Reuse and redevelopment of abandoned, idled, or underutilized industrial and commercial sites, also known as Brownfields, is both a challenge and an opportunity.

The risks associated with Brownfield redevelopment are complex and interrelated, but can be summarized into four main categories:

• Indemnities and liabilities associated with land ownership/transfer;
• Financial cost uncertainties associated with remediation;
• Contractor/Consultant project risks; and
• Risks associated with actual/perceived impacts on future users of sites.

Types of Environmental Insurance Used for Brownfields

The following three main types of environmental insurance are used together or separately to help manage some of the risks associated with Brownfield sites:

• Pollution Liability;
• Cleanup Cost Cap/Remediation Stop Loss; and
• Contractor’s Pollution Liability.

Pollution Liability Policies

Pollution Liability coverage for fixed locations, often called “Environmental Impairment Liability” (EIL) policies, are the most commonly used form of environmental insurance. In general these products are designed to provide coverage for loss arising from pollution conditions on, under, or emanating from an Insured location. The Pollution Legal Liability (PLL) policy form may offer a menu of environmental related insurance coverages, including:

• On site and off site cleanup costs related to pollution conditions;
• On site and off site bodily injury and property damage caused by a pollution condition;
• Coverage for non-owned disposal sites;
• Business interruption related to pollution conditions including extra expenses and project delay costs; and
• Coverage for first and third party diminution in value.

Cleanup Cost Cap Insurance

Cost overruns associated with an environmental cleanup can have serious negative financial impact on a company’s earnings or the financial returns of real estate development projects. There are several reasons why cost overruns can occur including:

• Actual volume/extent of contamination that is greater than anticipated;
• The chosen remediation technology is not as effective as originally projected;
• The cleanup standards to be achieved as part of a project change during the implementation of the remediation program.

Cleanup Cost Cap (CCC) is an environmental insurance policy that acts as a financial tool by allowing Insureds to limit the costs related to the cleanup of contaminated sites. The policy is underwritten based on a Remedial Action Plan (RAP), which outlines the cleanup methodology to be utilized and budget estimates for the project. The CCC then “caps” the cost of cleanup when the actual project costs exceed the original budget by a defined percentage, which serves as the policy deductible or self-insured retention. Unlike other forms of insurance providing coverage for ‘what might happen’, CCC is intended to provide coverage for ‘known’ environmental conditions.

Contractors Pollution Liability (CPL)

When hiring consultants and contractors to work to perform assessments and/or remediation activities on project sites it is important to make sure that they have insurance for pollution conditions that may be caused or exacerbated by their actions. Owner or contractor controlled project specific policies are available for larger and/or more complex brownfield redevelopments.

Why Use Marsh’s Environmental Practice?

No two Brownfield sites are identical and for this reason there are generally no “off-the-shelf solutions” to manage the risks associated with their redevelopment. Marsh Canada Limited’s Environmental Practice has the experience necessary to tailor an appropriate environmental risk management program for all types of Brownfield projects.