Indiana Real Property and Environmental Law Report - Commentary on State and Federal Environmental Issues Affecting Indiana

This could be environmental law - it could be labor and employment - Indiana's smoking ban became effective on July 1, 2012.  Individuals and establishments found in violation of the law can be fined or be subjected to a civil action. IC 7.1-5-12 et seq.

The law states that with certain exceptions, smoking is prohibited in: (1) a public place. (2) place of employment. (3) vehicle owned, leased, or operated by the state if the vehicle is being used for a government function. (4) the area within eight (8) feet of a public entrance to: a public place; or a place of employment.

A "public place" is defined as "an enclosed area of a structure in which the public is invited or permitted." A "place of employment" is defined as "an enclosed area of a structure that is a place of employment. The term does not include a private vehicle."

In addition, discrimination, discharge, refusal to hire, and retaliation are prohibited against persons who report a violation or exercise their rights under the smoking ban.

The "owner, operator, manager, or official in charge of an establishment or premises" in which smoking is allowed must post "conspicuous signs" in the establishment that read "WARNING: Smoking Is Allowed In This Establishment" or other similar language.

Covered employers and operators of public places in Indiana must inform their current and prospective employees of the smoking prohibition and remove all ashtrays and smoking paraphernalia from their premises (unless the display of ashtrays or other smoking paraphernalia is intended only for retail sale).

Employers and operators of public places must post conspicuous signs at each public entrance that read "State Law Prohibits Smoking Within 8 Feet of this Entrance" or other similar language.  In addition, the "owner, operator, manager, or official in charge of an establishment or premises" in which smoking is prohibited must post "conspicuous signs" with similar language.

If an individual is smoking in violation of the ban, the "owner, operator, manager, or official in charge of an establishment or premises" must ask the individual to refrain from smoking and, if that fails, cause the individual to be removed from the public place.

Enforcement of the law can be carried out by Indiana’s Alcohol & Tobacco Commission, the State Health Department, local health departments, and law enforcement agencies, among others. These entities may inspect premises that are subject to the new law to ensure compliance and fine and bring a civil action against those found not in compliance.

There are 11 exemptions which include bars, taverns, horse racing tracks, cigar bars, casinos, riverboats, and hookah bars. Also exempted are not-for-profit private clubs and fraternal organizations.

You wouldn't think that a municipal corporation would want more wastewater to treat that it already has, but Gary does. 

Hobart has been paying Gary for many years to treat its wastewater.  This led to an Indiana Court of Appeals decision this past week.  Gary vs. IDEM and Hobart.pdf

The City of Hobart's wastewater is currently treated both at Gary's wastewater treatment facility and at its own, aging Nob Hill wastewater treatment facility. Hobart pays Gary for its use of Gary's facility. Hobart's Nob Hill facility discharges into a tributary of the Deep River and consistently struggles to stay within its permit limits. Deep River is an impaired water source for mercury.  

In 2004, Hobart requested a permit to construct a new 4.8 million gallon per day wastewater treatment plant. The proposed plant would allow it to shut down the Nob Hill facility and disconnect from the Gary facility.  Also in 2004, IDEM issued the requested an NPDES permit, granting Hobart permission to operate a new wastewater treatment plant to be constructed along the Deep River. The permitted mercury limits for the proposed Hobart facility are a daily maximum limit of 3.2 parts per trillion (ppt) and a monthly average of 1.3 ppt per day. These limits are substantially less than the limits currently permitted at the Gary facility. Because the new Hobart facility will not utilize combined sewer overflows, it would completely avoid the discharge of untreated sewage. 

Shortly after IDEM issued a permit for the construction of the Hobart facility, Gary filed a petition for administrative review of the Hobart permit with the Indiana Office of Environmental Adjudication. On January 19, 2010, the environmental law judge issued its findings of fact, conclusions of law, and final order in favor of IDEM and Hobart. The environmental law judge concluded that the mercury discharge limits in the Hobart permit would result in an overall improvement in water quality, and IDEM's decision to issue the permit complied with applicable law. 

Gary then filed a petition for judicial review in Marion Superior Court. After briefing and oral argument, the trial court issued its findings of fact and conclusions of law on March 26, 2011. As is noted in the trial court’s findings and conclusions, the paramount issue in this case is the parties’ interpretation of IDEM’s antidegradation requirement for outstanding state resource waters (OSRW). 

Gary then appealed the Marion Superior Court's order affirming the order of the Office of Environmental Adjudication, which upheld the Indiana Department of Environmental Managements (IDEM) decision to issue a permit to the City of Hobart to operate a new wastewater treatment plant. 

The Court of Appeals consolidated Gary's issues.  First, whether IDEM's interpretation of 327 IAC §5-211.7 was reasonable; and, II; and second, whether IDEM' s decision to issue the permit was arbitrary and capricious and not in accordance with the law or is unsupported by substantial evidence.  The Court of Appeals affirmed the Marion Superior Court's order. 

The Court said that IDEM’s interpretation of 327 IAC §5-2-11.7(a)(2) was reasonable in that it only required Hobart to comply with subdivision §11.7(a)(2)(A) and (B), but not §11.7(a)(2)(C), in its decision to issue the permit. And, although the Hobart permit allows a new source for discharge of mercury, because Hobart will be able to close its non-compliant Nob Hill Plant and treat its wastewater more effectively than it is currently treated by Gary’s facility, the Hobart permit will result in an overall environmental benefit to and will not cause a significant lowering of water quality in Lake Michigan and its tributary, the Deep River.

Tierra Environmental and Industrial Services, Inc., a centralized waste treatment facility in East Chicago, its owner and a manager were charged with conspiracy and felony violations of the Clean Water Act in a seven-count indictment returned by a federal grand jury, on Friday, November 4.  

Tierra Environmental, owner Ronald Holmes and manager Stewart J. Roth have been charged with illegally discharging wastewater into the sewers of the Hammond Sanitary District from a closed facility.

Tierra is a centralized waste treatment facility that charges customers to dispose of their polluted wastewater.   Tierra advertised itself as specializing in spill remediation; bio-waste cleanup; waste brokerage; hazardous and non-hazardous transportation services; industrial wastewater/sludge removal and disposal; grease trap cleaning and tank cleaning for hotels and restaurants; and liquid waste transportation and disposal from food processors, distributors and manufacturers in all industries.   Tierra collected both hazardous and non-hazardous liquid wastes from customers, using a number of vacuum trucks and tanker tractor-trailer trucks.   Tierra had facilities for limited storage, separation and solidification of non-hazardous wastes.  

According to the indictment, Tierra’s East Chicago facility did not hold a permit to discharge industrial waste to the East Chicago Sanitary District’s sewer system and the facility’s connection to that sanitary sewer system had been sealed shut.   The company therefore had to transport wastewaters it collected from customers to other facilities for final treatment and/or disposal.     

The indictment alleges that the conspiracy was undertaken for the purpose of avoiding expenses associated with treating and/or paying other facilities to lawfully treat, store, or dispose of wastewaters collected from customers.   The indictment also alleges that the defendants conspired to achieve this objective by transporting wastewater to a shut-down, unpermitted facility located  in Hammond that was owned and/or controlled by Ronald Holmes.   There, the wastewater was discharged directly to the Hammond Sanitary District’s sewer system.

The Clean Water Act makes it a felony to knowingly discharge trucked or hauled pollutants into a publicly-owned treatment works (POTW) from a discharge point not designated by the POTW.

If convicted, Holmes and Roth face up to five years in prison on the conspiracy count and three years on each of the Clean Water Act counts, as well as a criminal fine of up to $250,000 for each count.   The company may also face fines and probation.

The case was investigated by the Northern District of Indiana Environmental Crimes Task Force, including agents from the U.S. Environmental Protection Agency’s Criminal Investigation Division, the Indiana Department of Environmental Management- Office of Criminal Investigations, the U.S. Department of Transportation, Office of Inspector General, and the U.S. Coast Guard Criminal Investigative Service.  

In National Union Fire Insurance Co. v. Standard Fusee Corp., Ind., No. 49S04-1006-CV-318  (December 29, 2010) the Indiana Supreme Court ruled that a company's principal place of insured risk is the most important factor in determining which state law governs multi-state insurance contract.  Justice Frank Sullivan Jr. wrote the opinion for the Court. 

The court said that by locating its headquarters at an insured site in Maryland, the policyholder made the site its principal location. 

Standard Fusee Corp., makes emergency signal flares and related products.  It leased facilities in Indiana and California. After tests showed contamination at the facilities by perchlorate, a chemical used in the production of flares, the company sought a declaratory judgment that several insurers from which it had purchased comprehensive general liability policies were required to defend and indemnify it against environmental liabilities arising from the contamination. 

The trial court granted Standard Fusee partial summary judgment, holding that Indiana law governed interpretation of the policies. The Indiana Court of Appeals reversed, adopting a “site-specific” approach to the choice-of-law issue and ruling that Indiana law governed interpretation of the policies with respect to the Indiana site and California law with respect to the California site. 

Both Standard Fusee and the insurers petitioned the Indiana Supreme Court to vacate the appeals court's opinion and apply a uniform contract interpretation approach. Standard Fusee argued that Indiana law governs policy interpretation; the insurers contended that Maryland law applies. 

The Indiana Supreme Court said that because Standard Fusee sued in Indiana, Indiana's choice-of-law rules apply. The court said a review of the state's case law shows that a uniform approach is more consistent with its jurisprudence in resolving choice of law issues than a site-specific approach and should apply in cases involving multi-site, multi-state insurance policies. 

In choice-of-law cases involving contracts, the court said, Indiana applies the law of the state in which the transaction is “most closely associated.” Under the Restatement (Second) of Conflict of Laws Section 188, certain contacts must be considered in making that determination: (1) the place of contracting, (2) the place of negotiation of the contract, (3) the place of performance, (4) the location of the subject matter of the contract, and (5) the domicile, residence, nationality, place of incorporation, and place of business of the parties. 

While none of the factors are determinative, the court said, the overall number and quality of contacts favor Maryland over Indiana. The court held that the substantive law of Maryland applies to the entire dispute.

In analyzing the respective contacts with Indiana and Maryland, the trial court found four of the five factors listed in Section 188 inconclusive while one, the place of performance, clearly pointed to Indiana. Rejecting that analysis, the Indiana Supreme Court said that if the principal location of the insured risk can be identified, under section 193 of the Restatement it is given more weight than any of the other factors in making this determination. 

On October 20, 2010, the US Environmental Protection Agency, the US Justice Department, and the Unites States Attorney for the Southern District of New York, along with the states of Indiana, Delaware, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Missouri, New Jersey, New York, Ohio, Pennsylvania, Virginia, Wisconsin and the Saint Regis Mohawk Tribe announced that Motors Liquidation Corporation has agreed to resolve its liabilities at 89 sites in 14 states across the country for approximately $773 million.

The agreement settles certain of the claims of the US, the states, and the tribe in the General Motors Corporation bankruptcy case relating to liabilities under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, also known as Superfund), the Resource Conservation and Recovery Act (RCRA), and the Clean Air Act (CAA).

The bankruptcy settlement will establish a $773 million Environmental Response Trust (the Trust) to conduct, manage, and fund cleanup at the 89 GM owned sites where MLC has liabilities. The bankruptcy settlement also envisions the redevelopment of the sites in the Trust.  Find all 170 pages of the Consent Decree and Settlement Agreement here.

MLC has agreed to transfer ownership in 89 properties to an Environmental Response Trust (ERT or “Trust”). The Debtors will initially fund the trust with $773 million in cash and other assets. The Trust will perform cleanup work pursuant to budgets approved by the lead agencies and reimburse the governments. The funding represents the most likely cost of cleanup based on available information.

The Environmental Response Trust will consist of the following:

• Minimum Estimated Property Funding Account containing $295 million;
• Reserve Property Funding Account containing $52 million;
• Long Term OMM Property Funding Account containing $84 million;
• Cushion Funding Account containing $68 million;
• Administrative Funding Account containing $232 million; and
• Administrative Funding Reserve Account containing $40 million.

The Indiana Court of Appeals, in an opinion written by Judge Elaine Brown, says a 20 year lag between discovery of an environmental problem and notice to the insurer is fatal to coverage.  This appears to be the first reported decision in which the Indiana appellate courts have affirmed summary judgment on the issue of late notice in the environmental coverage context.

In P.R. Mallory & Co., Inc. v. American Casualty Co., the Court of Appeals affirmed a trial court order granting summary judgment to an insurer - based on the insured’s failure to provide notice regarding environmental liability at a site in Attica for almost 20 years.  The appellate court held that notice to the insurers of the environmental claim swas unreasonably late, and that the insured failed to rebut the presumption of prejudice with any evidence.

Here's the timeline:

• 1950-1963: RMC dumps waste at “Site A,” which is on property owned by RMC in Attica, Indiana;

• 1963-August of 1980: RMC dumps waste at “Site B,” which is on property owned by RMC in Attica; 

• 1995-1996: RMC learns of extensive contamination at its Attica site (which, again, it owns) and begins on-site cleanup, during which RMC learns that it has contaminated groundwater; 

• March of 1999: EPA finds “a release of hazardous waste into the environment from the Attica facility”;

 • August of 2000: RMC files suit against multiple insurance companies, including the parent company of two insurers at issue here.

No surprise, the parties disagreed as to when notice was given. The Plaintiffs argue that notice was given to the insurance companies in August 2000 when the insured filed an Amended Complaint for Declaratory Judgment and Breach of Contract. The insurers argue that notice was not given until 2003. The Court said even if notice was as early as 2000, it was still too late.  The Plaintiffs had knowledge of an occurrence long before they notified the insurers and the delay in notification of the occurrence constituted unreasonably late notice.

The Court of Appeals found that the insured had knowledge of an occurrence long before it notified insurers and the delay in notifying its insurers of the occurrence constituted unreasonably late notice; and the insured's unreasonable delay was presumed to have prejudiced the insurance companies.

The court also said that notice is a threshold requirement which must be met before an insurer is even aware that a controversy or matter exists and it requires the cooperation of the insured. Further, the Court noted that the notice requirement is "material, and of the essence of the contract" and that “the duty to notify an insurance company of potential liability is a condition precedent to the company's liability to its insured.”

Indiana courts have previously interpreted the phrase “as soon as practicable” in the context of the notification provision to require “reasonable notice.”  Based upon the designated evidence, the Court held that the Plaintiffs had knowledge of an occurrence before they notified the insurance companies and that the delay in notification resulted in prejudice to the insurance companies.

So, the moral of the story: when you've got a problem ... give notice to your insurer and do it early on. Don't wait 20 years, don't wait six months.  Get the insurance company in the game.