Insurance > Risk Management

INSURANCE: Risk Management \| Scenarios
Updated: August 2010
INSURANCE: Risk Management

	Claims	FAQs

The Insurance Feature provides stakeholders with information on the application of environmental insurance and risk management solutions. Insurance plays a significant role in eliminating or reducing the uncertainty that exists for all parties involved in a brownfield site, thus further facilitating cleanup activities and encouraging sustainable development. Insurance is vital to municipalities, city governments, owners, developers, contractors, engineers and other environmental specialists, since insurance can protect these entities from the risks inherent to the remediation process. Often, environmental insurance providers offer flexible and responsive insurance products in order to facilitate the initiation and eventual completion of a brownfield project. Environmental insurance programs and policies are solutions to overcome redevelopment barriers and manage the risks such as environmental liability exposure and financial constraints associated with brownfields redevelopment and site remediation (cleanup of contaminated sites). The following examples of risks can be managed by way of insurance: The discovery of additional contamination during redevelopment or the aggravation of existing contamination by a consultant or a contractor; The discovery of residual contamination due to improper or inadequate cleanup efforts; The discovery of previously unknown, on-site contamination, or the discovery of contamination on adjacent properties; The initiation of third-party bodily injury and/or property claims; The spread of existing contamination during remediation; and The control of cleanup costs.
Third-Party Claims Administration In addition to the availability of insurance products tailored to address the foregoing issues, liabilities and risks can be minimized through the use of a third-party environmental claim administrator. Such administrators can be retained to manage a specific project or to serve as a general consultant. For example, an environmental claims administrator may be retained to review the qualifications of outside consultants and contractors, to audit project costs and to negotiate contract prices.
Frequently Asked Questions (FAQs)
Questions An Insurance Company May Ask Of You What Should You Provide For Pollution Liability Products? Basic information on site activity and past land use Existing Environmental Studies or Documentation Plot plans of facility layout Three (3) years Loss and Premium History Two (2) years audited Financial Statements Environmental Underwriting Application More detailed information required and obtained at site survey should insurance be purchased What Should You Provide For Professional Liability Products? Description of current and anticipated future operations including representative descriptions of previous projects Three (3) years Loss and Premium History Two (2) years Financial Statements Environmental Underwriting Application Contract and Bid Specifications, including scope of work (for project quotes) Copies of standard Client/Subcontractor Agreement Questions Asked By Clients Who Needs Insurance? What Risks Do You Need Mitigated? Environmental Insurance is the keystone to a sound environmental financial management program. The following is a list of inherent environmental risks that face participants in a brownfields project: *Developer or Financing Company/Partner:* The discovery of unknown environmental issues on the site may make redevelopment out of reach financially. Contamination discovered during redevelopment or aggravation of existing contamination by a consultant or contractor may result in additional cleanup costs and increased regulatory oversight. Purchaser: The discovery of residual contamination due to improper cleanup or possible future environmental problems may result in additional cleanup costs and increased regulatory oversight. Property Owner / Seller: The spread of existing contamination during remediation, adjacent property value diminution or, in some cases, business interruption due to inadvertent spread of contamination and third-party bodily injury and property damage. Municipality (Local Government): An environmental incident which may occur following redevelopment could trigger an investigation of the property. Contamination could be linked to improper cleanup during the municipality or city's ownership. The municipality or city could then incur additional costs. The specter of contamination can make marketing the property difficult. Contractor, Consultant, Project Manager: Contracting or consulting activities may aggravate or result in additional contamination, cleanup expenses or third-party bodily injury and property damage. Failure of the remedial design during the actual remediation or during a period of performance affects the timing of the entire project. Local Redevelopment Authority (LRA): Decisions regarding the development or implementation of the redevelopment plan for a Base Realignment and Closure Act installation can now be made that recognize subsequent changes of intended use. Pollution and remediation legal liability coverage may assist LRAs with sales and leasing of portions of the site as they become available during the reuse process. In instances where the LRA desires to use the property prior to complete cleanup, remediation cost containment may be used to quantify all environmental costs. What Does "Basic Environmental Liability Coverage" Mean? Basic Environmental Liability coverage offers insured companies protection against third-party bodily injury or property damage claims arising from on-site pollution conditions and against on-site contamination discovered during the policy period. Are There Limits To Insurance Protection? The environmental insurance market is currently offering limits of liability up to $100 million. How Do Insurance Programs Work? (Per Site? Per Project? Per Client?) In a brownfields scenario, it is per project. There are specialized programs which would cover real estate portfolios as well. Environmental insurance programs are tailored very carefully to the needs of the clients whether it be for a specific project or for day-to-day business operations. How Often Do You Renew Insurance Coverage? For a brownfields project, a typical policy has multi-year terms. Policy could be issued for 2, 3, 4 or 5 years. For bigger projects, the policy could have a 10-year term. What Is An Average Deductible? Typically, there are no deductibles. Some policies might require a Self-Insured Retention (SIR). What does a broker offer? A broker seeks to understand your risks and finds the right policy for you. - Brokers know of insurance solutions that are provided by the industry (several insurance companies). - No two insurance companies have the same appetite for risk. - A broker knows how insurers respond to a particular risk challenge and work to develop a custom solution for the client. A broker summarizes all available options, making the best decision boils down to having the most options available to you. - Typically when dealing directly with an insurance agency or an insurance company, you get options/products from one carrier. - A broker remains current of the industry to ensure that you get the “big picture” of the coverage available and how the industry currently views and prices your risk.