Perchlorate Contamination: Cost Recovery Options from Third Parties

Perchlorate contamination is of increasing concern for many U.S. companies. It has been discovered in groundwater in more than 14 states. Sources for perchlorate contamination include the solid propellant used in rockets, the material used to inflate air bags, and other industrial processes. EPA is actively considering a National Primary Drinking Water standard for perchlorate at the 1 ppb level, below the current 4 ppb detection limit. Perchlorate can persist for many decades in groundwater, and, while promising remediation techniques are being tested, as of now there is no proven method to quickly, efficiently and inexpensively remediate groundwater contaminated with perchlorate.

Companies faced with the prospect of investigating and remediating perchlorate contamination may have a number of different avenues for the recovery from third parties of some, if not all, of the associated costs. Depending on certain factual circumstances, private party CERCLA cost recovery and government contract-related claims may be viable. Such claims are most likely to succeed where the government owned the materials or equipment or had the ability to control the contractor's activities that created the perchlorate contamination.

In addition, insurance recovery, especially under older "long-tail" liability policies, could prove particularly promising. U.S. companies continue to recover billions of dollars from their insurers for the costs of investigating and remediating environmental contamination. Even companies that have previously settled environmental insurance coverage claims with their insurers may be able to recover again for a relatively new problem like perchlorate, depending upon the scope of the release for environmental claims such companies may have granted to their insurers.

McKenna's insurance recovery, government contracts and environmental groups have extensive experience recovering proceeds for environmental liabilities, including in matters involving perchlorate. McKenna has extensive knowledge of the law on the key government contract, environmental and insurance coverage issues in various jurisdictions. Using a multi-disciplinary approach, McKenna is able to quickly and efficiently analyze the potential for recovery across a broad range of fact and insurance scenarios. Though litigation is necessary in some cases, we have obtained significant recoveries through negotiation without litigation.

* This Information Advisory is for informational purposes only, and does not constitute specific legal advice or opinions. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations.

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