February 29th, 2016
While preparing for a presentation on “stigma” damages based on environmental contamination, I came across a tax assessment case (linked above) from Pennsylvania where the Supreme Court accepted a “standard” 5% reduction in property value for environmental contamination. A couple of cautions, however, to placing too much reliance on this decision, First, the opinion is really more of a “weight of the evidence” decision; i.e., the Court simply said a factfinder can determine whether an expert’s assertion of “standard” is proper or not. Second, one important factor for what is a relatively low reduction was there was already an existing agreement to remediate the property – which is correct, as “stigma” is based on the perception of harm, not actual harm.
Because “stigma” damages are based solely on perception, there is a lively academic debate whether they should be a proper aspect of damages in a legal case. South Carolina has recently waded into the “stigma” damages debate. In Chestnut v. AVX Corp, 776 S.E.2d 82 (SC 2015), the SC Supreme Court overturned a trial judge’s dismissal of claims for stigma damages based on TCE contamination of adjoining properties. The Court stated:
“Further development of the facts may demonstrate that appellants’ property has in fact lost value due to its proximity to the property contaminated by TCE, or that the contamination has been remediated and the alleged stigma ameliorated. The creation of a factual record will allow us to decide whether to adopt a “no stigma damages rule;” an “all stigma damages rule;” or a modified rule.”
South Carolina has recognized stigma damages in prior cases where there was direct physical injury (such as depreciation in wrecked autos, even after repairs), but the import of the AVX decision is that stigma damages could be available even where there is no direct injury. If so, the Pennsylvania decision could be cited to show that, even if allowed, they would be relatively minor.
For additional background on the AVX matter, see the links below.