common usage;

* the inappropriateness of the activity for the place in which it is conducted; and

* the extent to which the value of the activity is outweighed by the dangerous attributes.

It is important to note that strict liability for abnormally dangerous activity is not routinely applied to UST leak cases. However, it will be in the best interests of the UST owner who is considering installing new tanks or replacing old USTs to place them as far from adjoining private properties as possible and to take other necessary safety precautions to reduce the potential for the imposition of strict liability.

Nuisance

The essence of a private nuisance claim is interference with the use and enjoyment of land. Some courts have held that to recover for private nuisance, a plaintiff must demonstrate both that a substantial invasion of the use and enjoyment of the land occurred and that the invasion was negligent, intentional, and unreasonable [ Malone v. Ware Oil Co. 534 N.E.2d 1003 (Ill. App. 1989)].

However, other courts have held that in order for a neighbor to succeed in a claim of nuisance, it is not always necessary to show negligence on the part of the UST owner [Mel Foster Co. Properties, Inc. v. American Oil, 427 N.W.2d 171 (Iowa 1988)]. In fact, even where the UST owner attempts to avoid injuring the neighbor and rakes steps to prevent the leak from physically impacting the neighbor's land, a nuisance claim may still prove successful. A nuisance claim is not contingent upon whether the UST owner physically impinged on the neighbor's property, but whether the owner substantially and unreasonably interfered with the neighbor's use and enjoyment of the property exclusive of actual contact with that property. For example, an UST leaking vapor may prevent the neighboring property owner's use because of the smell. Therefore, harm to the affected property has, in some cases, been interpreted broadly to include "tortious interference," or in other words, improper interference with another party's rights . In this context, even the contamination of groundwater entirely contained on the UST owner's property has been deemed by at least one court to have imposed "crippling restrictions" on properties adjacent to the contaminated land [Yarema, Supra 516 A.2d 970]. This is particularly so where the owners of the adjacent lands were restricted from the free use of their land as a result of the contamination.

Unlike the negligence and strict liability arenas, nuisance claims present no apparent means for the UST owner to completely eliminate the potential for liability. However, by implementing the steps suggested in the preceding discussion, the owner will still be able to effectively minimize its potential exposure.

Limiting Liability

The bottom line for UST owners is the need to take reasonable steps to avoid having leaks go unnoticed for extended time periods. Unfortunately there is no way to guarantee the avoidance of litigation. However, by regularly raking steps to check on the structural integrity of the UST, placing USTs in reasonable locations within the confines of the UST owner's property, raking other reasonable safety precautions, and working quickly to remediate any leaks, potential liability can be significantly reduced.

Stephen A. Serfass is a claims counsel with ECS Claims Administrators, Inc, and ECS Company and a leading third-party administrator with comprehensive claims management capabilities. The firm may be contacted at www.ecsinc.com.

EPA Regulations Review

EPA regulation 40CFR280 established technical standards and corrective action requirements for owners and operators of underground storage tanks (USTs). All USTs specified in the regulations and installed prior to December 22, 1988, should have been in compliance with these regulations by December 21, 1998. In general, regulations require that existing USTs be upgraded for protection from spills, over fills, and corrosion; betaken out of service; or be replaced with new systems that adhere to the regulations. Every facet of the UST system is now regulated.

The purpose of the regulations is to prevent another generation of leaking USTs. The regulations also are meant to offer protection from leaks that can result from third-party claims and costly environmental clean-up for the tank owner.

USTs installed before 1998 must be retrofitted for:

Leak detection: USTs must employ one or more monthly monitoring devices, such as interstitial monitoring, automatic tank gauging, statistical inventory reconciliation, or other methods approved by regulators.

Spill protection: Tanks must have catchment basin installed around the fill pipe.

Overfill protection: Automatic shutoff devices, overfill alarms, or ball-float valves are required.

Corrosion protection: Tanks and their piping systems must now be made of non-corrodible material such as steel or fiberglass. They also must have corrosion-resistant coating and cathodic protection.

USTs installed after 1998 should already have these protections in place.