Transcript No Slide Title

WILLIAM GALLAGHER ASSOCIATES
NEWMOA
Workshop on Environmental
Insurance & Brownfields
Michael P. Long
Senior Vice President
March 21 and 22, 2007
The Duties of an Insurance Broker
 Provide independent, objective insurance advice
 Perform risk analysis/program design/placement
servicing/claims management
 Leverage relationships with insurance carriers on
behalf of clients
ENVIRONMENTAL LIABILITIES
 Potential Liability Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA)
issues of previously owned or newly acquired plants
that generated Hazardous Waste
 Potential Liability Under State Environmental Law
 Potential Liability under the Resource Conservation
and Recovery Act (RCRA) or similar state law .
CERCLA LIABILITIES and TOXIC TORTS
 Cleanup Costs
 Natural Resource Damage Claims
 Potential Liability for Non-Owned Disposal Sites
 Third Party Claims for Bodily Injury and Property
Damage
CURRENT OPERATIONS AND RCRA
 Gradual Pollution Releases
 Catastrophic events
 Improper waste disposal
ENVIRONMENTAL LIABILITIES
 Does the property have environmental liabilities ?
 How do we deal with them ?
MEASURES TO ADDRESS LIABILITY
IN CONTAMINATED PROPERTY TRANSACTIONS
 Estimate Cleanup Costs And Adjust Price
 Also Estimate Tort Liability Costs
 Escrow Necessary Funds And Hold Until Cleanup Is Completed
 Seller Agrees To Indemnify Buyer For Any Costs Incurred (May
Be Limited With Respect To Time And Amount)
 Insurance May Be Used To Supplement Or Replace Other Risk
Management Measures
Environmental Insurance Defined
 Pollution Legal liability insurance offers protection against
potential liability for site cleanup and third party claims
related to pollution conditions.
 Cost Cap insurance is used to insure against cost overruns
related to site cleanup projects .
 On Brownfields projects, both Pollution Liability and Cost
Cap policies are often used on a combined basis. These
coverages can sometimes involve finite risk components.
POLLUTION INSURANCE CARRIERS
 Carriers ACE , AIG , Chubb , Zurich, XL
 $50 million capacity per site
 10 year terms
 Only ACE , AIG , ZURICH and XL offer Cost Cap
INSURANCE SOLUTIONS
 POLICIES
 Pollution Legal Liability
 Cost Cap
 Blended Finite Risk
POLLUTION LIABILITY COVERAGE
 Cleanup – On-site, Off-site
 Bodily Injury – On-site, Off-site
 Property Damage – On-site, Off-site
 Legal Defense Expense
 Covers Current and Past Operations
POLLUTION LIABILITY COVERAGE
 Non-owned disposal sites
 Re-openers Under Regulatory Order
 Changes In Regulations That Require Additional Remediation
 Discovery of New Contaminants (Onsite/offsite)
 Third Party Claims for Bodily Injury, Property Damage or Cleanup
Costs (Onsite/offsite)
 Natural Resource Damage Claims
 Loss of Use or Loss Of Rents
 Business Interruption Due To Contamination
POLLUTION LIABILITY COVERAGE
 Terrorism Coverage – CGL/Property programs - no coverage for
nuclear, biological, radiological or chemical attacks.
 Buy back option on pollution policies
 Full Limit
 Additional premium
 TRIA and Non TRIA
 Terrorism Endorsement
 Change Definition of Pollution Conditions

Pollution Conditions means the discharge, dispersal, release or escape of any solid, liquid,
gaseous or thermal irritant or contaminant, including, but not limited to, smoke, vapors, soot,
fumes, acids, alkalis, toxic chemicals, medical waste, waste materials, and bacterial matter which
is released as a result of an act of terrorism, viruses or other bioterrorist agents of any
kind….
Pollution Liability Common Exclusions
 Asbestos, or asbestos containing materials, applied to any
building or other structure.
 Contractual Liability
 Employers Liability
 Criminal Fines and Penalties
 Insured’s Internal Expenses
 Intentional Non-Compliance
 Known Conditions not reported
 Underground Storage Tanks that are known but not reported.
 Insured vs. Insured
 Transportation
COST CAP
 Cost Cap covers cost overruns for:
 New found contamination during execution of RAP
 Change orders required by government that are incurred during
the policy term
COST CAP
 Cost Cap Basic Structure:
 Insured may participate in Cost Overrun
Insurance
Buffer Layer
Expected Costs
LIABILITY BUY–OUT USING FINITE RISK
CONTRACT
 Contractor may assume Contractual and Legal
Liability at Fixed Price
 Risk Finance and Risk Transfer Insurance
 Custom Designed Structure and Endorsements
FINITE RISK
 Finite insurance contracts fund known or anticipated
claims/expenses over a period of time.
 Typical insureds are companies who have
environmental liabilities from past operations
 Offset environmental liabilities from the balance sheet
by contract transfer to an insurance program
BLENDED FINITE PROGRAM
Cost Cap and
Pollution
Liability
Insurance
Unexpected
Claims/Costs
D
O
L
L
A
R
S
Remediation
Project
Costs/Funded
O&M
Monitoring
Costs/Funded
TIME
Finite Risk
BENEFITS OF ENVIRONMENTAL INSURANCE
 Due Diligence exercise and protection against
Catastrophic events
 Quantifies Cost of Cleanup and potential Tort Liability
 Removes uncertainty associated with Environmental
Liability
 Worldwide Coverage
Mike Long BIO
Mike Long has over 25 years experience in the hazardous waste and
wastewater treatment sectors of the environmental industry. He has
extensive experience in the areas of site cleanup, hazardous waste
storage and disposal, environmental regulation and insurance. He works
exclusively on analyzing environmental risks of company operations,
mergers and acquisitions and real estate transactions. Mr. Long received
his B.A. from the University of California, Berkeley, and has a Masters
Degree from the John F. Kennedy School of Government, at Harvard
University. Mike Long can be reached at (617) 204-6710 or email him at
[email protected].