Allocating Environmental Risk in Business Transactions

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Our lawyers are attuned to the desire of our clients to understand the potential environmental compliance challenges and liability risks involved in a transaction as well as to achieve an appropriate allocation of known and unknown environmental risks and liabilities and put in place mechanisms, including indemnity and escrow arrangements, to enforce the agreed upon allocation. Based on environmental diligence findings, including an understanding of inevitable diligence gaps, we help our clients to understand potential risks associated with historical activities as well as risks that could affect future operations and then to negotiate an informed allocation of these risks. Because we have represented buyers as well as sellers, borrowers as well as lenders, and underwriters as well as issuers, we are well-equipped to anticipate the level of due diligence that may be requested or required by all parties in a broad range of transactions and effectively and efficiently deploy the resources appropriate for each transaction. We have extensive experience helping our clients allocate and manage environmental risks relating to business transactions, including drafting and negotiating environmental representations, warranties, covenants, indemnification and escrow provisions as well as separate detailed agreements addressing environmental obligations and indemnities for transactions involving more complex environmental issues. We also work with clients to explore potential benefits of prospective purchaser agreements with governmental authorities, state and federal voluntary audit programs, and insurance and liability transfer mechanisms.

Using Environmental Insurance: 
An increasingly important consideration in many transactions is the potential use of environmental insurance to address a particular legal liability or environmental cleanup risk that can be associated with both asset sales and stock transactions. We have worked on a number of transactions where the availability of new types of environmental insurance has facilitated the closings that would not have occurred fifteen years ago. Working with brokers of environmental insurance has given us the opportunity to develop valuable contacts in this expanding industry. Indeed, our expertise with environmental insurance – including extensive work in negotiating manuscripted policy language with various insurance carriers – is a key component of our ability to advise clients interested in transferring their contaminated properties (and associated remediation liabilities) to third parties, including remediation contractors, in order to reap certain tax benefits, realize asset value and improve their balance sheet.

Anticipating Future Disputes:
Our lawyers handle a broad range of litigation and dispute resolution work that enables them to provide effective advice in the transaction context. The fact that many of our environmental lawyers have participated in significant litigation, arbitration, and mediation proceedings makes them better qualified to understand how contractual indemnity language might be interpreted in any future dispute between the parties and how best to structure dispute resolution provisions.