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The Law of Environmental Lender Liability

August 1991

Citation: ELR 10464

Author: Joel R. Burcat, Ronald W. Chadwell, David R. O'Connell, and Linda J. Shorey

Editors' Summary: The principle of environmental lender liability holds that in certain instances a creditor may be found liable for damages to the environment caused by his debtor. Despite the simplicity of this definition, the application of this principle has proven to be very complex. Courts that have addressed environmental lender liability issues have not agreed on what a creditor must do to become liable. In CERCLA litigation, environmental lender liability has had a major impact on the lending industry, making it virtually impossible in many industries to obtain a loan without paying for an environmental audit and agreeing to numerous conditions. The authors survey the current state of the law of environmental lender liability and examines legislative and regulatory proposals addressing this form of liability. The authors also examine common-law lender liability and concludes that, in order to make some sense of environmental lender liability, courts, litigants, and commentators should approach environmental lender liability cases from the perspective of common-law lender liability.

The authors are all associated with the law firm of Kirkpatrick & Lockhart. Mr. Burcat, Ms. Shorey, and Mr. Chadwell are located in the Harrisburg, Pennsylvania, office, and Mr. O'Connell is located in the Pittsburgh, Pennsylvania, office. The views expressed in this Article are the authors' and should not be attributed to any of the law firm's clients.

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