Docstoc

Environmental Insurance 101

Document Sample
Environmental Insurance 101 Powered By Docstoc
					                     Environmental Liability
                   Management & Risk Transfer
                           Solutions

                                  January 31, 2010




Presented by:
Kate Dodge, Aon Reed Stenhouse Inc.
                                            Environmental Insurance 101



AGENDA

• External drivers fueling the need to re-evaluate proper Environmental
  Risk Management in Canada
• Environmental Exposures specific to Municipalities
• Claims examples
• Risk Management Options
• Appropriate Contract Management
• Insurance Based Risk Transfer Solutions




Presentation Title
Driving Forces Effecting Environmental
         Liability Management
                                                     Environmental Insurance 101



Driving Forces Effecting Environmental Liability Management

• Perspectives to consider:
        – External pressures
        – Internal balance sheet/budget protection




Presentation Title                                                                 4
                                                               Environmental Insurance 101



External Pressures – Regulatory & Legal Framework

• Canada’s federal and provincial regulatory systems have adopted
  statutes designed to promote environmental responsibility and
  stewardship.
• In order to accomplish these goals, all provinces and territories have
  implemented environmental regulations that establish the
  rights, responsibilities, and liabilities of any property owner of a
  contaminated site or “generator” of a spill, including both private
  entities and municipalities
        – Exemptions in some provinces for land acquired through tax arrears
        – In the past residents/businesses were reluctant to bring suits against municipalities
          (sovereign immunity, bad publicity, perceived lack of community loyalty)
• This responsibility extends to individuals, including elected officials in
  some cases.



Presentation Title                                                                                5
                                                                Environmental Insurance 101



External Pressures


• Legal System;
        – “Polluter pays” principal – polluters should bear the cost of cleaning up the effects of
          pollution from their operations rather than the public taxpayer.
                • BC, Alberta, Ontario and Quebec have adopted the polluter pays principal as a
                  central policy underpinning their environmental protection regimes.
                • Lynnview Ridge, Calgary AB (Imperial Oil Refinery)
                • Province of Ontario vs Quinte-Eco Consultants Inc. & Ronald Carter



• Regulations;
        –    Federal/Provincial/Local
        –    Ministry of the Environment/Ministry of Labour
        –    US vs Canadian jurisdiction and application
        –    Native Assemblies

Presentation Title                                                                                   6
                                                                      Environmental Insurance 101



External Pressures- Provincial Regulations

   Recent Changes in Ontario:

   Bill 133 (June 2005/Aug 2007)
   Amends the EPA and OWRA – “You Spill You Pay”
              •Environmental penalties which differ from fines in that liability without fault or trial can be
              imposed
              •Broader due diligence and reverse onus for Directors and Officers
              •Municipalities and the province can recover costs associated with clean-up efforts without
              court action
              •New requirements for pollution prevention plans
              •Higher fines and longer jail sentences
              •“Pollution” and “Impairment” more broadly defined and consequently easier to prove

   Reg 511/09 (December 29, 2009)
            Amends Brownfield Regulation 153/04
                   •Revised Soil, Groundwater and Sediment Standards
                   •Revised Environmental Site Assessment Requirements
                   •Changes to the Record of Site Condition Process
                   •Streamlined Risk Assessment
Presentation Title •Transition Rules                                                                             7
                                                                             Environmental Insurance 101



External Pressures- Provincial Regulations

• Saskatchewan Regulations
        – Current regime developed in the 1970s to address “traditional” industrial pollution
        – November 30, 2009 significant boost to environmental protection while also encouraging
          responsible economic development
                • New proposed act: Environmental Management & Protection Act, 2009
                • Amendments to: The Environmental Assessment Act & The Forest Resources
                  Management Act
                • “Results-Based” Regulations
                     – Move away from controlling activities by permit and regulate through a Saskatchewan Environmental
                       Code
                     – Contaminated Sites: New process that requires the identification and assessment of impacted sites
                       and encourages voluntary clean-up
                     – Create a publicly accessible registry of contaminated sites (location/condition)
                     – Require municipalities restrict activities on impacted sites if required for public/environmental good
                     – Strengthen compliance and enforcement tools (modifying penalty provisions - $1MM/day)
                     – Impacted Sites Fund (Lieutenant Governor in Council)
                     – Provide clearer standards and objectives
                     – Qualified Persons with Ministerial oversight


Presentation Title                                                                                                              8
                                                                           Environmental Insurance 101



External Pressures

•     Financial Reporting Requirements (FIN 47);
        – Significant change in how firms must disclose their environmental liabilities
                • FIN 47 (US – 2005)
                • Recent OSC audit results (Feb 29-08, “OSC Staff Notice 51-716”; Environmental
                  Reporting)
                     – Reference to Ontario Staff Audit by BCSC
                     – What is “Material”?
                     – Do environmental matters/liabilities include climate change impacts?




Presentation Title                                                                                       9
                                                                 Environmental Insurance 101



External Pressures

• Greater Accountability for Directors & Officers
        – Financial Disclosures (SOX)
                • Improve the accuracy and reliability of corporate disclosures made pursuant to
                  federal securities law
                • Increases accountability of senior executives for the accuracy and completeness of
                  reported financial information
        – Operational & Compliance
                • Bill 133 (Ontario EPA/OWRA)
                     – Broader Due Diligence Requirements
                     – Notion of Reverse Onus
                     – Higher Fines & Longer Jail Sentences




Presentation Title                                                                                     10
                                                                            Environmental Insurance 101



External Pressures

Sustainability
        – Being sustainable increases financial performance
                • Reputation & Brand Strength
                • Cost of Capital and Borrowing Opportunities
                     – Investors are becoming more selective in where they put their money
                     – Lenders, like insurers, are considering sustainability good proxy to overall management
                • Increased Productivity thru maximizing efficiency
                     – Reducing waste streams - lower disposal costs;
                     – Reducing energy consumption
                • Supply Chain Costs (Business to Consumer or Business to Business)
                     – Consumers are becoming more selective and green in their buying
                     – Businesses are looking to partner with other “sustainable” companies
                • Legal Liability (reduce exposure to environmental impacts/unfair employment
                  practices)




Presentation Title                                                                                               11
                                                                     Environmental Insurance 101



Internal Considerations
•     Third Party liabilities
        –    Off-site Clean-up
        –    Bodily Injury
        –    Property Damage (including loss of use, Diminution in Value, NRD)
        –    Legal Defense Expense
•     First Party liabilities
        –    On-site Clean-up
        –    Business interruption/Extra Expense/Rental Income/Soft Costs & Delay
        –    Diminution in Value
        –    Associated Legal Costs
•     Opportunity Costs
•     Lender Concerns – Securing Financing on questionable sites or operations
•     Securitizing Contractual Obligations
        – Purchase & Sale Agreements/Indemnities
        – Service Agreements (waste haulers/disposal)
        – Lease Agreements
•     Punitive, Multiplied and Exemplary Damages/Civil
      Fines, Penalties, Assessments


Presentation Title                                                                                 12
Common Environmental Exposures
                                                                            Environmental Insurance 101



Common Environmental Exposures
        Municipalities manage a wide spectrum of environmental exposures including risk
          common to other sectors but certainly not as varied;

        We are “re-defining” what is meant by “Environmental Liability”

        – Brownfield/Contaminated Site (Legacy Liability) – both known and unknown pre-
          existing conditions;
                •    Tax arrears
                •    Economic Development
                •    Changing Regulations
                •    Midnight Dumping
                •    Multiple Responsible Parties

        –    Infrastructure Stimulus;
        –    “Pass through” contamination;
        –    Natural Disasters;
        –    Tenant Operations;
        –    Fire/Explosion
                •    Firewater run-off
                •    PVCs (polyvinyl chloride) plastics used in facility construction
                •    Toxic clouds (evacuation)
                •    Tank ruptures/explosions
                •    Mould

Presentation Title                                                                                        14
                                                                               Environmental Insurance 101



Common Environmental Exposures – Own Operations

        – Poor UST/AST inventory/maintenance
                •    Uncontained
                •    No leak detection/monitoring/regular testing
                •    Old or unknown assets (Phantom Tanks)
                •    Oil/water separators
        – Water & Wastewater
                • Drinking water quality
                • Proper Treatment and Discharge/Disposal
        – Solid Waste Management
                • landfilling, recycling, composting
                       –   Site Development/Grading
                       –   Off-site migration (poor groundwater monitoring or leachate colllection systems)
                       –   Odour/Noise/Dust Control
                       –   Misdelivery/Inaccurate Waste Class ID
                       –   NODS
                       –   Stigma
        – Indoor Air Quality (mould, bacteria, ACM, LBP)
                • Daycares, Residential, Long Term Care, Historical Properties

Presentation Title                                                                                            15
                                                                        Environmental Insurance 101



Common Environmental Exposures – Own Operations

        – Airports
                •    Fuel Management & Liability Streams
                •    Historial Conditions/Responsibility
                •    De-icing/Glycol Management
                •    Storm water Run-off
                •    Noise
        – Rail Transit
                • Operational/Maintenance/Expansion
        – Road Maintenance;
                • Salt application/storage
                • Paving/repair
        – Fleet & Garages;
                • Fueling services
                • Maintenance (storage & disposal of oils/solvents/lubricants)
                • Washing Facilities
        – Fire Fighting Facilities & Operations
        – Cemeteries
        – Obsolete Equipment Yards
Presentation Title                                                                                    16
                                                                         Environmental Insurance 101



Common Environmental Exposures – Own Operations

        – Power Gens/Co-Gens
                •    Asbestos & PCB containing equipment
                •    Impact of thermal pollution (warm cooling water) on local surface waters, and aquatic and
                     marine life in the receiving stream, river or lake
                •    Impacts on local ambient air quality from odors, NOx, SOx, and particulates due to the
                     combustion of coal and cooling tower emissions
                •    Storm water runoff from coal storage areas and piles of fly ash, bottom ash, slag, heavy
                     metals/compounds etc


        – Oil & Gas Production
                •    Climate Change risks and emerging regulatory responses
                •    Release from major upset conditions or explosions
                •    Failure to detect and repair leaks from piping, values, pumps etc
                •    Air pollution equipment that is not properly operated, maintained, tested and monitored


        – Pools, Arenas and Recreational Facilities
                •    Chemical containment and spill risk: ammonia, chlorine and other chemicals
                •    Use of pesticides at outdoor recreational facilities
                •    Ice Maintenance

Presentation Title                                                                                               17
                                                            Environmental Insurance 101



Common Environmental Exposures – Contractor Related

• Scope of Contracting Operations giving rise to environmental risks
        –    General Building
        –    Excavation/Concrete
        –    Demolition
        –    Flood & Fire Restoration
        –    Asbestos/LBP/Mould Abatement
        –    Mechanical (HVAC), Electrical, Refrigeration
        –    Street/Road and Heavy Highway
        –    Environmental/Remediation
        –    Geotechnical
        –    Dredging
        –    Utility




Presentation Title                                                                        18
                                             Environmental Insurance 101



Common Environmental Exposures – Contractor Related

• Release of oils/fuels/chemicals from on-site storage tanks or other
  usage (weather related, vandalism, rupture);
• Impacting existing or underground infrastructure (utility & sewer
  lines);
• Discovery and/or disruption of pre-existing conditions (site prep
  work/excavation/demo);
• Completed Operations (i.e. mould);
• Uncontrolled surface water discharge releasing sediments and
  contaminants onto adjacent properties/waterways;
• Third Party Transported Cargo/Waste Contractors;
• Non Owned Disposal Sites;
• Air emissions (fumes, dust).


Presentation Title                                                         19
                                                              Environmental Insurance 101



Public Sector Claims…..

• Wetland Impact
        – A street/road contractor was lifting barriers when a crane overturned and spilled
          hydraulic oil into the adjacent wetlands. Oily water and coated waterfowl. $650,000 in
          response costs and wetlands restoration;
        – A third party is suing several municipalities for discharging their sewage lagoon into a
          nearby lake, thus polluting the third parties land and causing them emotional stress and
          anxiety.

• Dispersal of fungus through hospital HVAC
        – Mechanical contractor removed ductwork that was later discovered to be contaminated
        – Dismantling activities and on-site storage of ductwork caused the fungus to spread
          through the HVAC system infecting numerous patients
        – Contractor found liable for BI & PD (claim in excess of $1MM)




Presentation Title                                                                                   20
                                                               Environmental Insurance 101



Public Sector Claims…..

• Contractor At Fault
        – In July 2007, a BC municipality hired a road contractor to perform routine maintenance.
          During the course of performing the road repair, the contractor ruptured a
          pipeline, resulting in a crude oil geyser discharging product into the nearby Burrard Inlet
          and surrounding residential community for 30 to 60 minutes before being capped;
        – A street and road contractor was preparing to lay asphalt down on a newly built Hospital
          parking lot. As they graded the site the contractor unknowingly ruptured the
          underground fuel line running into the hospital furnace. As the leak went unnoticed for a
          couple of days, product was allowed to build up under the foundation. The paving
          contractor is placing blame on the mechanical contractor for installing the pipeline too
          close to the surface. On the flip side, the mechanical contractor is arguing that the
          underlying geology of the site didn't allow for the pipeline to be entrenched any lower
          and the paving contractor should have taken better read of information and maps
          provided at the onset of the project. Depending on whether a full clean-up or risk
          assessment is allowed by regulators, clean-up costs range from $5MM to $23MM.



Presentation Title                                                                                  21
                                                            Environmental Insurance 101



Public Sector Claims…..

• Pass Through Contamination
        – An Ontario-based drycleaner was in operation for a number of years before it was
          discovered in 2004 that improper disposal practices of chemicals had severely
          contaminated their site. The plume had impacted groundwater and migrated off-site to
          adjacent properties, including municipal land and roadways. The drycleaner has not
          remediated any of the city-owned property to date.
• Brownfield – Tax Arrears
        – Under the Tax Recovery Act, a municipality claimed a gas station and sold it several
          years later. Underground pollution was discovered and the new owner is suing all
          previous owners. (Note: the original owner is bankrupt);
        – A municipality purchased property to be used for a maintenance yard. The previous
          owner of the property was unknown. In 1990, the municipality sold the property to an
          outside party. The new owner discovered that the property contained an underground
          tank that leaked, and the new owner sued all previous owners for the clean up costs.



Presentation Title                                                                               22
                                                               Environmental Insurance 101



Public Sector Claims…..


• Municipal Permitting
        – A municipality issued an occupancy permit for a recycling facility; however, the municipal
          officials were unaware that the operations included illegal storage of oil industry waste in
          unsafe underground containers. The business went bankrupt and the mortgage
          company sued the municipality for not ensuring the facility was utilized as intended.




Presentation Title                                                                                   23
                                                            Environmental Insurance 101



Liability Streams

• Who has liability for pollution conditions at a fixed location?
        –    Property Owner (Corporation and Individuals)
        –    Property Manager
        –    Tenants
        –    General Contractor/Project Manager
        –    Sub contractors
        –    Lenders




Presentation Title                                                                        24
                                                        Environmental Insurance 101



Risk Management Options

• Self Insurance;
• Avoidance;
• Risk Control/Engineering;
• Contractual transfer:
        – Most commonly used environmental risk management tool
• Risk Transfer (Insurance based solutions)




Presentation Title                                                                    25
                                                            Environmental Insurance 101



Contract Management

• Unprecedented shift in contractual liability being placed on others in
  Canada – especially in the public sector
        – Opportunity for the City to transfer risk
        – Possibility for City to assume unintended risk


• Types of Contracts with Environmental Clauses:
        – Purchase and Sale Agreement (acquisitions/divestitures);
                • Gifting or for other consideration
        – Lease Agreements;
        – Right-of-Way/Access Agreements;
        – Service Vendors.




Presentation Title                                                                        26
                                                              Environmental Insurance 101



Contract Pitfalls

• Renewing contracts without re-evaluation
• Lack of central verification process & consistency in language
• Indemnification & Hold Harmless Provisions
        – New Conditions (arising from Covered Ops or otherwise) & Pre-existing (Known or
          Unknown)
        – Direct & Indirect Damage
• Definition of Hazardous substances
        – Inconsistent with regulatory definitions
        – May not encompass “non hazardous” such as storm water, sediment etc.
• Site conditions – Establishing Baselines
        – Appropriate Due diligence
• Insurance Provisions
        – Not consistent with indemnity obligations
        – Gaps in standard GCL/Wrap-Up
        – Certificates Obtained & Qualifying extent of Pollution Liability coverage evidenced

Presentation Title                                                                              27
Insurance Based Solutions
                                                             Environmental Insurance 101



Pollution Coverage in the P&C Marketplace

• Historical Perspective:
        –    Pre 1966: No pollution specific exclusions
        –    Late 1960s: Accident to occurrence (CGL)
        –    1970s: Absolute Pollution Exclusion (CGL)
        –    Mid 1970s: Sudden & Accidental
        –    Mid 1980s: Hostile Fire
        –    Early 1990s: Limited First Party Clean-up (Property)
        –    Mid 1990s to present: Development of dedicated environmental products




Presentation Title                                                                         29
                                                           Environmental Insurance 101



Insurance: Making Sense of it All……

• Practice CGL or Liability “Wrap-up”
• Marine
• Automobile
• Property
• Directors & Officers
• Dedicated Environmental Products:
        – Fixed Site Pollution Legal Liability (EIL/PLL)
        – Contractor’s Pollution Liability – CPL
        – Remediation Cost Cap/Stop Loss




Presentation Title                                                                       30
                                               Environmental Insurance 101



The Environmental Marketplace

• Over $2 billion of premium annually (North America)
• 20% annual growth rate for the past 5 years
• Major Carriers – Chartis (formerly
  AIG), XL, Zurich, Chubb, Liberty, ESR, ACE, Great American
• Carriers have a physical presence in Canada and better
  understanding of our unique risk profile
• Rates have been very competitive given introduction of new players
• Dozens of different products with new and improved forms
• Product flexibility and tailoring to suit specific client needs
• Multi-year policy periods with shared aggregate limits
• Total Market Capacity - $250 Million +



Presentation Title                                                           31
                                                               Environmental Insurance 101



Fixed Site Pollution Liability (EIL/PLL)
•     Also known as:
        –    Pollution Legal Liability (Chartis/Liberty)
        –    Environmental Impairment Liability (Zurich/ESR)
        –    Environmental Site Liability (Chubb)
        –    Premises Pollution Liability (ACE)
        –    Pollution and Remediation Legal Liability (XL)
•     It is a site-specific policy that allows the Insured to design a program suitable
      for the transferring the environmental risks of a single property or portfolio of
      properties;
•     Can add multiple parties as “Insured” – Lenders, Tenants, Directors &
      Officers etc.
•     It is a claims-made form;
•     Covers pollution conditions on, at, under or migrating from a covered location
      (regardless if source is off-site);
•     Insuring agreements are set out in “menu” format for easy customization;
•     Defense expense is within the limits;
•     Who should purchase? Municipality, tenants, adjacent land
      owners, contractors with public property in their CCC.


Presentation Title                                                                           32
                                                          Environmental Insurance 101



Pollution Liability – Clean-up Costs

• Clean-up Costs/Remediation Expense for both On-site and Off-site
  Pollution Conditions;
        – Coverage is triggered by 1. Insured’s Discovery; 2. Government Mandate; or 3. Third
          Party claim;
• Includes investigation, removal, remediation and monitoring, disposal
  costs to the extent required by environmental law (or that have
  been incurred by the government/Third Parties);
• Includes “Replacement Costs” (damage to Insured’s property
  sustained during the course of remediation);




Presentation Title                                                                              33
                                                           Environmental Insurance 101



Pollution Liability – Clean-up Costs

• What is Covered?
        – During expansion/construction of a new structure the Insured discovers an old
          leaking storage tank which has impacted the soil & groundwater;

        – “Pass through” contamination from a neighbouring property impacts an Insured
          site;

        – A site was historically remediated to the standards of the day and proper
          closure obtained by regulators. Years later the regulations change and the
          property owner is forced to clean to a higher criteria (i.e. regulatory re-opener).




Presentation Title                                                                              34
                                                                Environmental Insurance 101



Pollution Liability – Bodily Injury & Property Damage

• Policies cover Third Party claims for Bodily Injury and Property
  Damage arising from conditions on, at, under or migrating from an
  Insured Site;
• Bodily Injury includes:
        – Physical injury, sickness, mental anguish, emotional distress, shock, building related
          illness, death
• Property Damage includes:
        – Natural Resource Damages (injury/destruction and loss of value of
          land, fish, wildlife, biota, air, water, groundwater, water supplies and other resources
          owned/controlled by the government or any Indian band);
        – Loss of use (whether the property has been physically impaired or not);
        – Diminution in Value




Presentation Title                                                                                   35
                                                         Environmental Insurance 101



Pollution Liability – Bodily Injury & Property Damage

• What is Covered?
        – Engineered controls fail on an exhaust source and emissions exceeding the
          certificate of approval are released into the atmosphere. They settle on a
          neighbouring agricultural property and the Third Party farmer can no longer sell
          the crop and needs to replant the entire field;

        – Operations at an Insured site contaminate the groundwater and migrate off-site
          impacting an adjacent site that is for sale. The Third Party can not obtain “fair
          market value” given the condition of their property and claims for diminution in
          value;




Presentation Title                                                                            36
                                                              Environmental Insurance 101



Pollution Liability – Coverage Extensions

• First Party Diminution in Value;
        – Covers the unrealized potential market value of a property that is sold by the Insured
          (difference between the market value of the site prior to contamination being discovered
          and the value of the site after the pollution condition has been clean-up). Limited market
          available.
• Transported Cargo (Third Party/First Party);
• Non-Owned Disposal Sites;
• Punitive/Multiplied Damages & Civil Fines/Assessments/Penalties;
• Terrorism;
• Mould/Bacteria & Viruses;
• Asbestos & Lead Based Paint;
• First Party Business Interruption, Extra Expense and Rental Value;
        – Include full and partial suspension of operations

Presentation Title                                                                                 37
                                             Environmental Insurance 101



Pollution Liability – Known Conditions

• All conditions known to a “Responsible Insured” must be disclosed to
  the insurer;
• Different approach to carving out Known Condition Exclusions taken
  by insurers;
• Depending on how well the condition is
  delineated/characterized, many insurers will provide coverage for
  Third Party claims of BI/PD arising out of these identified conditions;
• Clean-up costs for conditions above standards are obviously
  excluded EXCEPT if a condition is being managed through a Risk
  Assessment – can sometimes get the policy to “wrap around” the
  remedy and insure against any government required changes.




Presentation Title                                                          38
                                               Environmental Insurance 101



Pollution Liability – Required Underwriting Information

• Schedule of Locations including COPE information
• Description of Operations
• Environmental Risk Management Policy (including
  Acquisition/Divestiture due diligence protocols)
• Claims history
• Environmental Site Assessments
• Schedule of Underground Storage Tanks
  (age, construction, contents, size, containment information, integrity
  tests)
• Financials
• Application (completed after Insurer has been selected)

     NOTE: The above information is required for a firm bindable quote.
       Pricing indications can be obtained with site information/available
                                     ESAs.
Presentation Title                                                           39
                                                              Environmental Insurance 101



Pollution Liability – Pricing Considerations

• Premium is based on:
        –    Limit of Liability required;
        –    Retention/Deductible assumed (usually start at $50,000);
        –    Policy Term (1 to 10 year terms available);
        –    Site history and operations;
        –    Site Conditions (i.e. “clean” or “contaminated”);
        –    Availability of recent/comprehensive information;
        –    Location and surrounding property uses;
        –    Scope of Coverage Required (New conditions only vs Pre-existing; Off-site only vs On-
             site);




Presentation Title                                                                                   40
                                                               Environmental Insurance 101



Contractor’s Pollution Liability

• Covers Third Party claims for Bodily Injury, Property Damage or
  Clean-up costs arising from pollution conditions associated with the
  Insured’s contracting operations or services rendered;
        – Can be written on a practice/blanket basis or project specific basis;
        – Occurrence and Claims-made forms;
        – Contractor Controlled or Owner Controlled (OCIP) if part of a CGL wrap-up;
        – All market forms are very similar – key is to clearly defined the scope of covered
          operations;
        – Wide appetite for a range of contracting operations
          (generals, demo, abatement, mechanical, road/street, utility)
        – Can be written on a combined form offering E&O coverage as well (COPS);
        – Enhancements similar to the PLL/EIL form
• Who should purchase? Municipality (Project Basis) & Contractors



Presentation Title                                                                             41
                                                     Environmental Insurance 101



Clean-Up Cost Cap or Remediation Stop Loss

 Cost Cap for Projects where remediation of known pollution conditions is
                                 required


•     Provides protection against overruns on expected costs of remediation of
      known pollution conditions and cleanup costs for newly discovered
      conditions
•     May also apply to some non-environmental activities (i.e., demolition, site
      preparation, capping of contaminated areas)
•     Underwriting is based on a specific remedial action plan (approved by
      underwriters) and the expected costs to implement that plan
•     Insurance coverage attaches above a “buffer” of 10% to 20% of expected
      costs
•     Important coverage where cost overruns cannot be absorbed by the
      contractor(s)
•     Who should purchase? Municipality, developers, remediation contractors

Presentation Title                                                                  42
                                                                 Environmental Insurance 101


Remediation Cost Cap Program – Simplified Program Structure



  NOTE: Pricing
     range for
   Remediation
     Cost Cap




                                                   Coinsurance
   programs are
 between 6 to 12%                      Cost
 of the Estimated                    Overrun                        Limit of
 Original Clean-up                   Coverage                       Liability
       Costs

                                                                     Buffer (anywhere from 10 to 25% of Estimated
                                                                                  Original Clean-up)


                           Self-
                        insured
                       Retention     Expected
                                   Cleanup Costs



  Presentation Title                                                                                       43
Questions & Answers