The facts

An environmental engineer was retained by a prospective purchaser to provide a Phase I and a partial Phase II environmental assessment of a 20-hectare industrial parcel of land. The engineer did not detail ground water issues as part of their reports.

The purchaser of the land relied upon the engineer’s reports when they purchased the property. It was subsequently determined that there was severe ground water contamination throughout the site. The purchaser sued the engineer and the former owner of the site for approximately $2 million in damages that resulted from the engineer’s failure to disclose the ground water contamination.

Initially, it appeared that the engineer would face substantial exposure to liability for failing to detect ground water contamination. However, during the investigation of the claim, it was determined that the ground water contamination was actually very complex and originated from multiple sites adjacent to the subject property. The property owners of the adjacent sites were added to the action and after the completion of several expert reports from the various parties, settlement discussions were initiated to avoid the considerable costs of proceeding to trial.

The result

The environmental engineer was insured by a Victor Environmental Package Insurance for Contractors and Consultants policy, which specifically included the Errors and Omissions policy section. With other parties sharing the potential liability exposure, the cost to resolve the matter exceeded $100,000.

Risk factor

Environmental consulting firms completing environmental site assessments must be provided with the full scope and requirements for the services they are required to provide. A standard form contract outlining these services is very helpful in the event of lawsuits against the consultant. 

*This claim scenario is for illustrative purposes only. Please remember that only the insurance policy can give actual terms, coverage, amounts, conditions and exclusions.