Chapter 14: Environmental Liability Insurance

What is considered a nuisance claim?

A case without merit that the insured urges the insurance company to resist making payment against; however, it would cost far more to fight the case than to settle it.

What is an other insurance clause?

A clause that specifies how much each policy will pay in the event of a loss so that the insured cannot collect more than the total amount of the loss..

What is a pollution exclusion?

A provision in many standard insurance contracts that eliminates coverage for injuries or damages caused by pollutants.

Once a claim has come to settlement between the involved parties, what does the insurer receive from the claimant?

A release

If there is some doubt as to whether a claim will be paid, under what provision can the insurer continue to investigate the claim?

A reservation of rights letter.

Who are public claims adjusters?

An adjuster who is paid by the insured to help submit a claim properly to provide advice on achieving the most equitable settlement and to represent the insureds interest as an intermediary with the insurance company.

Who are independent claims adjusters?

An independent contractor who adjusts claims for different insurance companies. They are typically hired by an insurance company when it does not have enough claims activity in a certain geographical area to justify have its own personnel or when a claim requires and adjuster with a particular expertise in claims of that type.

Which type of insurance can be purchased to cover potential liability for removal of asbestos-containing materials?

Asbestos abatement liability insurance.

Which types of insurance policies are written on an occurrence basis?

Asbestos abatement liability; lead based paint abatement liability; and asbestos in place insurance.

Which type of insurance can be purchased to cover potential liability for the asbestos operation and maintenance program?

Asbestos in place insurance.

What are nine potential sources for environmental hazards found in buildings or on properties?

Building materials containing asbestos; lead-based paint; polychlorinated biphenyls (PCBs) in bulbs; chemicals emitted by new building finishes or cleaning materials; contaminants brought by the air; unknown but preexisting contaminants on, within or under the property; pollution migrating onsite from an offsite source; pollution from a third party on the property; pollution arising from building operations or procedures.

What are eight costs that can be anticipated related to pollution/environmental compliance?

Capital expenditures for the best control technology to comply with environmental laws; environmental expertise, either in house or out sourced; administration of record keeping and reporting requirements; health and safety training programs; raw material and wast disposal expenses; legal costs; general business counting for environmental costs; costs of evaluating real estate transfer opportunities.

If a cloud of toxic fumes is accidentally released in the atmosphere, what insurance policy will cover third-party claims?

Claims for off-site bodily injury resulting from on-site conditions.

What twelve types of situations can be covered by pollution legal liability insurance?

Claims for on-site cleanup of unknown preexisting conditions triggered by discovery or a third-party claim; claims for on-site cleanup of new conditions triggered by discovery or a third-party claim; third-party claims for personal property damage caused by on-site pollution; third-party claims for bodily injury caused by on-site pollution; third-party claims for cleanup costs off site, resulting form preexisting conditions; third-party claims for cleanup costs off site resulting form new conditions; third-party claims for property damage off site resulting from on-site conditions; third-party claims for off-site bodily injury resulting form on-site conditions; third party claims for off-site bodily injury, property damage, or clean-up costs resulting from conditions originating at a nonowned location; third-party claims for onsite cleanup costs on, within, or under a nonowned location and resulting from pollution conditions originating from a nonowned location; claims resulting from an interruption of the insureds business due to pollution conditions; third-party claims for cleanup costs resulting from the transportation of product or waste.

What insurance coverage is available for property owners using third party vendors for the transportation of waste?

Contingent automobile liability coverage in the PLL policy.

Why did the first attempts to establish environmental insurance fail?

Due to lack of historical data, insurance companies had to learn to underwrite, evaluate, and rate an exposure that many had previously uninsured.

What is cost overrun insurance?

Insurance that limits the financial loss exposure of environmental remediation projects for owners who are cleaning up nonoperational assets, investors purchasing contaminated properties; and those who have been identified as potentially responsible parties.

What data will insurance underwriters and technical experts analyze before underwriting a pollution legal liability policy?

Loss control survey.

What does a hold harmless agreement with a contractor protect the property manager against?

Losses caused by persons not under its control.

What are the duties of the insured during the claims process?

Notify insurer of claim; provide needed documentation; cooperate with the insurer in the investigation and adjustment of the claim; 1st party provides proof of loss and cares for damaged property to protect from future loss.

How can property owners maintain control over large-scale abatement projects and ensure adequate liability limits for contractors?

OCEIP; Owner controlled environmental insurance policy.

What are the four options an insurer ha sin making payment for a property loss?

Pay the insured for the value of the lost or damaged property, pay the cost of repairing or replacing the lost or damaged property; take any and all parts of the property at an agreed upon or appraised values; repair,rebuild or replace the property with other property of like kind and quality.

What insurance protection is available for owners who use their own vehicles for the transportation of waste?

Pollution liability - broadened coverage covered autos endorsement to the commercial automobile liability policy.

What is draft authority?

The delegation of authority to the agent to make payment on small claims.

What are the thirteen most common deficiencies in risk management and insurance?

Property and business income insurance is not provided on a blanket, replacement cost and agreed-amount basis; not all named insured or additional insureds are properly named on all policies; the firm fails to obtain umbrella liability insurance; the firm fails to obtain various types of professional liability insurance; the firm fails to obtain crime insurance; the firm fails to require that its contractors and tenants have adequate insurance and have signed hold harmless agreements and that contractors have provided performance bonds for large jobs; the firm has placed its own insurance coverage or has accepted insurance form tenants or contractors with companies that are not A- rated in Best's guide; the firm insures against small losses, but fails to insure adequately against catastrophic losses that can put the firm out of business; the firm fails to heed insurance company loss control recommendations or fails to practice prudent risk management techniques; the loss exposures of the firm have been misclassified in its general liability, automobile, and workers' compensation insurance policies; the firm gives it attorney carte blanche to draft insurance provisions in leases or other contractual agreements; the firm fails to report claims on a timely basis or attempts to handle claims itself, which can void any valid insurance; commercial real estate firms tend to view insurance as just another overhead expense and to purchase coverage based solely on price.

Of the four methods of claims payment, which is the lease likely choice for the insurer?

Repair, rebuild or replace the property with other property of like kind and quality.

What is incurred loss?

The amount that the insurance company has already paid with respect to a claim plus the additional amount the insurance company estimate it will have to pay in the future relating to that claim.

If a claim is litigated, what obligation does the insurer have?

The insurance company must preserve the rights of the insured since the legal defense provided by the insurer on behalf of the insured.

What is subrogation?

The process in which an insurance company seeks reimbursement form the party responsible for the loss. In most insurance policies the insured gives the right to the insurance company so it can collect any loss payment it has made to the insured.

When is it most likely that an insurance company will pay a claim to an insured and not subrogate against the responsible third party?

When the cost of subrogation would be excessive in comparison to the amount to be collected.

If, in the course of landscaping a piece of property, a developer discovers several drums labeled as hazardous waste, will the pollution legal liability insurance cover this occurrence?

Yes; claims for on-site clean up of unknown preexisting conditions triggered by a third party.

What are the five types of claims adjusters?

Your insurance agent, insurance company staff adjusters, independent claims adjusters, national adjusting firms, public adjusters.