Environmental consultants who failed to detect that a Mount Kisco property had been used for a uranium refinery during the Manhattan Project will not have to compensate the bank that hired them to check the property for hazardous conditions.
BankUnited of Miami Lakes, Florida, sued Merritt Environmental Consulting Corp. and Lender Consulting Services Inc. for professional malpractice, negligence and breach of contract.
Last month, U.S. District Judge Cathy Seibel in White Plains granted the consultants’ motion to dismiss the lawsuit. The statute of limitations for these types of claims is three years, she ruled. The bank had hired the consultants in 2013 and sued in 2017, four years later.
The attorney for BankUnited, Joseph C. Savino, disagreed with the ruling in a letter to the judge. But in view of her opinion and the “continuing costs of litigating in this altered landscape,” he agreed to withdraw the claims.
The property at 105 Kisco Ave. was part of the secret Manhattan Project to develop atomic weapons during World War II.
In 1942, Canadian Radium and Uranium Corp. (Canrad) began refining uranium sludge into highly radioactive radium, polonium and actinium. Canrad stopped producing weaponized uranium after the war, but still produced commercial quality radioactive materials.
Inspections by the state Department of Labor found deplorable conditions, according to BankUnited’s complaint, and in 1957 the state prosecuted Canrad for exposing employees to excess radiation.
Canrad failed to decontaminate the property in several attempts from 1958 to 1966. Then the Mount Kisco Urban Renewal Agency bought the property, with the goal of cleaning it up. But a contractor, according to court documents, released radioactive materials into the soil, further contaminating the site.
From the late 1970s to 2013, county, state and federal agencies inspected the property and found many “hot spots.”
In 2013, 105 Mt. Kisco Associates LLC asked BankUnited for a loan to refinance a mortgage on the property.
The bank hired Merritt Environmental of Hauppauge to assess the environmental risks of the property and Lender Consulting of Buffalo to review the report.
The report concluded that the property had been used for a lumber mill, garage, paint shop, coal and wood sheds, auto sales and service and woodworking. It cited maps from 1916 to 1949 that depicted a 250-gallon gasoline tank under Kisco Avenue and a Standard Oil Co. oil tank on the property.
Merritt and Lender had failed to discover that the site had been contaminated by radioactive materials for more than 70 years.
Merritt, according to the bank’s lawsuit, had not even interviewed local and state government officials, as required by professional standards for environmental assessments.
Relying on the consultants’ work, the bank said, it loaned nearly $3.3 million to the property owner.
In 2015, state and federal agencies met with the owner and discussed contamination issues. Then a contractor for the Environmental Protection Agency surveyed the property and found high radioactive levels throughout the site.
A consultant for the property owner estimated the cost of cleaning up the site at $4 million to $30 million. The owner defaulted on the loan, owing more than $3 million.
A 2013 appraisal had valued the property at $4.3 million. A 2017 appraisal said it was “worth nothing.”
BankUnited also sued three companies that had insured the environmental consultants. But the policies, according to court documents, had numerous exceptions. The insurers asked the court to dismiss the charges against them.
Seibel postponed ruling on their motions and offered BankUnited a chance to bolster its case against the insurers.
Savino, the bank’s attorney, argued in his letter to the judge that state law prohibits exclusionary language that defeats or nullifies the purpose of an insurance policy.
Merritt and Lender had paid substantial premiums “for what appeared to be a robust pie of coverage,” he wrote, but “each exclusion in the policies removes a slice of the pie, leaving nothing but a plate of crumbs at the end.”
But given the judge’s ruling on the consultants, he withdrew the bank’s claims against the insurance companies.