Knowledge and Respect
When Downtown Railyard Venture, LLC, planned to acquire a former Union Pacific railyard in Sacramento, Calif., obtaining pollution legal liability was crucial to completing the transaction.
The principal’s long-time broker proved his mettle in a series of complex privatizations of a former Air Force base, but when the seller recommended the work of Trisha Blau, DRV’s broker said, “I know Trisha, and she’s better than I am.”
A former environmental engineer, Blau educated the insurers on both the historical and future use of the development, resulting in a manuscripted environmental policy that met all stakeholder needs.
“It’s extremely valuable for brokers to understand a deal down to bare bones,” said Jay Heckenlively, principal and general counsel. “It’s not just placing a single pollution legal liability policy; it’s understanding all the policies we’ll need later. She modeled the future for us.”
When CenterPoint Properties Trust wanted to buy a property on the Duwamish River near Seattle — a Superfund site — its pollution carrier bailed. With multiple strikes against the property and an imperative to find the environmental coverage the board of directors required, Blau went to the marketplace.
She produced not just one policy option but several offering great terms that met the board’s needs.
Anticipating Client Needs
At the best of times, one of Cristin Bullen’s clients, a leading risk management organization serving health care facilities in New York, faces difficult exposures: legionella bacteria, waste disposal challenges, construction-related environmental liabilities, and contractual and real estate ownership complexities.
Just before contract renewal in early 2015, some of its hospitals suffered widely publicized, fatal Legionnaire’s disease outbreaks, and an older facility undergoing a $200 million-plus renovation project needed help resolving a mold issue, said the executive responsible for insurance.
Added to that, there were some market challenges, including the environmental insurance market’s diminished risk appetite over the past year and onsite cleanup cost exclusions related to redevelopment and capital improvements.
At renewal, the incumbent insurer decided to halve the client’s insurance capacity. In response, Bullen devised a solution using excess capacity.
To manage the cleanup cost exclusions, she engaged her client and the markets in technical discussions about the actual redevelopment and capital improvement risk — negotiating to the point where the exclusions became manageable.
“At every step, she anticipated my needs,” the executive said. “I often have to educate brokers, but Cristin helped me with the monumental chore of managing the hundreds of properties we insure.”
Taking Care of Business
When a supplier of aerospace systems faced non-renewal because of an anomalous chemical discharge at a now-closed site, several carriers declined to quote, said the company’s risk manager.
With less than a month to expiration, Pantalone set up tours of the company’s new state-of-the-art facility, arranged hygiene inspections, reviewed for them the company’s tighter safety protocols and made such a compelling case that he moved the large program to a new carrier with favorable terms.
“I didn’t even have a face-to-face with underwriters,” said the risk manager, “and they took all of Pete’s Phase 1 and 2 inspections on electronic media. Whatever he did behind the scenes worked.”
Another company, a large chain of convenience stores and gasoline stations, also had a large environmental claim just before renewal. Between that, some aging underground tanks and “issues” with its long-term carrier, its director of risk management and compliance was losing sleep.
Pantalone “did behind-the-scenes stuff to ease our worry,” she said.
He also unearthed tank reports at off-site locations, marketed the policy and finally binded it with a new carrier with “a ton” of policy improvements.
“He had a calming effect,” the client said.
Creating a Needed Insurance Solution
Terry Peters, technical director, Society of Plastics Industries, said his members were vulnerable to frivolous lawsuits by people seeking to exploit California Proposition 65, which requires that more than 800 chemicals be labeled as toxic.
Among the list was a popular plasticizer for tools and hand grips.
One of his members was sued over a chemical that was manufactured in Wisconsin, processed into a hand grip in Indiana, and installed on bicycles in California.
The lawsuit asserted that the grip violated Proposition 65 because it had no warning label. In fact, the hand grip didn’t contain the substance in question, but the Wisconsin manufacturer settled out of court for $100,000 rather than spend $250,000 in court on defense.
“Until Glynis, we had no insurance solution to protect our processors from arbitrary and disastrous lawsuits,” Peters said.
The National Practice Leader at Wells Fargo created an insurance product specifically for Proposition 65 risks, he said.
It took hundreds of hours, said Michael C. Davis, an attorney and partner at Venable LLP.
“Glynis sorted through an abundance of data and case law, figured out what damages would be, conducted historic research on claims, defense costs and average settlements,” he said.
His Heart’s in His Work
A year before its environmental insurance policy expired, the Presidio Trust went to market, but no carriers took the traditional pollution loss liability bait.
The 1,500-acre San Francisco public park the Trust manages was a military base with environmental issues that the incumbent paid more than $40 million to remediate, said Andrea Andersen, acting general counsel, Presidio Trust.
Markets were also deterred by an agreement between the Trust and the U.S. Army that limited recovery in disputed claims against the Army only to the Trust. The Army retains liability for newly discovered pollution it created.
Jim Vetter proposed a new idea: a sliding scale self-insured retention structure that incentivizes the Trust to negotiate and maximize cost recovery from the Army.
As cost recovery rates increase, the amount of the paid claim increases.
“This broke the logjam,” Andersen said, resulting in interest from the markets. “He’s clever. He was going to make the deal happen.”
Anybody can place a policy for a clean site, said Eleni Koumelis, a partner at Winston and Strawn LLP.
But Vetter, formerly an environmental consultant, is able to anticipate underwriters’ technical questions about the “hairy, messy brownfield” sites owned by some of the firm’s clients, she said.
Creativity and Technical Know-How
When other brokers can’t place environmental coverage for brownfield real estate clients, Max West finds a way. What does he have that the others don’t?
Off-the-charts creativity, said a partner in a law firm that conducts transactions involving contaminated properties.
“He’s not just selling insurance, he’s designing insurance,” the partner said.
For example, West adapted the standard excess over-indemnity insurance — typically available only to big, high net worth companies — to small companies seeking to indemnify larger ones, such as a risk transfer firm buying a power or chemical plant.
And although carriers typically won’t cover known contaminations, West was able to place pollution legal liability coverage for a site in Connecticut with a known offsite contamination plume, said Ron Froh, CEO, Commercial Liability Partners.
He also beat the naysayers by getting natural resources damage coverage for a brownfield site in Ohio that the Sierra Club and local environmental groups feared was affecting a river.
His technical understanding of environmental cleanup work wins the confidence of the underwriters, Froh said.
“In most cases, a property doesn’t present as big a risk as underwriters perceive,” he said. “Max explains which are perceived risks and which are real ones. They believe him.”