Unsafe sewage sludge or beneficial biosolids?: Liability, planning, and management issues regarding the land application of sewage treatment residuals

Boston College Environmental Affairs Law Review, Summer 1999 by Goldfarb, William, Krogmann, Uta

With the advent of Part 503, the ambiguity regarding whether sewage sludge is to be considered an irritant, contaminant, or pollutant for pollution exclusion purposes is even more likely to be fact specific. It is important to note, however, that typical pollution exclusion language precludes coverage for bodily injury and property claims, but may not preclude coverage for "personal injury" claims.469 For example, in Blackhawk-Central City Sanitation District v. American Guarantee cfc Liability Insurance Co., the court held that the pollution exclusion clause precluded property damage coverage for a complaint alleging damage from a POTW's discharge of pollutants in excess of federally permitted levels, but the court also held that the claim potentially fell under the policy's personal injury coverage, obligating the insurer to defend.470 However, this coverage was limited in TerraMatrix, Inc. v. United States Fire Insurance Co., where the court held that personal injury coverage under the CGL policy is applicable only to entries or invasions committed by an owner, landlord or lesee, not by. third persons.471

The Springfield Farm Credit Bank Symposium participants agreed that there are still many unresolved questions relating to insurance coverage for land application of sewage sludge. The problems regarding what environmental and liability risks are to be covered by policies, what mechanisms trigger claims against policies, and what evidentiary burdens a claimant must meet, are yet to be resolved.472 In all likelihood, insurance companies will add to existing pollution exclusion language specific limitations or other provisions unique to sewage sludge management.473 When that occurs, liability will again be governed by common law and statutory principles.

C. Express Contractual Indemnification: The Preferred Risk-Sharing Mechanism

The most readily available risk-sharing mechanism in the field of solid waste management is the indemnification contract.474 Claims for indemnification may arise because two parties have contracted to have one of them bear the expense of any judgment arising from the undertaking. This is called express indemnification. At the Springfield Symposium, it was agreed that: (1) POTWs generating sewage sludge should indemnify processors and others down the disposal chain against the risk that sewage sludge does not conform to the applicable Part 503 standards; (2) processors and handlers should indemnify farmers/landowners against the same risk, as long as the sewage sludge is properly applied by the farmers; and lastly, that (3) farmers/landowners applying sewage sludge themselves should indemnify processors, handlers, and generators against harm suffered as a result of farmers' negligence or failure to follow Part 503 regulations.475

However, open-ended indemnification contracts can often be problematic because, as discussed above, the risks associated with sewage sludge application are often difficult to identify and subject to technical uncertainty.476 If generators are municipalities, large judgments against them will limit their ability to provide other essential services to residents. Furthermore, companies and farmers may be forced into bankruptcy if subject to large judgments. Thus, the Farm Credit Bank and EPA have sought to develop a workable model contract for indemnification, outlining the terms of liability.477 The purpose of such a venture is to develop model contract language that could be used across the nation. The model indemnification clause reads as follows478