January 30, 2018

Massachusetts Highest Court Clarifies When Claims for Permanent Property Damage Under Chapter 21E Accrue

Holland & Knight Energy and Natural Resources Blog
Dianne R. Phillips

On Jan. 19, 2018, the Massachusetts Supreme Judicial Court (SJC) issued a decision in Grand Manor Condominium Association v. City of Lowell, 2018 WL 473078, which clarified, and some would say "changed," when a claim for property damage accrued under G.L. ch. 21E, the Massachusetts Oil and Hazardous Material Release Prevention and Response Act, also known as the state superfund law. The statutory scheme is comprehensive covering a number of topics, but the one decided by the SJC most recently relates to when a property owner must assert a claim against a third-party responsible for contamination impacting the property owner's interests, or risk being time-barred. As with many such liability schemes for property contamination, claims are statutorily divided into two categories: response costs, the cost of remediating contaminated property, and property damage, the diminution in value or loss of use caused by the contamination. Massachusetts imposes different statute of limitations accrual dates for the different claims. Claims for reimbursement of response costs are not due before the cleanup is completed. Claims for diminution in property value, however, are required to be asserted "within three years after the date that the person seeking recovery first suffers the damage or within three years after the person seeking recovery of such damage discovers or reasonably should have discovered that the person against whom the action is being brought is a person liable pursuant to this chapter for release or threat of release that caused the damage, whichever is later." G.L. ch. 21E, § 11A(4). 

Relying on the policy behind the statutory scheme which encourages full remediation, the SJC concluded that because the Section 5 was intended to provide compensation for "residual damage that cannot be cured or compensated by remediation or the recovery of responses costs" those claims cannot be barred prior to the time when a plaintiff has "knowledge that he or she suffered damage that is not curable by the MCP remediation process" which could be long after the plaintiff knows his or her property is contaminated, and even who is responsible. In the Grand Manor case, that event was after the responsible party completed its Phase II report and chose from available remedies outlined in its Phase III report which, under applicable regulations, is due four years after "tier classification" which is due one year after notice of a release is filed with the Department of Environmental Protection.

Depending on the remediation history, this decision could support a claim far into the future for sites which pursue an iterative approach to remediation, a "Temporary Solution" (previously known as a Class C Response Action Outcome), or other sites which did not strictly follow the Phase II/III timeline. In Grand Manor, the claim was brought only 16 months after the defendant learned of the scope of contamination and that it could not be fully remediated, which the SJC held was timely as a matter of law. Other cases might be harder to decide. In any event, this decision will surely open the door to more disputes about who knew what when.

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