In the event of an environmental incident involving an entity you own, like a recently acquired company, well-written indemnity provisions could save your business. If you can “Take 2” minutes to follow along, DE Partner Sam Blink shines some light on this issue in our latest video.
Transcript:
Successor liability is a need-to-know concept for any business going through a merger or acquisition the term most often comes up in cases involving product liability, employment, or environmental contamination. My most recent DE Insight focuses on the last of those three.
Let me provide for you an example: imagine you just purchased a ketchup company, but that ketchup company carries with it liability from an alkaline battery manufacturing plant. Although you may think the ketchup company was a safe purchase, if there were ever an environmental release near the battery manufacturing plant, you as the owner of the ketchup company will be one of the first calls made by the environmental regulators. At this point, you’ll be hoping that you had quality environmental indemnity provisions crafted in your transactional documents.
When examining case law, it’s unfortunate, but it’s hard to find cases where quality environmental indemnity provisions were used. That’s why my DE Insight provides three tips to drafting the ideal environmental identity provision. You should use these tips when drafting your transactional documents after you’ve done thorough due diligence of potential successor liability of not only your target entity, but also its predecessors and interest. This could save you thousands, if not more, if an environmental release were ever discovered.
