Owner/Borrower Environmental Site Protection
Policies which protect an owner of real estate also come under a variety of names, mainly to distinguish the providers of these products. The most common are Pollution Legal Liability (PLL) and Environmental Site Liability (ESL). Both accomplish essentially the same purpose. Depending on coverages selected, the policies can insure against cleanup of contamination in excess of current standards, as well as protect against third party liabilities resulting from that contamination. Coverage can be extended to cover off-site, which is valuable if the contamination has migrated to a neighboring property.
The basic policy will cover against pre-existing, unknown contamination at the site, as well as contamination that develops in the future. Third party liabilities associated with known, existing contamination can also be covered in certain circumstances.
Policy terms of up to 10 years are available. The long term can be a valuable feature, as coverage is triggered by violation of then current standards. So, if environmental regulation of a substance becomes stricter in the future, an existing contaminant which is currently at acceptable levels may have to be remediated to the newer standard. A good example of this is asbestos, which at one time was thought to be benign. Now, asbestos must be removed or addressed in other ways to mitigate exposure to the public. So a prudent property owner will want to consider environmental coverage even if there is little or no known contamination at his property, according to today’s standards.
Limits, Deductibles and Pricing
Limits of up to $100,000,000 are available, and a minimum deductible of $5,000 is required. As a practical matter, the high limit and low deductible are not available, and would not be cost effective if they were. We will try to guide you to the best use of your premium dollar by working with you to assess your tolerance for risk and balancing that with realistic expectations of the level of loss a given property might generate. There is no “rule of thumb” rating guideline that will generate anything more than misinformation. The best way to get a handle on cost is to talk with us about the risk you want to insure and let us do some homework. With some ballpark terms in hand, you can determine whether it’s worth your time to proceed with obtaining firm terms.
Generally, it is required to have a Phase I site assessment available. Some carriers can do an internal database search to see if the site has been reported to environmental authorities as having had contamination and will use that method instead of a Phase I. There are plusses and minuses for each approach, and sometimes you don’t get a choice. The best option for you will be dependent on the risk, and we will be happy to provide you with ideas on which way to go.