Discussion Question:Disposal Dispute

You recently began working for Starr, Inc. as general counsel.Years before you began working there, Starr was required by the Environmental Protection Agency ("EPA") to remove several ground water hazardous contaminates from its property.Unfortunately, Starr was unable to remove all contaminates from the ground water.Therefore, in the years since, EPA and Starr have worked together to maintain and control these contaminates on the property.Specifically, EPA required Starr to inspect and complete testing within certain buildings on Starr's property.

In 2014, Starr moved its operations to another property and no longer occupied the contaminated buildings/property.After Starr's relocation, EPA still required Starr to submit yearly reports on whether the buildings were in use, which would trigger inspection and testing of the buildings.

Shortly after the relocation, Starr entered into an agreement with North American Supply, Inc. for the sale, disassembly, and removal of the buildings located at its previous location.North American Supply dismantled the buildings and disposed of all the materials, except for steel beams.

In March of 2015, after Starr submitted its yearly report, EPA officials learned the buildings previously located on Starr's property (which they still own) had been disassembled and disposed of by North American Supply.After significant investigation, EPA traced the steel beams of the buildings to North American Supply's storage site.At the site, EPA conducted testing and identified the same hazardous contaminates were present at the storage site which were present at Starr's previous property.However, EPA was unable to confirm whether these contaminates came directly from Starr's previous property.

The EPA has now directed Starr to retrieve and correctly dispose of the dismantled buildings - at a huge cost to Starr.The CEO of Starr has approached you, as new general counsel, for advice.The CEO informed you that she came on board with Starr in early 2016, and was not present when the buildings were dismantled and disposed of by North American Supply.The CEO also indicated Starr has a general liability insurance policy with policy limits of $1 million per incident that she hopes would cover and costs Starr may have to pay.

How would you advise Starr?

Consider the following questions:Can Starr be held liable for the costs of "cleaning-up" the disposed buildings?Can North American Supply be held liable for the clean-up costs?Would the general liability insurance policy cover Starr's potential liability?Is there any other information you would like to know that affects your advice to the CEO?What should Starr do better in the future to prevent issues such as this?Also consider:If either Starr and/or North American Supply can be held liable, is the cost the company(ies) incur to clean-up contaminates 'fair'?