Transcript Please post this information on the last slide. As part of

Welcome to RIMS 2012 Annual Conference & Exhibition
RIMS Session INS202
(Philadelphia, PA)
Wednesday, April 18, 2012
8:45 am – 10:00 am
“Managing Emerging
Environmental Risks”
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SPEAKERS
Moderator:
Debbie L. Gramer
Director, Global Risk Management
Arrow Electronics, Inc.
Michele Schroeder, J.D., M.S.L.
Product Underwriting –
Zurich In North America
[email protected]
Gene P. Devine, J.D., SVP
The Treiber Group/
Arthur J. Gallagher
Risk Management Services, Inc.
[email protected]
John G. Nevius, Esq., P.E.
Shareholder
Anderson Kill & Olick, P.C.
[email protected]
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Disclaimer
• The views expressed by the participants in this
program are not those of the participants’
employers, their clients, or any other
organization.
• The opinions expressed do not constitute legal
advice, or risk management advice.
• The views discussed are for educational
purposes only, and provided only for use
during this session.
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Managing Emerging
Environmental Risks:
Increased Government Regulations –
Financial Assurance
April 18, 2012
Michele Schroeder – Zurich In North America
Environmental Business Division
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Overview
• Background of Environmental Financial
Assurance
• Current Federal Environmental and Land
Management Financial Assurance rules
• Insurance as a Financial Assurance Instrument
• Emerging Financial Assurance Regulations
CERCLA 108(b)
• Current status and open items
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Financial Assurance Background
• Environmental Laws and Regulations
– Standards of operations and duties of care
– Polluter pays
• Why Risk Transfer - Insurance?
– Regulated entity voluntarily manages environmental risks
• Why Financial Assurance?
– Government mandates demonstration of financial resources for
environmental risks and future environmental obligations
• Adequately compensate affected third parties
• Mitigates effects of bankruptcy; corporate dissolution; and
abandonment
• Transfer ultimate resource management from regulated entity to
a “guarantor” – avoid reversion to Government
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Financial Assurance Background
• Types of Acceptable Financial Assurance Instruments
–
–
–
–
–
Surety bonds – default for payment
Bank letters of credit – guarantee / unconditional access
Insurance – terms and conditions
Trust funds or escrow accounts
Net worth test and parental guarantees
• Have changes in the economy affected use of instruments?
–
–
–
–
Surety bonds – superior credit rating; retract from certain classes
Bank letters of credit – fee increases; capacity limitation
Cash and asset depletion – funds, accounts, balance sheet, guarantees
Insurance
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EPA’s Federal
Financial Assurance Regulations
RCRA 40 CFR 264 and 265 – third party bi and
pd; corrective action; closure and post
closure care
Hazardous waste treatment, storage and
disposal facilities, landfills
RCRA 40 CFR 258 – third party bi and pd;
corrective action; closure and post closure
care
Solid waste disposal facilities, landfills
TSCA 40 CFR 761 – third party bi and pd;
corrective action; closure and post closure
care
PCB commercial storage facilities
RCRA 40 CFR 280 – third party bi and pd;
corrective action
Petroleum underground storage tanks
RCRA,SDWA 40 CFR 144 – plugging and
abandonment/closure of wells
Deep well injection of hazardous waste;
natural gas and oil; inject fluids for extraction
of minerals; CO2;
OPA, CERCLA 33 CFR 138 – third party bi and
pd; corrective action; natural resource
damages
Vessels carry oil or hazardous substances
OPA, OCSLA 30 CFR 253 – third party bi and
pd; corrective action and plugging and
closure of wells
Offshore Oil facilities (oil exploration, drilling,
production and transport)
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Land Management
Federal Financial Assurance
Regulations
Surface Coal Mining and Reclamation Act –
(SCMRA 30 CFR 800) land reclamation and
mine closure and post closure maintenance
Coal mines
Bureau of Land Management (BLM 43 CFR
3809) land reclamation and mine closure and
post closure maintenance
Hardrock mines
Atomic Energy Act (10 CFR 50, 60) – plant
decomissioning and closure
Nuclear Facilities
US Army Corps of Engineers (33 CFR 332) –
restoration of wetlands
Wetland Mitigation Banks
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Financial Assurance
• State administration – can expand scope/obligations and do!
• Condition of operational permits or shut down and pay fines
• Proof of financial assurance to controlling agency
• Amount (limit) of financial assurance
 3rd party bodily injury and property damage
 Size and number of tanks ,wells, vessels/throughput of
product/site characteristics/land acreage etc. prescribed by
regulation
 Closure, post closure care, maintenance, land reclamation and
corrective action
 submit plan of operations and cost estimates for closure, post
closure, maintenance and/or land reclamation for regulatory
signoff
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Insurance Financial Assurance
• Structure of insurance
– Terms and conditions
– Underwriting process and insurance contract
• Payment for accidental occurrence/ unexpected future costs
– Development of third party claim
• Adjustment to the insurance process for expected future costs (closure,
corrective action, land reclamation)
• Fortuity
– The risk involves elements outside of the control of the insured and the
insurer that may trigger a loss
• Adequate risk transfer
– Structure risk transfer insurance above expected future costs or as
additional coverage
• Account for expected future costs
– Collateral; captives; etc.
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Insurance Financial Assurance
Key Underwriting Considerations
• The purpose of the financial assurance: expected v. unexpected
future costs
• The environmental risks attendant to these industry operations
• The operators ability to manage and mitigate the risks
• Financial solvency/stability of the operator
• Unique attributes of the facility to manage and mitigate the risks
• Other risks posed by the surrounding area/location
• Regulatory risk
• Plan of operation and feasibility of implementation
• Cost engineering/estimate evaluation
• Duration of risk
• Limits for risk
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Emerging Federal Financial
Assurance Regulations
CERCLA Section 108 (b)
74 Fed. Reg., 143, pg. 37213
July 28. 2009
Proposed rule identifies industry segments
subject to Environmental Financial Assurance
• Hard rock mining industry – extract, beneficiate or
process metals (ie: copper, gold, iron, lead,
magnesium, molybdenum, silver, uranium and zinc
and non metallic, nonfuel minerals (ie: asbestos,
gypsum, phosphate rock and sulfur)
CERCLA Section 108 (b)
75 Fed. Reg. 3, pg. 816
January 6, 2010
Proposed rule identifies industry segments
subject to Environmental Financial Assurance
• Electric power generation, transmission and
distribution (due to coal ash) NAICS 2211
• Waste management and remediation services NAICS
562
• Wood product manufacturing NAIC 321
• Fabricated metal product manufacturing NAICS 332
• Electronic and electrical equipment manufacturing
NAICS 334 and 335
• Basic chemical manufacturing industry
NAICS 3251
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Emerging Federal Financial
Assurance Regulations
CERCLA Section 108 (b)
75 Fed. Reg. 3, pg. 816
January 6, 2010
Proposed rule identifies industry
segments subject to Environmental
Financial Assurance
• Resin, synthetic rubber and artificial synthetic fibers and filaments
manufacturing NAICS 3252
• Pesticides, fertilizer and other agricultural chemical manufacturing
NAICS 3253
• Paint, Coating, and Adhesive Manufacturing NAICS 3255
• Soap, cleaning compound, and toilet preparation manufacturing
NAICS 3256
• Other chemical product and preparation manufacturing NAICS 3259
• Petroleum refineries NAICS 32411
• Asphalt paving, roofing, and saturated materials manufacturing
NAICS 32412
• Other petroleum and coal products manufacturing industry (not
coal mining) NAICS 32419
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Why? and When?
• CERCLA 108 (b) and Sierra Club v. Johnson (D.C. N.D. Calif. 2009)
– Compel EPA to act
• Identified industry segments
– In the past generated large superfund program costs
– Potential for substantial on-site releases of hazardous waste
• When
– Was Spring 2011? Never happened
– Was March 2012? Never happened
– Is December 2012? Doubtful
– Likely 2013? Final rules begin to roll out
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Open Items
• Duplicate existing obligations – more administrative burdens
– CERCLA 114(d) pre-emption clause or Waiver?
• Not accurate/excessive Financial Assurance limit may be required?
– Old superfund data as basis to calculate future amounts
• Pre-environmental regulation or risk management/best practices
– “One Size fits all” approach
• Without consideration to unique attributes/risk management
• Scope of Financial Assurance not determined?
– Corrective action, closure and post closure maintenance, land
reclamation
– 3rd party bodily injury and property damage
• What instruments will be acceptable?
– Discussion to disqualify net worth / corporate or parental guarantee
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The information in this presentation was compiled from sources believed to be reliable for informational purposes only. All sample policies and
procedures herein should serve as a guideline, which you can use to create your own policies and procedures. We trust that you will customize
these samples to reflect your own operations and believe that these samples may serve as a helpful platform for this endeavor. Any and all
information contained herein is not intended to constitute legal advice and accordingly, you should consult with your own attorneys when
developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in
connection with this publication and sample policies and procedures, including any information, methods or safety suggestions contained herein.
Moreover, Zurich reminds you that this cannot be assumed to contain every acceptable safety and compliance procedure or that additional
procedures might not be appropriate under the circumstances The subject matter of this publication is not tied to any specific insurance product
nor will adopting these policies and procedures ensure coverage under any insurance policy.
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RIMS Session 2012
Wednesday, April 18, 2012
8:45 am – 10:00 am
Managing Emerging Environmental Risks:
Energy Use and Related Developments
Presented by John G. Nevius, Esq., P.E.
Anderson Kill & Olick, P.C.
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II. Energy Use and Related Developments
A. Climate Change Litigation
1. Key Legal Issues
2. The Duty to Defend
3. The Cinergy Case: Compliance Related Litigation
4. D&O Liabilities Related to “Environmental”
Disclosures
B. Hydro-Fracking Coverage Implications
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“Climate Claims Are the New Asbestos”
National Underwriter (May 29, 2009)
Or Are They Just Another Millennium Bug…?
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The images show the ice cap as it was in 1979 and the ice cap in 2003.
Source: awitness.org
© Dan R. Anderson, UW-Madison (RIMS-SD-AK)
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Ecosystem Risks
Source: United Nations Environmental Programme (UNEP)
© Dan R. Anderson, UW-Madison (RIMS-SD-AK)
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Global Warming – Where Are We Now?
Key Legal and Coverage Issues
– Political Question Doctrine
– Causation has several layers:
• Do humans impact the temperature of the planet?
• Assuming that there is global warming, did it contribute
to the plaintiffs’ claims?
• Even assuming the above, did defendants’ conduct
caused global warming?
– Standing
– Duty to Defend; P.D. and B.I.; D&O and E&O?
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Key Issues Related To Property
Coverage
• Climate change impact:
– Higher incidences of and/or more costly property and business interruption
claims as long as “resulting” damages are covered
– Issue of anti-concurrent causation
• All-Risk policies provide coverage for multiple perils and/or business losses
with different coverage amounts and deductibles based on:
– The covered peril (e.g. flood v. wind)
– The type of loss (e.g. property damage, business interruption, extra expenses)
• Insured must not only track, document and calculate losses, but must:
– Put these losses in the proper coverage category or “buckets”
– Apply appropriate deductibles and limits to each “bucket”
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Proper Characterization, Tracking and
Presentation of Losses and Costs!
Illustrative Case: St. Paul v. Cinergy
• Allegations that energy company violated CAA (as
part of a national enforcement decision by the EPA)
• No “damages” on account of “property damage” but
seeking to recover costs necessary to comply with
the law and prevent future harm
• Basis for denial of the duty to defend?
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Proper Characterization, Tracking and
Presentation of Losses and Costs!
3. Mitigation v. Prophylactic:
• Internal costs (your own employees)
• Gray areas
• RI/FS distinction (one example of how courts have
drawn a line)
• Costs to prepare the Proof of Loss…
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Suits Claiming
Nuisance/Seeking Damages
Native Village of Kivalina v. ExxonMobil, et al., N.D.
Cal. (February 2008).
• Native Village in Alaska brought a nuisance suit against
24 self-identified major oil companies seeking relocation
costs and damages regarding fisheries.
• Plaintiffs seek joint and several liability for nuisance and
civil conspiracy, and seek monetary damages and
declaratory judgment for past and future damage caused
by global warming.
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Suits Claiming
Nuisance/Seeking Damages
• On September 30, 2009, Federal nuisance
dismissed – state law claims?
• Dismissal based upon the attenuated nature of
the causal link between the claimed injuries
and any particular defendants’ conduct, and on
the basis that the regulation of greenhouse gas
emissions was an issue best left to the political
branches of government.
• Appeal to 9th Cir. Pending (Briefing stage)
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O.K., But Is There Coverage?
Steadfast Ins. Co. v. AES
Related Declaratory Judgment Coverage Case
pending in VA state court
– Summary Judgment on Occurrence for
insurance interests – but is it?
– Is there a duty to defend?
•
•
City of Chesapeake…
Is a disinfectant an added pollutant?
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Coverage Defenses
• Loss In Progress
• Attenuated Causation / No Occurrence
• Non-Standard Pollution Exclusion Language
VA Supreme Court rejected, but rehearing
pending.
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Uncovered Risks Abound
• International Trade Risks
– Carbon Content Tariffs
– Communications/coordination failures
• Failure to Plan Risks
– For Peak Oil
– For rising power costs
– For higher cost raw materials
• “Best Available Technology” Risks
– Costs to conform to new requirements
– Loss of competitive position due to changes
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Existing Coverage
• Because global warming liabilities largely would result
from policyholders’ normal business operations, CGL
policies reasonably should provide coverage.
• Reasonable corporate emitters would not likely have
considered CO2 to be environmental pollution?
– The EPA generally has not labeled it a pollutant –
regulatable – April 2009 “Endangerment.”
– Congress has only instructed federal agencies to study the
issue.
– The only references in the Clean Air Act to CO2 are in nonregulatory provisions.
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Environmental Insurance Policies –
A Possible Solution
•
What are the Damages?
– Cleanup Costs?
• Air scrubbers, et al. – Feasible?
– Property Damage?
• Loss of Use – Natural resource damages
• Physical Injury - Dislocation
– Bodily Injury?
• Increased severity/spread of contagious diseases by
extending range of disease-carrying insects
• Side Affect - Altering markets for life / health insurance
Or, will it be in some form of Fine or Penalty (i.e.,
NRD)?
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Environmental Insurance Policies –
A Possible Solution
•
Potential Constraints
–
–
–
–
•
Naturally Occurring Substances Exclusion
Known Conditions Exclusion
Intentional Non-Compliance (CAA)
Fines & Penalties Exclusion
Biggest Immediate Benefit
–
Defense Cost Coverage – all you typically need is an
allegation of liability for the “Duty to Defend” to kick in.
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Potential Liabilities of
Directors & Officers
•
•
Shareholder derivative suits or class actions - any
perceived failure by corporate leadership to show
adequate care in avoiding or mitigating globalwarming liabilities.
Moreover, Item 303 of SEC Regulation S-K requires
companies to disclose “known uncertainties” that
could materially affect their bottom line.
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Climate Change Risk
Disclosure Requirements
•
•
•
SEC - No specific “climate” disclosure
requirements
National Association of Insurance
Commissioners - “Climate Risk Disclosure
Survey”
Under certain circumstances a failure to
disclose vulnerability to global warming suits
could create exposure…
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SEC Disclosure Guidelines
• No specific regulations for climate change disclosures, but
some general requirements in place for impacts to/from the
environment
• SEC provides guidance on climate change disclosure
requirements in relation to existing regulations in February
2010
• Companies should consider and disclose:
–
–
–
–
Impact of Legislation and Regulation
Impact of International Accords
Indirect Consequences of Regulation or Business Trends
Physical Impacts of Climate Change
• New guidance “may” have D&O implications
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Coverage For Directors & Officers
• D&O Environmental Pollution Exclusion
– May apply depending on allegations of the claim
and relation to environmental pollution.
– Actions incidental to pollution – allegedly
misleading statements – re: a decline in share
price from environmental pollution – less likely to
trigger.
– “Best Practices”: enhance D&O coverage to
include “environmental mismanagement claims.”
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Importance of Shale Gas to the USA – Hydro fracking
30
 Shale formations represent a growing source of natural gas for the
nation and are among the busiest oil and gas plays in the country.
Alaska
25
Tcf/year
20
Gas Shale
15
10
U.S.
Department of
Energy , 12/10
Coalbed
Methane
5
0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
U.S. Department
of Energy , 12/09
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New Report on Global Shale Gas Reserves
•
U.S. DOE released a new report on April 5, 2011 that assessed 48 shale gas
basins in 32 countries, containing almost 70 formations.
http://www.eia.gov/analysis/studies/worldshalegas/
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Plenty of Challenges Ahead
Source: C.B. Veil – taken in Ithaca, NY, June 2010
[email protected]
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Managing Emerging
Environmental Risks:
Natural Resource
Damage Liability
Presented by Gene P. Devine, JD, SVP
Arthur J. Gallagher Risk Management Services, Inc.
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NRD DEFINED
“Injury or loss of land, fish, wildlife, biota,
air, water, ground water, drinking water
supplies, and other such resources
belonging to, managed by, held in trust by,
appertaining to, or otherwise controlled by
the United States ... any State or local
government, any foreign government, [or]
any Indian [T]ribe."
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NRD Liability
• CERCLA
• OIL POLLUTION ACT (OPA)(Post Valdez)
• Various Citizen Suit Provisions:
– Clean Water Act
– Clean Air Act
Contain power to act on behalf of the people in
certain circumstances.
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WELL KNOWN CASES
Deepwater Horizon
U.S. v. Exxon (Valdez)
U.S. v. Montrose Chem. Co.
Morton International, Inc. v. General
Accident Insurance Company
Coeur D’Alene Tribe v. ASARCO, Inc.
Commencement Bay Superfund Site
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Deepwater Horizon
• $1 Billion “Early Restoration” agreement announced
by Trustees and BP on April 21, 2011
• On Dec. 12, 2011, the NRDA Trustees released the
Deepwater Horizon Draft Phase I Early Restoration
Plan & Environmental Assessment (DERP/EA) for
public comment
• 8 proposed projects for initial round of Early
Restoration, two each in AL, FL, LA and MS
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U.S. v. Exxon (Valdez)
 Nearly $1 Billion Award to Federal and State (Alaska)
Trustees
 $25 Million in Fines
 $100 Million in Restitution (Does NOT include
private party actions)
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U.S. v. Montrose Chem. Co.
883 F. Supp. 1396 (C.D. Cal. 1995), rev’d on other
grounds, 104 F.3d 1507 (9th Cir. 1997)
The Discovery Rule: Looks at the specific
Trustee’s knowledge:
– NOAA Site Review
– NOAA Paper
– S. Cal. Coastal Water Research Project
– Cal. Dept. of Parks & Recreation
– Cal. Dept. of Fish & Game
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Morton International, Inc. v. General
Accident Insurance Co.
134 N.J. 1, 629 A.2d 831 (1993)
• Pre-1985 CGL Insurance Policies Should Cover
NRD
 See also General Accident Ins. Co. of Am. v.
State of New Jersey, 143 N.J. 462, 672 A.2d 1154 (1996)
(Environmental Defense Costs v. Indemnity Costs)
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Coeur D’Alene Tribe v. ASARCO, Inc.
280 F. Supp.2d 1094 (D. Idaho 2003)





Original Allegation of over $1B in “damages”
$30 million NRD Award
$43 million remedy
Sole or Proximate Cause If Not Commingled
CERCLA S.O.L. – 3 Years From Discovery
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CURRENT TRENDS – The New
“Environmental Tax”?
It’s not just “NRD” as defined.
There are a growing number of “Superfund”
type actions underway where cleanup of the
“natural resources” is the main focus:
– Gowanus Canal, Brooklyn, NY (USEPA)
– 18 Mile Creek, Lockport, NY (USEPA)
– Lower Passaic River, Newark, NJ (NJDEP/USEPA)
These are not traditional “NRD” claims.
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Gowanus Canal
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Lower Passaic River
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WHY NOW?
In part it’s driven by louder public outcry
combined with greater enforcement:
– USEPA FY 2011 BUDGET for Enforcement:
• $618M
– USEPA FY 2012 BUDGET for Enforcement:
• $621M
One of the few areas within EPA which saw
an increase from last year to this year.
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Current State NRD Trends
At least 36 States have some form of an active
NRD program and are getting more active in
pursuing recoveries.
Includes NY, NJ, MA, CA, CO, WA and CO
Vary widely in scope, focus and enforcement
Not just tied to CERCLA or OPA, but pursuant to
State statute and regulatory framework
Generates $100s of $M in revenue to States
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Who Is Liable?
In these more recent cases/trends, any party
that has possibly contributed to the pollution or
degradation of the natural resource.
– Example: Riparian Property Owners
• Intentional / Unintentional Discharges
– Storm Drains, SPDES Permits
– Leaking USTs
– Manufacturing Activities (floor drains, overspray, emissions)
• Latent / Legacy Pollution
– On-Site or Off-Site Sources
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STATUTE OF LIMITATIONS
Four applicable Statutes of Limitations:
–
–
–
–
Non-NPL Sites
NPL “Superfund” Sites
Native American Tribes
States
Each of the above has different SOL –
check with your environmental attorney for
specific clarification
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GENERAL LIABILITY COVERAGE?
 EPA Has Even Contemplated Recovery of
Insurance Proceeds with Respect to NRD
 See In re Energy Co-op., Inc., 173 B.R. 363, 366 (N.D. Ill.
1994)
 EPA’s similar treatment of CERCLA response costs and NRD,
EPA’s recognition of the potential for insurance coverage
for both, and the court’s acceptance of the settlement.
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Timing of the GL Coverage Triggering Occurrence is Crucial
 Before 1973 or 1985 – significant years in
evolution of “Pollution Exclusion”
 “Release” has to occur after December 11,
1980 (post-enactment of CERCLA).
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NRD = PROPERTY DAMAGE?
YES, NRD = Third-Party Property Damage:
 See Aetna Cas. & Sur. Co. v. Pintlar Corp., 948 F.2d
1507, 1514 (9th Cir. 1991) (the government has a
“quasi-sovereign interest in environmental
resources.”).
 See United States v. Compaction Systems Corp., 88 F.
Supp.2d 339, 353 (D.J.J. 1999)
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GL COVERAGE ISSUES
• “As Damages” – damages do not occur until
quantified = when Trustee incurs expenses
• Owned Property Exclusion – is it truly 3rd-party
PD?
• “Suit” – are these claims in fact “suits”?
• Expected/Intended – goes to intention of
discharge, dispersal, release or escape…
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Environmental Insurance –
A Feasible Solution
Most PLL policies affirmatively include NRD within the
definition of “Property Damage”:
• Physical injury to or destruction of tangible property of parties other than
an Insured, including the resulting loss of use and, except with respect to
tangible property located on an Insured Property, diminution in value
thereof;
• Loss of use, but not diminution in value, of tangible property of parties
other than an Insured that has not been physically injured or destroyed;
or
• Natural Resource Damage.
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Environmental Insurance
•
Under most traditional Pollution Liability (PLL)
policies, a claim must result from a discharge,
dispersal, release or escape of pollutants from a
“covered location” in concentrations greater than
those present in the natural environment.
•
This presents two possible hurdles:
1. Proof it originated from a “covered location”, and
2. Proof the concentration is greater than naturally
existing conditions.
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Nuances to Watch Out For
– Off-Site v. On-Site?
• When dealing with Groundwater Contamination, while
the majority of States view GW as property of the
States, some States view GW as property of the
landowner.
– Cleanup Costs
• Most PLL policies include “Restoration Costs” – the def.
varies, but typically includes the cost to repair, replace
or restore real or personal property that is damaged
during work performed in the course of incurring CleanUp Costs.
– Fines and Penalties
• Some PLL policies offer coverage for “Civil” fines and
penalties, and only exclude “Criminal”
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Environmental Insurance
Biggest Immediate Benefit
Defense Cost Coverage – all you typically need is an
allegation of liability for the “Duty to Defend” to kick
in. Most policy forms include not just defending
against ‘suits’ but also include coverage for legal
fees incurred in dealing with regulatory agencies in
furtherance of a claim for “cleanup costs” or
“property damage”.
One claim / allegation and the policy will pay for itself.
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Gene P. Devine, JD, SVP – (516) 622-2483 or
[email protected]
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IV. Additional Issues
A. Hydro-Fracking
B. State of the Market
C. Other Issues
1.
2.
3.
4.
Captives
Green Buildings
Indoor Air Quality/Vapor Intrusion
What is ISO doing?
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A. Hydro-Fracking
Brief Summary By State
Disclosure of fluid constituents?
PA – Full speed ahead
NY – Generic Supplemental EIS – a definite maybe
WV – Fast tracking new regulations
MD – Wait and see
TX – Been there, done that
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Third-Party Liability Claims
• Likely Insurer Defenses
– Pollution Exclusions
• Some policies are designed to protect against pollutionrelated bodily injury or property damage – these
policies may not contain a pollution exclusion
• But….
• In the mid-1980’s general liability policies began
including a form of pollution exclusion commonly
known as the “absolute” pollution exclusion
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But…
• Louisiana has held that the absolute pollution
exclusion is ambiguous and presents a
question of fact regarding its applicability to a
given occurrence. See Doerr v. Mobil Oil
Corp., 774 So.2d 119 (La. 2000)
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The amount of money involved may mean
that once again there are efforts to do away
with or soften the pollution exclusion:
• What if the fracking does not use chemicals?
• What if the chemicals are not the ultimate cause of
the damage?
• What if natural gas is not a pollutant?
• Separate allegations of negligence?
• E&O coverage?
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Potential Claims
• Energy/Drilling Companies
• Individuals & Commercial Businesses
– Property Damage
• Well Blow-Outs
• Seismic activities beneath insured property: Collapse, Cracking, Shifting,
Sink holes
– Utility Service Interruption
• Provides coverage for losses that the policyholder incurs due to the interruption of
utility services that result from physical damage to the property that supplies the
utility.
• For example, if hydraulic fracturing activities results in your business losing access
to its water services, and your business then incurs losses because of interruption
of service, you may have an insurable loss – i.e. a farm’s inability to water its crops
or provide water to its livestock
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B.
1.
2.
3.
•
State of the Market
Michele
Gene
John
The number of companies offering "environmental" coverage
has exploded, but which ones will have the experience,
resources and staying power to be there when called upon in
the future?
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C.
Other Issues
1. ‘Captive’ Insurance
• Used by many large firms to comply with requirements
that they carry insurance.
 The captives are subsidiaries of the firms
 While captives are accepted as covering under many federal
requirements, some states do not accept them for the same
purpose under their regulations
• Each state has its own ‘captives’ rules
• Companies can pick the state in which to incorporate their
captives
• Vermont is the preferred home state
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2. Green Building Issues
• Real Estate Implications
– Structuring Contractual Undertakings
• Contractor Liability and Spreading Risk
• U.S. Green Building Council
• 82% of corporate America is expected to
“green” more than 16% of its real estate
portfolio
_______________________
* 2007 McGraw Hill Construction, Greening of Corporate America – Small Market
Report, updated in 2009.
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2. Green Building Issues
• Need for National Standards
• Potential for Disputes*
– Shaw Development v. Southern Builders, $7.5M
luxury condo in Maryland supposed to be
“environmentally friendly” – Silver LEED
– Arbitration settled – mechanics lien, breach of
contract, negligence, loss of $635,000 in tax
credits
_____________
* See also John G. Nevius: Green-Building and Renewable-Energy Insurance Claims:
Where Are We Now?, Environmental Claims Journal, Issue 21(4) (December 22, 2009)
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3. Indoor Air Quality/Vapor Intrusion
4. What is ISO doing?
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THANK YOU
Gene P. Devine, Esq., EVP
(516) 655-1031
[email protected]
Gene P. Devine, Esq. recently joined Arthur J. Gallagher, previously he was an
Executive Vice President at JCH in Rockville Center having joined JCH in 2001.
Prior to JCH, Gene was a Vice President and environmental specialty broker in the
New York City office of Marsh & McLennan where he managed numerous major
accounts including multiple site transactions, finite, and blended finite insurance
programs. For five years prior to joining Marsh, Gene was a managing attorney in
AIG's Environmental Claims Department where he handled claims brought under
Cost Cap and other environmental policies. His technical experience as a field
biologist and environmental analyst for a local regulatory agency in New York
round out his understanding of environmental law and the issues surrounding
regulatory enforcement. He is responsible for manuscripted environmental
insurance policies and negotiating policy terms and conditions with insurance
carrier’s counsel. Gene is a member of the New York State Bar Association's
Environmental Law Section.
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THANK YOU
John G. Nevius, Esq., P.E.
(212) 278-1508
[email protected]
John G. Nevius is a shareholder and Chair of the Environmental Law Group in the New
York office of Anderson Kill and has successfully resolved and litigated a variety of legal
and technical matters, most of which involve insurance coverage. He has represented
numerous Fortune 500 companies and has extensive experience trying or arbitrating
complex environmental, telecommunications, construction, real estate and work-place
safety disputes generally on behalf of policyholder clients.
He is routinely retained by policyholders, developers and other lawyers to evaluate, and
maximize, recovery of insurance assets. He is also a Senior Consultant at Anderson Kill
Insurance Services (AKIS), a non-legal subsidiary of the firm as well as an Adjunct Faculty
member at Pace University Law School where he teaches a courses on Environmental
Science and on Climate Change and Insurance.
Mr. Nevius is a Registered Professional Engineer (PE 045229E) and has a J.D. from Pace
University School of Law with a concentration in environmental law. He has Masters
degrees in Civil/Systems Engineering as well as Geology from the University of
Pennsylvania.
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THANK YOU
Michele Schroeder, J.D., M.S.L.
Michele Schroeder
(516) 678-6602
[email protected]
Michele Schroeder leads environmental risk management and product
development for environmental risks at Zurich. Her responsibilities include the
development and oversight of environmental underwriting standards of practice. She
provides underwriting and business counsel in areas of environmental risk, law and
financial assurance and concerning environmental insurance products. She
evaluates environmental risks, and develops and drafts policy language for complex
deals and emerging risk areas. Michele is an attorney licensed to practice law in
New York and Connecticut. Michele came to Zurich in 1993 from private practice in
Washington D.C and N.Y. where she participated in the defense of general litigation
including construction and superfund cases in state and federal court. Michele has
a bachelors degree in Environmental Studies form SUNY – Binghamton and
received her Masters in Environmental Law and Policy and Juris Doctorate from
Vermont Law School.
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As part of RIMS green initiatives, there are no printed handouts. Visit
www.RIMS.org/2011Handouts to download available handouts. Printing on
Demand stations are available in Level 1 Lobby of the Vancouver convention Centre,
as well as in RIMS Cyber stations located in booths #227 and #1931 in the Exhibit
Hall.
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