HUB International Insurance Services' Environmental practice team is a leader in environmental risk management. Our depth of experience, knowledge and talent can help you manage your environmental risk with the confidence you manage your other risks. We provide innovative solutions that incorporate your overall business plan as well as your specific needs. Our seasoned professionals have unique knowledge of the environmental marketplace and policy forms to develop successful solutions to complex problems.
Protecting Commercial Real Estate Lenders
Lender environmental policies address the special needs of banks, lenders, loan originators, financial institutions and investors that may hold or invest in loans backed by commercial real estate. These policies provide collateral value protection in the event of a loan default and the subsequent discovery of a recognized environmental condition at the covered location during the policy period.
In the event of the borrower's default and discovery of environmental damage at the collateral property, the policy reimburses the lender for the "lesser-of" the unpaid loan amount or remediation costs (Coverage A) or, following foreclosure, for on-site remediation costs (Coverage B). The policy also helps to protect the lender against third-party liability claims arising from pollution incidents on the collateral property (Coverage C).
Coverage A can be alternatively structured as a "loan balance" coverage such that the lender would be paid the unpaid loan amount at the time of default and discovery of environmental damage.
Limits up to $100,000,000 are available and deductibles start at $10,000. Active remediation sites can be covered.
How is this policy utilized?
A bank wants to implement a new program that will:
- Streamline the environmental due diligence process for loans with real estate as collateral;
- Offer a cost-effective alternative to traditional due diligence borne by the bank's borrowers; and
- Provide an efficient mechanism for transferring the environmental risks to a financially secure company.
A customized due diligence and insurance program can be designed by HUB International Insurance Services in partnership with the bank to cover the bank's commercial loan portfolio or to cover each loan separately.
An Example of How It Works:
After the program's inception, a loan has an event of default. The bank's pre-foreclosure due diligence investigation reveals the presence of environmental contamination from a past dry cleaning operation. In lieu of foreclosing on the property, the bank makes a claim for the outstanding loan balance and extra expense associated with the loan. This policy is usually structured for the “lesser-of” the unpaid loan amount or remediation costs as mentioned above.
Environmental Site Protection
The Environmental Site Protection policy provides for on-site and off-site coverage for the Insured against third party liability for bodily injury and property damage (including defense costs).
Remediation costs resulting from both pre-existing and new pollution conditions at the insured location can also be covered. Multiple locations can be insured under the same policy, sharing the limits and reducing average cost. A lender can also have coverage under this policy as an additional insured.
Unlike the Lenders Environmental Protection policy which is triggered by default on the loan and the discovery of a recognized environmental condition, this policy affords coverage for a recognized environmental condition or a government mandated cleanup without a default.
Active remediation sites can be covered. Limits up to $100,000,000 are available and deductibles start at $10,000.
How is this policy utilized?
This policy addresses the unique needs of the real estate investor in transaction and portfolio management. It can be used as a tool to expedite real estate financing or mergers and acquisitions. It can also be used to take the risk out of environmentally challenged properties that are otherwise a sound investment.
Supplemental coverage is available for transportation, non-owned disposal sites, and business interruption.
We can usually give you an indication of coverage terms with limited information very quickly. A bindable quote will be delivered within a few days of receiving the environmental reports and application.
Remediation Cost Cap
Remediation Cost Cap policy helps to eliminate financial uncertainty from environmental remediation projects by "capping" the costs that an insured would pay for remediation activities. If the self-insured retention is exhausted in the course of performing the remediation project, the RCC pays cost overruns which can occur as a result of increased volumes of:
- "Identified" pollutants (i.e., those that are the focus of the remediation project),
- Discovery of unidentified pollutants (i.e., pollutants other than "identified" pollutants),
- Changes made by the regulatory authority to the remediation project scope of work or to the cleanup standard.
The Remediation Cost Cap protection can be complemented with Environmental Site Protection coverage to "wrap" around the remediation project.
Financial Specialty's Environmental Contractor’s Pollution Liability policy covers the contractor's liability for third-party claims caused by pollution events arising out of covered operations performed by, or on behalf of, the insured at project sites.
Contractor’s can be protected in the areas of: asbestos / lead abatement, demolition, electrical, excavation / grading, plumbing, masonry, painting, roofing, DOD & DOE, transformer / PCBs, general contracting, environmental remediation, drilling, emergency response, industrial cleaning / maintenance, lab packing, mechanical, paving, Superfund, storage tank and utility.
- Available on a claims-made or occurrence basis
- Blanket additional insured status for clients
- Natural resource damage is defined and covered
- Broad “covered operations” definition
- Innocent insured coverage
- Silent with regard to punitive damages
- No exclusions for asbestos, lead, underground storage tank, Superfund, or radioactive matter
Environmental action over coverage
- Choice of optional extended reporting periods available on claims-made policies —an extended reporting period of up to three years and a supplemental extended reporting period of unlimited duration
Available as a practice policy, project-specific or owner controlled
Environmental Liability Transfer
Environmental Liability Transfer programs can provide a solution for companies seeking an exit from their legacy environmental liabilities or long-term closure obligations. The scope of a liability transfer can range from a commitment to remediate a site for a guaranteed fixed price to the outright transfer of the contaminated asset and its associated liabilities.
How is this policy used?
A growing number of firms, primarily from the environmental engineering services sector, is actively pursuing opportunities to help contaminated property owners resolve liability issues through such transfers.
These liability outsourcing contracts are supported by comprehensive financial assurance and insurance programs which can, in some cases, run for 30 years or more.
Environmental Liability Transfer programs allow organizations to transfer the responsibility and management of known contamination issues, large and small, for a single facility or group of properties. These programs may also transfer third-party "toxic tort" liability and legal defense costs. In most cases, ownership and control of the asset are not transferred and organizations can still realize value from sale or development opportunities.
The principle benefits of these innovative programs include:
- Cost certainty and stakeholder reassurance
- Creation of real estate value for non-performing assets
- Facilitation of transactions
- Improved financial disclosure and accounting treatment of liabilities
- Reduced management distraction on non-core operations