Statement of Limitations

A very important, and often overlooked or misunderstood, component of Environmental Site Assessment reports is the Statement of Limitations, or SOL. These are meant to provide some level of protection for the consultant conducting the ESA and outline to the stakeholders what is and is not covered in the report and, ultimately, by the consultants insurance should things go sideways. When I started in environmental consulting many years ago; most consultants did not incorporate a SOL in their ESA reports, with some believing that they did not really provide any protection. When consultants first started using SOL, they were initially very brief – a paragraph or two mainly limiting unauthorized third-party use of the report. Now most SOL are a full page (or more) and usually require separate and unique versions of the SOL covering Phase I ESA, Phase II ESA, Peer Review, Remedial Reports and others. Over the years, Canadian case law has upheld the validity of SOL, especially regarding third party use and limitations to the privity of contract (Edgeworth Construction Ltd v. ND Lea & Associates – Supreme Court of Canada, 1993; and Wolverine Tube (Canada) Inc. v. Noranda Metal Industries Ltd., Ontario Court of Appeal, 1995).

A well-crafted SOL should cover things like: limitations on unauthorized third party use of the report; restrictions on third party liability (unless the party is authorized or permitted to use the report); a summary of what is included in the ESA (e.g. completion of the report to CSA or other Standards); listing of those activities not covered (e.g. structural, geotechnical, life-safety or other investigations, as well as asbestos surveys, remedial actions etc. unless specifically agreed to). The SOL may also include statements regarding assumptions on the accuracy of third party research or reporting, including but not necessarily limited to interview findings, regulatory and database information, laboratory test results, etc.

These protections are vital for consultants, especially considering how some clients often give the reports to third parties – without getting the required permission from the consultant for such third party use. This often occurs when the original ESA is conducted for a property owner, who then passes along the report to a potential purchaser, without seeking permission from the consultant to allow the third party to rely on the report (I’ll discuss these Reliance Letters in a future blog). It is important that the client/stakeholders are made aware of the SOL prior to finalizing any transactional or financing decisions. This is best accomplished by providing a copy of the typical SOL wording at the time of the work proposal, so there is no confusion about the SOL upon report submission. Some clients, especially financial institutions will not accept overly restrictive SOL, particularly when it comes to unreasonable restrictions or limitations on consultant liability, such as limiting liability to the fees charged. In my opinion, this type of liability limitation suggests the consultant doesn’t really stand behind their work – after all that’s why we carry millions of dollars in insurance. In closing, consultants should always include a comprehensive SOL in their ESA reports and ensure all stakeholders fully understand the implications. It’s also a good idea for both client and consultants to have the SOL wording reviewed and vetted by a qualified environmental lawyer.

Bill Leedham, P. Geo., CESA
Bill is the Head Instructor and Course Developer for the Associated Environmental Site Assessors of Canada (www.aesac.ca); and the founder and President of Down 2 Earth Environmental Services Inc. You can contact Bill at info@down2earthenvironmental.ca