Chlordane: a Gnawing Concern

Insurers involved in the continent wide asbestos and urea formaldehyde litigation have taken some comfort in recent years that most potential environmental hazards associated with the building trades are now known and banned. In some Canadian cities, however, there is a lingering environmental concern in the form of a potent insecticide once in common use, called Chlordane.

Chlordane is a manufactured chemical used as a pesticide in the U.S. from 1948 to 1988. Technically, it is not a single chemical but a mixture of pure Chlordane and many related chemicals. It does not occur naturally in the environment. It is a thick colorless liquid with a mild irritating smell.

In America, Chlordane was employed as a pesticide on crops like corn and citrus fruits and on lawns and gardens until 1983. Because of concern about damage to the environment and harm to human health, the U.S.-based Environmental Protection Agency (EPA) banned all uses of Chlordane in 1983, except to control termites. In 1988 the U.S. government finally banned all uses.

Chlordane is stable and persistent: staying in the soil for over 20 years. It sticks strongly to soil particles at the surface and is not likely to enter ground water. Since it leaves the soil only by evaporation into the air and breaks down very slowly, it has a tendency to remain in structures almost indefinitely when it is injected into wood.

Chlordane affects the nervous system, the digestive system and the liver in people and animals. Headaches, irritability, confusion, weakness, vision problems, vomiting, stomach cramps, diarrhea and jaundice have occurred in people who breathed air containing high concentrations of Chlordane, or accidentally swallowed small amounts of Chlordane. Large amounts of Chlordane taken by mouth can cause convulsions and death. The chemical can also cause behavioral disorders in children if exposed before birth or whilst nursing.

Termite factor

In the U.S., hundreds of lawsuits have been filed against Chlordane’s manufacturer Velsicol Chemical Corp. Most of the litigation has been unsuccessful due to the difficulties in proving a link between Chlordane and long-term health effects. On the other hand, houses that have been heavily treated with Chlordane are now unmarketable in some American jurisdictions.

While some people may be exposed to Chlordane by eating contaminated fish and shellfish, the highest exposure comes from living in homes that were treated with Chlordane for termites.

In the U.S., non-disclosure of houses treated for termites with Chlordane have become the subject of heated and emotional litigation. In some instances, families have abandoned their homes after reporting a variety of unpleasant symptoms, particularly in children.

Canadian experience

All pest control products that are used in or imported into Canada must be registered under the Pest Control Products Act and regulations (i.e., have a pesticide control products registration number). Federal registration for all products with Chlordane as an active ingredient were discontinued in 1990. Unfortunately, wholesale and retail sales of “end use” products with Chlordane were permissible until 1995.

Although Chlordane is now prohibited by Ontario Regulation 162/94 under the Pesticides Act of Ontario, section 62 of legislation states: “No person shall use, handle, store, sell, transport or dispose of a pesticide that contains Alderin, Chlordane, Chlordecone, DDT, Dieldrin or Endrin.”

Despite subsection 1, a pesticide described in that sub-section may be managed and disposed of as a hazardous waste in accordance with the Environmental Protection Act, and the regulations under that act. Because of the fact that termites are most prevalent in the southern U.S., Canadian insurers have by and large ignored growing litigation and health concerns arising out of the use of Chlordane for termite control.

In fact, in most risk management appraisals, the major exposure to home inspectors and real estate agents in the form of possible errors and omissions (E&O) coverage arrives from failing to carry out adequate termite inspections in older houses. The Ontario Real Estate Association lists a number of home inspection factors to be considered before purchasing. They recommend that older homes should be examined for lead paint, aluminum wiring, asbestos, urea formaldehyde and termites since the presence of any of these may effect the appraisal.

At the present time, real estate agents in Ontario continue to regard an effective termite program, particularly those using Chlordane, as being a “sales advantage” since it almost warrants that the spread of termites was stopped following the chemical treatment.

Ongoing termite problem

In Canada, domestic Chlordane exposure essentially co-exists with termite infestations. Predictably, cities that have had traditional problems with termites also face potential problems with Chlordane contamination.

There are only two major families of termites to be concerned with in Canada. The more benign of the two are the “rotten wood” termites that are pretty much confined to the west coast. In addition there are the more common “subterranean” termites. “Reticulitermes flavipes” is the most troublesome and important of these pests, capable of building shelter tubes over foundations or through cracks and into structural timber. It is the most destructive pest in North America, and the only resident termite species in Ontario. Colony populations of between one and 10 million, and foraging territories up to several thousand square meters, have been estimated for the northern populations.

These termites are now found in British Columbia, possibly Alberta and many Ontario municipalities. They were first recorded in the City of Toronto in 1938. At the time that Chlordane was banned, almost 20% of Toronto’s residential neighborhoods were estimated to be infested to some degree. Since the discontinuation of Chlordane, it is projected that this number is now considerably larger.

Traditionally, real estate agents and home inspectors will carry out inspections in and outside of a structure looking for evidence of old and new termite activity. If evidence of termite activity is found in the property, the home inspector or real estate agent will usually attempt to ascertain whether a chemical treatment has previously been performed by examining the structure for termite treatment holes, or checking city records to confirm spraying had been carried out.

Chlordane health effects

The U.S. governing EPA has issued the following summaries on the proven health risks of Chlordane. As with any EPA health effects hazard summary, the environmental lobby believes it to be a considerable understatement, while the manufacturer considers it to be an exaggeration of the risk.

The EPA’s “Health Effects Notebook” for hazardous air pollutants (1994) describes the hazard summary for Chlordane as follows: “The acute short term effects of Chlordane in humans through inhalation and ingestion exposure consists of gastrointestinal distress and neurological symptoms, such as tremors and convulsions. Chronic (long term) inhalation exposure to Chlordane in humans results in effects on the liver with possibly effects on the nervous, respiratory, and cardiovascular systems and the lungs and blood.”

Limited human studies are available regarding the reproductive or developmental effects of Chlordane. Animal studies have reported reduced fertility and neurological effects in the offspring of animals treated with Chlordane.

Human studies are inconclusive regarding Chlordane and cancer. Animal studies have reported liver cancer in mice and male rats exposed to Chlordane via ingestion. EPA has classified Chlordane as a ‘”Group B2’, probable human carcinogen of medium carcinogenic hazard…” Under “Reproductive Developmental Effects”, the EPA states: “A study of women living in homes repeatedly treated for termites with Chlordane revealed an increased incident of ovarian and uterine disease compared with a reference population.”

However, it is not possible to state whether these effects were solely due to Chlordane or to other chemicals as well. In studies conducted so far, Chlordane has not been directly linked with causing birth defects in either animals or in humans. Since Chlordane can build up in breast fat, however, several studies have looked at levels of a chemical contained in chlorine mixtures and breakdown products in the breast fat of woman with or without breast cancer. The results of these studies have not been consistent, but the long-term risk has been assessed as the possibility that Chlordane induced changes in the immune system can affect breast cancer risk.

Negligent misrepresentation

It is not difficult to see how the existence of high concentrations of Chlordane in a house or business could result in possible litigation for negligent misrepresentation if the contamination is not disclosed to a possible purchaser. By the same token, purchasers of a house or property treated with Chlordane might well want to consider taking steps to ensure its removal, particularly if they have young children.

In some American jurisdictions, the courts have considered whether knowledge of past treatment of a property for termites is sufficient to raise an inference that Chlordane contamination was possible. The law with regard to negligent misrepresentation in Canada was set out by the Supreme Court in the case of Queen v. Cognos Inc. [1993] 1 S.C.R. 87. In that case, Iacobucci J., speaking for the court, set out at page 110, five elements in a claim for negligent misrepresentation:

There must be a “special relationship” between the representor and the representee;

The representation in question must be untrue, inaccurate or misleading;

The representor must have acted negligently in making the misrepresentation;

The representee must have relied in a reasonable manner on the negligent misrepresentation; and

The reliance must have been detrimental to the representee in the sense that damages resulted.

Each of these elements must be made out for the plaintiff to be successful in a claim of negligent misrepresentation. In the case of a domestic real estate transaction, the essence of an alleged negligent misrepresentation would be that the vendor represented to a purchaser that the house would be suitable for any use intended and free from volatile insecticide contamination.

The courts have found that willful silence or a failure to divulge highly pertinent information may, in some circumstances, amount to negligent misrepresentation. This was set out in the Cognos case supra at page 653 and in Spinks v. Canada (1996) 13 D.L.R. (4th) 233 (Fed. C.A.). If a potential purchaser is warned by either the real estate agent or the vendor that a house has been treated with Chlordane, and the purchaser decided for various economic reasons to go ahead with the purchase, the courts will take a dim view of the purchaser subsequently complaining that they were unaware of the potential damages.

Assessing risk

Since Chlordane was banned more than a decade ago, consumers in Canada have been largely unaware of the controversy surrounding the chemical in the U.S. Because the use of Chlordane as a popular termite control treatment continued in Ontario for at least six to seven years after it was banned south of the border, there is a nagging question as to why federal and provincial governments failed to act sooner when the EPA information was made available to them. Efforts to ban the chemical began in the mid-1970s when the health risk became known.

At the present time, the dynamic real estate market in southern Ontario makes it unlikely that any concerted effort will be put into addressing this potential problem. Underwriters, however, should be aware of the fact that enormous sections of downtown Toronto, particularly older neighborhoods with termite infestations, were treated heavily with Chlordane, and therefore pose a potential exposure.

Homeowners who discover that their house has been treated for termites in the past, would be wise to take positive steps to educate themselves with regard to Chlordane and its possible side effects, particularly if there are young children in the house.

From an insurer’s perspective, forewarned is forearmed. Hopefully, we will not become aware of the potential threat posed by Chlordane only when confronted with class action lawsuits.