USA – ALABAMA Law and Practice Contributed by: John M. Johnson, Lana A. Olson, W. Larkin Radney IV and Brian P. Kappel, Lightfoot, Franklin & White, LLC
8. Insurance 8.1 Environmental Insurance
6.5 ESG Requirements Alabama recently passed an “anti-ESG” law that pro- hibits the state government from contracting with companies under certain, specific conditions when those companies refuse to do business or otherwise penalise another company for economic activity that does not meet environmental or social justice criteria. Consistent with that approach, there is no mandatory ESG reporting regime in Alabama. Companies may voluntarily publish their own ESG reports, however, and they may also engage in ESG corporate respon- sibility initiatives (including refusal to do business with entities meeting stated criteria) if they do not intend on contracting with the state government. 6.6 Environmental Audits Alabama does not require environmental self-audits as a matter of statutory law. Certain regulatory pro- grammes mandate annual reporting to ADEM, some of which involve audit-like reviews. Other legislative programmes enacted by the state encourage com- panies to perform voluntary self-assessment and rehabilitation of owned properties. One example is the Land Recycling and Environmental Redevelop- ment Act, which provides incentives and related limitations on liability for companies that implement property assessment and cleanup plans approved by ADEM. Additionally, self-reporting and correcting violations may be considered by ADEM in determin- ing the amount and nature of regulatory penalties. Otherwise, Alabama has not established any statu- tory self-auditing privilege. Discovery and disclosure protections for audit-related materials are governed by state and federal rules of evidence and procedure.
Alabama allows for insurance coverage to pro- tect against environmental liabilities for compa- nies, although the extent of such protection heavily depends upon coverage terms and is often subject to specific exceptions or exemptions within the policy. Companies are also free to insure individual directors, officers and employees against those same liabilities. Individual insurance coverage for environmental liabili- ties is rare, however. Due to the significant sensitivity to terms, all policies should be carefully reviewed to ensure that coverage is sufficient for individual and corporate needs. Pollution legal liability (PLL) insurance is available in Alabama and can be structured on a site-specific or portfolio basis. PLL may cover unknown pre-existing conditions (subject to underwriting), third-party bodily injury/property damage, cleanup costs and business interruption. Common exclusions include voluntary sampling outside a regulatory directive, known con- ditions, intentional acts, USTs, certain lead/asbestos exposures, PFAS, contractual liabilities and changes in use. Representation and warranty insurance may, in appropriate transactions, backstop environmental representations, subject to customary exclusions. For historical releases General Liability (GL) policies may not contain broad pollutions exclusions and may pro- vide coverage, particularly if issued before the mid- 1980s. Alabama has adopted federal principles with respect to lender liability for environmental contamination. Lenders are generally shielded from liability for holding security interests in real property, facilities or equip- ment that is used to store or treat hazardous waste or other potential environmental contaminants. Excep- tions exist if the lender participates in management of the property in question or exercises control over its operation. Alabama’s clean‑up framework also mir- rors federal safe harbour laws, with a focus on timely divestiture of contaminated property after a foreclo- 9. Lender Liability 9.1 Financial Institutions/Lenders
7. Personal Liability 7.1 Directors and Other Officers
Alabama state law imposes the traditional duty of good faith on directors and officers. Liability otherwise follows traditional common law principles. A director or officer’s personal liability may arise if personally and directly involved in the conduct at issue or if the direc- tor or officer otherwise knowingly controls or approves the violations giving rise to liability.
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