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

Contractor agrees to indemnify, defend, and hold harmless [Landowner/Leaseholder] from and against any and all claims, suits, actions, demands, losses, costs, liabilities, and expenses (including remediation costs and reasonable attorney fees) to the extent such losses result from: (1) Contractor's or Generator/Preparer's violation of applicable laws or regulations in effect at the time of biosolid application; or (2) the negligence or willful misconduct of Contractor in the delivery and application of biosolids to the undersigned Landowner's/Leaseholder's property. In the event this indemnification is enforced against the Contractor for a violation of law by a Generator/Preparer, Landowner/Leaseholder agrees to assign and subrogate to Contractor its claim against Generator/Preparer. This indemnification shall survive termination of this Agreement until the expiration of any applicable statutes of limitations. Landowner/Leaseholder shall promptly notify Contractor in the event of a third-party claim and Contractor shall have the right to provide and oversee the defense of such claim and enter into any settlement of such a claim at its discretion (holding the landowner/leaseholder harmless). Landowner/Leaseholder agrees to fully cooperate with Contractor in the defense against any third-party claim.479

The efficacy of such an agreement has yet to be tested in the courts. If societal concerns clearly seem to outweigh the interests in enforcement of such language, then the above agreement may be unenforceable under grounds of public policy.480 Although this is true, courts have determined after much debate that there is no public policy against private parties bargaining over indemnification for CERCLA liability.481 So it is likely that "freedom of contract" would not be limited for sewage sludge. However, the clause's "any and all claims" language may be a source of future litigation. Does this language indicate an intent on the part of the Contractor to indemnify the owner/leaseholder against liability based on the owner/leaseholder's concurrent negligence with the contractor? The sole negligence of the owner is clearly not covered. Most importantly, what about strict liability claims? The court may look beyond the contract to general law and custom in determining if the quoted language indicates an intention to indemnify against an indemnitee's strict liability. This is clearly a gamble for indemnitees.

Overall, the above contractual language demonstrates a move in the sewage sludge management arena towards a contractually governed system-a system where single contractors will carry out all the regulatory steps "in house" in order to reduce liability and transaction costs. Naturally, these companies want assurances from farmers that management requirements are being followed. This is now the role of the indemnification contract. The control of the sewage sludge arena by large companies makes sense, because "in reality . . . indemnity agreements do not shift the loss, but shift the burden of paying for and procuring insurance."482 However, only large contractors can afford liability coverage.