The Environmental Imperative
There may be no clearer example of insurance as an enabler of commerce than the dynamics of environmental insurance.
Jennifer Lester’s knowledge of environmental coverage was the key to her client securing work providing building operations and management services for Chicago’s Union Station, the third-busiest rail terminal in the United States.
The age of Union Station presented substantial challenges. It opened in 1925 and hazardous substances were very likely to be disturbed during the course of the client’s work. This in turn could endanger the more than 130,000 commuters and Amtrak passengers who pass through the terminal on a daily basis.
Lester successfuilly crafted a contractor’s pollution liability policy that satisfied all contract requirements and provided coverage for the client’s work.
One client, which had acquired a division spun off from a supermarket, benefited from Lester’s work in getting underwriters comfortable with the properties’ historic environmental exposures.
Lester was also kept busy within the last year by providing last-minute insurance options for a nationally acclaimed real estate and asset management company. The work involved devising solutions for new construction projects, building renovations and real estate transactions.
“She was professorial … in instructing us in exactly what we were buying and what would be covered, what some of the definitions meant in the policy,” said one admiring client.
It may sound a little extreme, but this is how one client described the work of Marsh’s Steve Manz in the past year.
“Steve has done a terrific job for us,” a client said. “He’s gone the extra mile to meet our needs on a very different risk — he’s broken necks to do a good job this year.”
Another client put it less graphically. “He doesn’t waste our time. Some people spend too much time on sales and end up adding little. Steve is not that kind of broker—he is very professional.”
With a background in environmental engineering consulting and environmental remediation, Manz is well-suited to communicate with clients and underwriters the nuances of environmental exposures and coverages. His niche knowledge of construction exposures allowed him to craft a renewal for a construction client that reduced the overall premium 30 percent from the expiring program. This with a policy that covered the client for a range of pollutants, including mold and legionella.
For another client, Manz streamlined the process for getting coverage for new locations from weeks to a matter of days, which allowed the client to make advantageous business decisions in real time. While streamlining the process, Manz also found several deficiencies in the policy structure and worked with the carrier to make needed corrections.
Across the board, clients said Manz excelled at customer service, a key attribute in a Power Broker®. “He really understands the dynamics of our business,” said a client.
No Delay in Coverage
Governmental agencies are utilizing innovative public-private partnerships to replace their aging civil, transit and social infrastructure. But there can be significant environmental risks on such projects, particularly delay costs to remediate unexpected contamination. Such exposures generally are excluded.
To address this significant gap in coverage, Aon’s Adrian Pellen worked with an environmental carrier to modify its pollution legal liability policy to provide coverage for equipment rental costs, consulting and other expenses in connection with a delay arising out of the discovery of a pollution condition. This coverage extension has been offered to more than a dozen projects, including several public-private partnerships.
One real estate development firm became aware that a redevelopment site likely had underground oil and gas storage tanks, but Pellen was able to obtain a comprehensive insurance program that protected both the client and its lender. It’s a situation Pellen has handled deftly more than once. “Once again, Adrian was able to come in relatively quickly to take care of our needs,” the client said. “We got a pretty good insurance program, with good pricing and really good coverage — no fuss, no muss and everything taken care of.”
“Adrian Pellen is always one step ahead of you — you don’t need to constantly request information,” said a real estate investment trust client.
“He’s excellent,” said a construction firm client. “We’ve done a lot of work together and worked closely with him and his team, and we can really count on their responsiveness.”
Getting the Markets to Pay Attention
Environmental Liability Transfer Inc. had one particularly challenging deal last year for a former solvent recycling company, including liabilities for properties no longer owned or operated by the seller.
Thomas Swartz was able to not only obtain third-party liability coverage for known conditions, but also first-party coverage, which is very seldom granted on complex sites. “Tom Swartz is extremely skilled at bringing comfort to our clients who are requesting insurance, by educating them about the policies, the exclusions and the covered items,” said Randall Jostes, ELT’s president and CEO.
For Niagara Worldwide, a demolition, salvage and real estate company, Swartz was able to acquire relatively broad coverage on a complex 100-year-old paper mill site, despite the fact that the site had not been thoroughly assessed. He obtained third-party liability coverage and even retained some cleanup coverages through the creative use of endorsements, which restricted the discovery of contaminants through voluntary Phase II assessments.
“Tom Swartz is probably one of the more sincere experts in this industry that I know,” said Eric Spirtas, president of Niagara Worldwide. “He’s always available to consult; he always has his phone on to talk and give advice on the whole spectrum of insurance.”
“He gets the markets to pay attention to my clients,” said George von Stamwitz, a partner at Armstrong Teasdale. “He can get a product wrapped around a difficult environmental risk, which is the case more often than not as we’re dealing with pre-existing conditions in a wide variety of settings.”
Making the Difficult Possible
A private equity firm was acquiring the global assets of a chemical company, including plants with both known and suspected pollution conditions. When another broker couldn’t secure on-site cleanup coverage, the firm went to James Vetter and his team.
Vetter worked with the client to draft a summary of the risks, including a tabular analysis regarding specific concerns and financial materiality. Vetter then convinced the client to present their case to carriers.
“At the end of the meeting, one of the carriers commented that it was the best discussion and presentation of risk that they had ever been involved in,” the client said. “All carriers agreed that this greatly helped them in their understanding and ability to underwrite the risk.”
Vetter was able to secure coverage that included on-site cleanup for all but two sites, and the exclusions for known conditions were significantly minimized. On- and off-site coverage was afforded in addition to business interruption.
“Jim Vetter is outstanding,” the private equity client said. “We had signed up a transaction with assurance that we could get environmental liability insurance for unknown environmental conditions of chemical manufacturing facilities around the world, but that turned out to be inaccurate. Jim did an outstanding job of marketing the opportunity, revisiting the application for insurance and we got it done on time.”
“With Jim Vetter, Marsh brought a true subject matter expert to us, for an exposure that was difficult to get our arms around,” a client said. “He helped push this over the finish line.”
Covering the Known and the Unknown
A U.S. manufacturer was acquiring a U.K. company whose site had more than a 100 years of industrial use, and Max West had just five working days to obtain a quote. West told the London carrier that both known and unknown pollution conditions could be insured since operations would not change. Four days later, West was able to secure $10 million in protection, including coverage for any future cleanup costs.
West had another client, a law firm that was helping a Japanese company buy a U.S. manufacturer with sites that had “long environmental histories” — but the seller did not want to let the buyer perform any environmental testing prior to the acquisition. West helped the buyer secure environmental insurance that would allow them to test the soil and groundwater after the acquisition, and would cover them for cleanup costs and environmental third-party liabilities. West helped the carrier customize the policy to cover “the kitchen sink” for 10 years.
The buyer “had some pretty unprecedented demands about wanting a lot of unknown environmental liabilities and conditions to be covered,” said West’s law firm client. “They also wanted the ability to do subsurface testing, which seemed to be over-the-top. But Max was able to get it all. At the end of the day, the cost of the environmental policy, which complemented the reps and warranty policy, was a small fraction of the overall insurance cost — I was really blown away.”
“Max did a terrific job obtaining coverage for a known environmental pollution condition that typically is not insurable,” a law firm client said.
Max West first became interested in the environment when, as a young man windsurfing off of Hayling Island in Great Britain, he became ill due to an accidental sewage spill.
After graduation, he took a position with AIG as an environmental underwriter and a career was born.
These days, West makes his mark by being a tireless advocate for his clients.
“I have a tremendous desire to win and manage the expectations of the client,” West said.
“I think some insurance brokers sit on data and submissions. I understand how important environmental insurance is to making a deal happen. I will never let environmental insurance get in the way of making a deal happen. They will never be waiting for me,” West said.
West regularly networks with environmental attorneys and consultants both to educate himself and to provide better professional contacts for his clients.
On the nonprofit side, West is a supporter and a board member of the Friends of the Chicago River. He also recently assisted his home town of Glenview, Ill., by finding an environmental solution that allowed affordable housing to be maintained on Chicago’s North Shore.
“Deals would not happen and litigation would not be settled without environmental risk transfer,” West said.