Environmental Risk Management

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Environmental RiskManagement Insurance for
Real Estate
Brad A. Maurer JD, CPCU
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The Environment is both natural and man made
AirLandWater
Manmade Structures
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Environmental Risk Management
has 3 main steps.
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Define Environmental Liability
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Manage Environmental Liability Risk
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Assess Environmental Liability Risk
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Environmental Liability
starts with actual or threatened release of
pollutants.
Component 1 Is there a Pollutant Condition?

• Pollution as defined by insurers
• What event? A discharge, dispersal , release or
  escape
• Of What? Any solid, liquid, gaseous or thermal
  irritant or contaminant, including, but not
  limited to, smoke, vapors, soot, fumes, acids,
  alkalis, toxic chemical s, medical waste and
  waste materials.
• Where? Into or upon land, or any structure on
  land, the atmosphere or any watercourse or body
  of water, including groundwater.

Can include EMF, Mold, LLRW, Legionella.
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Environmental Liability can be
patent or latent.
Component 1 Is there a Pollutant Condition?
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Environmental Liability can impact
different media.
Component 2 Impact of Pollution Condition?

• Media Affected
• Time of Latency
• Receptor Sensitivity
• Discovery Events
• Patent Spill
• Due Diligence
• - Development
• - Illness/nexus

Air
IAQ
Soil
Most Large Environmental Insurance Claims Arise
from Present Discovery of Latent Pollution
Conditions.
Surface Water
Groundwater
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Indoor Air Quality

• Indoor Air Quality is a set of Pollution-Related
  Issues
• Microbial Matter (fungus and bacteria)
• Sick Building Syndrome

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Mold
The Fungus Among Us

• Results from excessive moisture
• Possible construction or design defect
• Is often hidden
• Remediation is expensive

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Environmental Liability can come in many
forms of loss.
Component 3 Is Loss Caused by
Pollution Condition?
Clean Up
Defense Expense
Bodily Injury
Property Damage

• Physical Damage
• Loss of use
• Diminution in Value
• Resource Damages

• Physical Injury
• Death
• Disease
• Monitoring

• Investigation
• Removal
• Treatment
• Disposal
• Restoration
• Monitoring

Fines Penalties Punitive Damages
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Environmental Liability has
many legal bases.
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Safe Properties can be Impacted

• Tutor Time Mineola, NY. Daycare facility located
  adjacent to a superfund site indoor air quality
  at daycare found to be degraded by PCE from
  polluted site.
• Kiddie Kollege Franklin Township, NJ. Daycare
  built upon site of old mercury thermometer
  manufacturer. Daycare indoor air reveals mercury
  levels 27 time allowable limits. Attendee blood
  tests revealed elevated mercury levels in
  children.
• Methuen Village at Riverwalk Park, Metheun, MA.
  Former industrial site converted to 91 assisted
  living units.
• Visiting Nurses Association Somerville, MA.
  Former mattress factory remediated for 95 unit
  assisted living construction.
• Sholom Home II, St. Paul 45 senior rental units,
  a 66-unit assisted living facility and a 90-bed
  nursing home constructed upon former bulk
  petroleum plant.

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Environmental Risk Management
has 3 main components.
1
2
3
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Environmental Risk Management
starts with risk identification.
1

• Current Operations Review
• Historical Use Review
• Self-Audit
• Phase I Environmental Assessment
• Asbestos Assessment
• Lead Assessment
• IAQ Assessment/Baseline

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Environmental Risk Management
then proceeds to quantification of risk.
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Determine Environmental Liability Probabilistic
Cost
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Environmental Risk Management
quantifies risk.
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Every Business has an Environmental Liability
Probabilistic Cost
Pollution Event
Manifestation Of Harm
Resolution Cost
Probabilistic Cost
X
X

• Use of Hazardous
• Substances
• (past/present)
• Containment
• Waste Generation
• Management Practices

• Media Affected
• Time of Latency
• Receptor Sensitivity
• Discovery Events
• Patent Spill
• Due Diligence
• - Development
• - Illness/nexus

• Media Affected
• Toxicity of Pollutant
• Receptor Sensitivity
• Remedial Technology
• Volume Affected
• Publicity
• Jurisdiction

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Environmental Risk Management
leads to a Risk Treatment Plan.
3
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Environmental Risk Treatment
guess what? has 3 main components.
3
1
2
3
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Environmental Risk Treatment begins with
prevention, (which has 3 main components).
1
3. Management Controls
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Environmental Risk Treatment
involves loss control measures.
2
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Environmental Risk Treatment is
completed with loss financing.
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Retention-Self Finance
Insurance
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Environmental Insurance is available.

• Covers Indemnity and Defense for
• Bodily Injury (including medical monitoring)
• Property Damage
• Clean-up
• Post-Clean-up Restoration
• Business interruption, loss of rent (optional)
• arising from pollutants.
• Asbestos, lead and microbial matter coverages
  have supplemental applications.
• Coverage also for underground storage tanks.

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Environmental Insurance is available.

• Policy Types
• All are claims-made and reported
• Multi-years programs available up to ten years
• Varying levels of coverage
• Full pollution (historical and new).
• New pollution only
• Building environment only
• Capacity - 25mm any one insurer

• Insurers
• ACE
• AIG
• American Safety
• CHUBB
• Great American
• XL
• Zurich

• Underwriting Process
• Main Application
• Supplemental Applications
• Building Maintenance Plan

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Environmental RiskManagement Insurance
Contact Brad A. Maurer JD, CPCU 215-579-6478
BMaurer_at_JKJ.com