Waterfront Brownfield
Habitat Restoration
Captive Program
Corporate Risk Management
Remediation Strategy
Mediation Support
Real Estate Portfolio
Waterfront Brownfield: Environmental Insurance and Risk Management for Interim Property Use and Redevelopment
Background: A developer needed environmental insurance to meet lender requirements under a short timeframe for acquisition of a large waterfront property with a long history of industrial activity but limited environmental information about dredged fill material and sediment quality. After obtaining insurance, the developer decided to implement interim redevelopment activities beyond the originally agreed scope imposed by the insurer based on the limited site information.
Role of ER&FS: At the outset, ER&FS conducted an exposure assessment and worked with the developer’s legal and insurance professionals to negotiate and secure coverage to meet lender requirements. After learning of the developer’s change in plans, ER&FS led an effort coordinated with the insured’s consulting team to address data gaps associated with the fill material and design a soil management plan to mitigate risk during interim redevelopment activities.
Client Benefits: ER&FS’ services supported placement of coverage under a limited timeframe that required strong insurance market relationships and understanding of environmental coverage allowing the deal to close on schedule. Historic research and risk management measures addressed data gaps and the insurer’s concerns about the interim redevelopment activities, allowing extension of coverage with no additional premium. Data gaps were addressed without the need for costly subsurface sampling that could potentially identify unknown conditions demanding remedial action.
Habitat Restoration: Environmental Insurance to Facilitate Project
Background: A habitat restoration project on public land with oversight by a wildlife foundation requires that 1.5 million cubic yards of fill be imported to restore a tidal marsh and wildlife refuge. Sources of fill include dredged sediments and upland excavation projects.
Role of ER&FS: To protect the restoration project against potential contamination from imported fill, insurance was required to supplement risk management procedures that include a rigorous sampling protocol. ER&FS worked with the wildlife foundation, the environmental consultants leading the project, and the insurance professionals in designing and implementing coverage to address the risks of contamination and natural resource damage arising from the fill material and other exposures.
Client Benefits: With the security of the specifically-designed environmental insurance protections, the wildlife foundation was able to conclude a transaction with a private company to be paid for receiving imported fill at the restoration site. As a result, cost savings are estimated in the millions of dollars and the foundation was able to proceed with restoration of 1,400 acres of tidal salt marsh to provide habitat for endangered species and other native wildlife.
Captive Program: Development of Proprietary Environmental Insurance
Background: A manufacturing company with dozens of locations in North America and Europe was concerned about its environmental exposures from decades of operations. Neither required nor wanting to conduct detailed site investigations, the company was interested in quantifying its environmental risks at a high confidence threshold and creating a long-term financial plan to address contingencies.
Role of ER&FS: Based on the available information, ER&FS created a risk model to measure potential third-party liabilities and remediation costs over thirty years, in coordination with development of environmental insurance coverage designed to address the company’s specific needs. ER&FS created insurance policies and risk-pricing, and facilitated the company’s search for interested insurers. After market declinations, the company used its captive insurance company, with assistance from ER&FS for developing premiums, issuing policies and endorsements, and supporting claims analysis.
Client Benefits: With the environmental insurance program developed by ER&FS, the company has successfully implemented an efficient financial structure for addressing its environmental exposures and obligations in a manner that realizes cost savings and provides for responsible long-term corporate stewardship.
Corporate Risk Management: Environmental Insurance Program Enhancement
Background: A company with hundreds of locations had an environmental insurance policy with numerous general and site-specific exclusions limiting, and in many cases entirely eliminating, the company’s coverage for significant environmental exposures.
Role of ER&FS: After creating a framework for gathering key information, ER&FS evaluated the company’s exposures relative to its coverage, implemented a competitive process to fill coverage gaps, negotiated terms, and structured a layered program involving six environmental insurers. ER&FS continues to support the company’s program with environmental risk management services.
Client Benefits: The company has successfully removed many key exclusions, obtained unique elements of coverage, more than doubled its policy limit and reduced its normalized premium rate. With the benefit of the underwriting information and exposure assessment, the company has expanded its internal risk management systems and controls.
Remediation Strategy: Environmental Management of Remediation, Compliance and Insurance Matters
Background: With over $20 million in expected remediation at six locations and more than 30 operational facilities with environmental compliance challenges in multiple states, an industrial services company purchased a long-term environmental insurance program providing coverage for expected remediation and related contingencies, as well as potential environmental liabilities.
Role of ER&FS: After reviewing the company’s exposures in the context of the insurance program, ER&FS designed and implemented a “stratified” management strategy for the remediation sites involving an RFP process, regulatory discussions, contract negotiations, and coordination with the insurer’s engineering staff. Ongoing consulting is provided to the company’s directors, outside legal counsel, and real estate, engineering, accounting, and risk management departments with respect to remediation, regulatory agency strategy, environmental insurance, compliance, and real estate and business transactions.
Client Benefits: ER&FS’ services have resulted in significant remedial cost savings, aligned goals of the consulting team with the company’s strategies, accelerated the remedial sites towards closure, and improved the company’s regulatory standing and community relations. Overall, the services have enabled the company to better understand and manage its exposures and resources, allowing it to focus on its core business.
Mediation Support: Integrated RFP Process
Background: Contentious litigation in mediation involved a manufacturing company in bankruptcy and municipal entity in dispute over future remediation cost, and third-party exposures related to a large chlorinated VOC plume. The opposing parties’ consultants offered differing remedial approaches and third-party risks included impact to water-supply wells and vapor intrusion issues. An added complexity was the involvement of CGL insurers representing the sole financial resources of the manufacturing company.
Role of ER&FS: By implementing an integrated request for proposal (RFP) process, ER&FS obtained remediation proposals with risk-sharing components, crafted to meet underwriting criteria, from pre-qualified environmental consultants. Consultant proposals were evaluated with three insurers that provided program structures for cost over-run and liability protection. The technical and insurance proposals allowed ER&FS to conduct an integrated “cost of risk” and exposure analysis quantifying remedial, risk-transfer, and uninsurable costs and third-party liability exposures.
Client Benefits: This process established a cooperative framework and assisted the parties in achieving a settlement that provided the public entity with its expected costs and released the manufacturing company and its insurers. The mediated settlement was facilitated by the “cost of risk” analysis and focused resources on a remedial approach that mitigated third-party exposures, avoiding additional costly and time-consuming litigation.
Real Estate Portfolio: Environmental Liability Coverage and Mold Management
Background: A developer’s real estate portfolio had prior operations including a paint manufacturing facility with known contamination, a utility substation, a construction yard, automotive repair operations, agricultural uses and former USTs. The developer had purchased environmental insurance, but its insurer had imposed significant limitations and exclusions for prior conditions, known or unknown, and provided minimal coverage for mold since the developer had experienced mold-related claims.
Role of ER&FS: In coordination with the developer and its insurance professionals, ER&FS prepared a mold management plan to obtain higher coverage limits for mold, reviewed policy exclusions and negotiated with the insurer regarding the site conditions and technical basis (or lack thereof) for exclusions. In addition, ER&FS obtained competitive proposals from other environmental insurers and evaluated renewal options.
Client Benefits: ER&FS enabled the developer to broaden coverage with increased limits for mold and elimination of site-specific exclusions, for a competitive price. In addition, the developer improved its loss experience with mold-related claims based on implementation of the mold management plan and training program.
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