Questions & Answers

 Information supplies by Marsh, Inc.

Environmental liabilities can arise from locations with known contamination as well as sites with no known contamination.  In either case, environmental liabilities can generate significant financial uncertainties.

 There are generally three major environmental concerns associated with ownership or the operation of a property or facility.  First, the possibility of onsite cleanup of contamination resulting from ongoing operations.  Second, the potential third party liability arising from historical or ongoing operations.  Finally, under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA – or “Superfund”), the current owner of a contaminated property may be held liable and responsible for the cost to clean up the location regardless of his/her involvement in the creation of the problem.

Q:         What are some examples of exposures that can create potential environmental problems?

A:          Historical or ongoing operations present various exposures to a site.  These can include, but are not limited to:

Ø      Unknown or missed contamination from previous cleanup projects that requires future cleanups.

Ø      Wastewater discharges into streams or air emissions can result in contamination that requires cleanup or third party claims.  

Ø      Leaking underground or aboveground storage tanks that cause soil or groundwater contamination.

 Ø      The storage and handling of chemicals or other hazardous materials that results in a spill or a release to the environment.

All of these potential scenarios can trigger cleanup obligations for the site owner or result in a third-party claim.  In addition, similar exposures at neighboring properties can impact an owner's site. Contamination can migrate onto your property, which may produce business interruption or property damage.

Q:        What types of coverages are available in a PLL?

A:         The primary intent of a PLL is to respond to claims for third party bodily injury and property damage resulting from pollution conditions and/or first party environmental cleanup costs and legal defense expenses resulting from pollution conditions that are “unknown” and “unexpected”.  A PLL policy can also incorporate coverages for the transportation and disposal of waste, first party business interruption, and diminution of value.

Q:         What types of business can benefit from the PLL program?

A:          Environmental risks can have an impact on just about any business.  The following is a sampling of industry classes that Marsh has helped to find solutions:

Q:         Can this program be used in mergers & acquisitions?

A:          Yes.  Often, future environmental liability protection can be essential to the completion of a transaction.  A PLL program can resolve liability concerns.  In addition, these programs can be strategic tools in finding a buyer because they are transferable from the owner to the buyer.

Q:         Would this program be appropriate for real estate investors and developers?

A:          Yes.  After cleaning up a site, a PLL program can protect investors and developers as well as the new owner.  The developer and investors can use this program as an "exit strategy," thereby minimizing future liabilities and protecting the value of their investment.  These policies are also transferable, enabling them to be useful marketing tools when selling the properties.

Q:        Can a PLL policy cover multiple locations?

A:         Aggregate coverage can be crafted for a single site or multiple sites under one policy form.

Q:        Is the coverage claims-made or occurrence?

A:         Claims-made.

Q:        What is the maximum policy term available in the marketplace?

A:         The maximum policy term (duration) available in the marketplace is 30 years. However, these policies are generally purchased with 3- to 10-year terms.

Q:        Who are the major insurance carriers?

A:         AIG Environmental, Kemper Environmental, Zurich American, and Environmental Compliance Services, Inc (ECS).

Q:        What limits are available in the environmental insurance marketplace?

A:         Marsh has structured PLL programs with limits as high as $800,000,000 per occurrence or $800,000,000 aggregate.

Q:        Can a PLL be combined with a Cleanup Cost Cap (CCC) program?

A:         Yes, it is quite common to combine the CCC and PLL programs into one manuscripted coverage form to provide coverage for the “known” and “unknown” issues associated with a site or multiple sites.

Q:        Can these programs be written for international locations?

A:         Yes.

Q:         Upon what are the underwriting decisions based?

A:          An assessment is conducted to evaluate the site and to review operations. For some projects, existing reports and documentation may be sufficient.

Q:         What is included in an environmental site assessment and who pays for it?

A:          A site assessment is a review of documents regarding ongoing and historical operations, and can include a tour of the facility.  The insurer’s in-house environmental professionals normally conduct these assessments at its own expense.  The site assessment does not include any type of environmental testing or sampling and, in many cases, can be conducted over the phone.

Q:         How long does it take to structure these programs?

A:          This depends upon the number of and complexity levels of the locations and the types of coverage that have been chosen.  After submission of the required materials, a quote may be obtained in one to two weeks.  Larger policies or more complicated situations may take a month or longer for the insurer to perform his/her due diligence.

Q:        How much do these programs generally cost?

A:         The cost for a PLL program varies based upon the number of locations, the nature of the potential exposures, the limits, and deductibles.  However, premiums have decreased over the past several years.

It is important to understand the environmental solutions that can help protect your investment.   Please contact your local Marsh representative to discuss these issues in greater detail.