ENVIRONMENTAL SURVEY UPDATE ARTICLES

Capping Remedial Costs - A Good Option for Your Project?

All too frequently, environmental liabilities are difficult to manage at environmentally impacted properties where remediation costs are high. The problem typically is compounded when there are multiple parties involved in funding the response action. Capping and finding a way to guarantee the remediation costs at the site, is a relatively new risk management alternative and is receiving increased attention among environmental attorneys, real estate developers, and additional stakeholders whose responsibilities include assessing, then managing known or "hidden" environmental liabilities as properties undergoing expensive remediation.

RT has been working closely with Mellon Clair Odell (MCO), a Mellon Financial Services company, specifically their Environmental Risk Management Division, to design and offer Remediation Cost Cap (RCC) insurance for several of our projects. RCC is typically provided on large projects that are undergoing some form of remediation in accordance with an environmental regulatory directive. An engineering cost estimate for the remediation is prepared for the selected Remedial Action Plan. Insurance underwriters review the plan, cost estimates and other applicable environmental due diligence information, then develop and offer an RCC insurance program specific for that property.

For example:

A project has an estimated remediation cost of $1.4 million. The developer purchases an RCC insurance policy with a $100,00 deductible. If the project costs exceed $1.5 million (estimated remediation cost + $100,000 deductible), the RCC policy will respond and cover the remediation cost overruns.

RT offers a creative contract to our clients whereby we would split the deductible costs in the event the base remediation budget is exceeded. If the project falls within budget, the client benefits. Should the project go over the original estimate but fall below the deductible ceiling, the client and RT split the cost 50/50. The incentive remain to incur no more costs than necessary and maximum liability protection is provided.

Some of the advantages of working the MCO are that you are partnering with professionals who have the environmental expertise that has typically been foreign to the insurance brokerage industry. MCO has established sound relationships with and therefore provides access to all of the primary environmental insurance carriers. These relationships are manifested through more competitive pricing, enhanced coverage and maximum service. MCO’s track record and expertise allows RCC premium/coverage preliminary indications to be obtained within three to five days from the respective markets. RT has developed a wonderful partnership with MCO and consequently, we are able to work together to guarantee your maximum remediation liability for your project(s).

Should you desire any further information on RCC insurance or have any questions regarding the management of environmental risks and exposures, contact Gary Brown at RT Environmental Services (610-265-1510), or Matt Winters, CRM at Mellon Clair Odell, (610-825-8100, ext. 149) or via email at winters.m.cog@mellon.com.