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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.
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