Indiana Supreme Court Clarifies Statute of Limitations

for Environmental Cost Recovery Actions

On June 19, 2008, the Indiana Supreme Court issued its opinion in Richard U. Pflanz and Delores J. Pflanz v. Merrill Foster, individually, Merrill Foster d/b/a/ Friendly Foster’s Service, and Sunoco Inc. (R&M), No. 36S01-0710-CV-425. The Pflanz decision clarifies the statute of limitations in two types of environmental cost recovery actions. This important ruling provides a significant victory for property owners asserting claims to recover for the costs associated with environmental clean-ups.

In 1984, the Pflanzes purchased a former gas station from Foster. Foster told the Pflanzes that there were underground storage tanks on the property, but indicated the tanks were properly emptied and sealed. In 2001, the Pflanzes learned that the tanks were leaking fuel. The Indiana Department of Environmental Management (IDEM) ordered the Pflanzes to clean up the property. In 2004, the Pflanzes filed a lawsuit against Foster seeking (a) the costs of the clean-up under the Underground Storage Tank Act (USTA) and (b) property damage for the stigma of environmental contamination.

After the trial court dismissed the Pflanzes’ claim, the Indiana Court of Appeals affirmed the dismissal. The Court of Appeals concluded that all such claims had to be filed no later than 1997, which was six (6) years after the enactment of certain amendments to the USTA. The Indiana Supreme Court reversed and held that the statute of limitations for a cost recovery action under the USTA is ten (10) years, and that the statute does not begin to run “until after the Pflanzes were ordered to clean up the property.” Because IDEM’s order regarding the Pflanz property was issued in 2001, the Pflanzes’ lawsuit was well within the ten-year statute of limitation.

The court also ruled that the claim for environmental stigma damages was viable. The court concluded that the damage in such claims is not the environmental contamination itself, but is rather a diminution in property value despite the clean-up. Therefore, stigma damage claims only accrue after remediation has been substantially completed, and the Pflanzes’ claim for stigma damages was filed within the statute of limitations.

If the Court of Appeals’ decision had been affirmed, the remedies available to innocent Brownfield owners and developers who incur environmental clean-up costs would have been severely limited. The Supreme Court’s decision in Pflanz reversed that decision, clarified the law and gave a significant victory to public and private entities seeking to recover environmental clean-up costs from those who caused or contributed to the contamination, as well as their insurers.

Ice Miller was proud to represent the Indiana Association of Cities and Towns and Indiana Municipal Lawyers’ Association before the Indiana Supreme Court in the Pflanz case.

You may contact Don Snemis if you have any questions regarding the Pflanz case in particular, or environmental cost recovery actions in general.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.