Month: August 2021

DRYCLEANERS ASK ENVIRONMENTAL ATTORNEYS ABOUT HISTORICAL INSURANCE CASELAW, POLICY LANGUAGE THAT DETERMINES IF AND HOW THEY ARE COVERED 

BY: DRU CARLISLE

Environmental cleanup is an expensive and time-intensive endeavor but finding old insurance coverage can alleviate some of that burden. Once you find your old insurance, the next step is to figure out if that insurance can actually be used and how much protection it will provide. The answer lies somewhere on the other side of a lengthy analysis of your policies, the language written within them, and the state case law in the physical location of the business being covered.  

EnviroForensics recently discussed this topic at length in a webinar with attorneys Andrew Skwiewarski and Ted Warpinkski of Davis|Keulthau Attorneys at Law. At the end of the presentation, the panelists took questions from drycleaners about their unique circumstances and provided broad-stroke answers to their policy concerns. Read on to see their answers.      

Get instant access to the recording of the webinar: How much environmental cleanup will your insurance actually pay for?”

This Q&A session has been lightly edited for clarity.

1. QUESTION: IF A CARRIER RESERVES ITS RIGHTS AND THE INSURED AGREES TO THE RESERVATION OF RIGHTS AND THE SELECTION OF DEFENSE COUNSEL BY THE INSURER, DOES THIS RESULT IN EXPENSES BEING PAID UPFRONT?
ANDREW SKWIEWARSKI: It is not a guarantee that it will happen. The reality is if you’re going to try to get the insurance carrier to pay upfront it’s going to be easier if you use their recommended counsel or their recommended consultant. New Jersey’s a little bit different because New Jersey has this LSRP program where if you’re getting a specifically licensed individual to do it and they have strict obligations as to what needs to be done. In other jurisdictions, we’ve seen where the insurance carrier’s consultants are sometimes cleaning up to reach the bare minimum requirement from the regulators. It’s not an inherent conflict of interest, but there’s a business conflict there that you need to be aware of, and in this case, you would be better off with your own consultant, especially when the insurance carrier is reserving their rights. An investigation is also going to be used to determine whether the occurrence happened during the policy period or other legal issues that are going to come up. So, in terms of New Jersey, there is some argument that by accepting what the carrier has given, you’re going to have a better position to get them to pay upfront. 

TED WARPINSKI: The key question is what exactly are they identifying as the reasons for their reservations and how do those reservations impact how the investigation or the defense of the claim is handled? If it’s unlikely that those issues are going to be impacted by the investigation, then letting them do it may be less of a risk. 

2. Q: HAVE YOU DEALT WITH AN ENDORSEMENT REQUIRING A GOVERNMENTAL MANDATE IN CONTEXT OF CLAIMS-MADE POLLUTION POLICIES?
WARPINSKI: We’re definitely talking about a more recent type of coverage if you have a claims-made, pollution liability coverage, so I would have to see the exact language to give a more definitive answer. That said, I have seen those policies that include an exclusion for government-mandated work. So, if you’re just complying with normal business regulations, that’s not necessarily a claim that’s going to be covered now. It’s already in normal business operations versus an accident or occurrence. That may give rise to a claim that’s covering that policy, so we have to look at the incident that is triggering coverage under that claims-made policy and how is that related to the exclusion language? 

3. Q: IF A DRY CLEANER IS USING A STATE DRY CLEANER REMEDIATION FUND, CAN THEY STILL USE INSURANCE?
SKWIEWARSKI: It depends on the fund. Some funds have a requirement that you try to use your insurance first before you can use the fund. Recently, I had to deal with the Alabama Trust Fund, which was an interesting one because Alabama had provisions that yielded the dry cleaner from any liability whatsoever if you were actually in the fund. And so, there’s a pretty good argument in Alabama that if you’re in the fund and you got in before a certain deadline, and you’ve got that full shield of protection, you don’t actually have a claim yet against your insurance carrier. The shield and the protection is so good, there’s no third-party liability for you to make on a claims-made policy. Each fund is different. We have had success where somebody had gone into the fund, used the fund to pay for certain amounts of cleanup, and then when the fund was either dried up or taking too long to reimburse switched to the insurance carrier. You’re likely not going to see recovery of those past funds that you may have fronted, whether you’ve been reimbursed from the state, and again, if they’re pre-tender, they’re probably not going to be covered, but mixing and matching between the insurance carrier and the drycleaning funds is possible, depending upon the jurisdiction and the fund. 

WARPINSKI: Right, the issue is going to be double-dipping. You can’t try to recover the same cost from two different sources. It makes great sense to do all this insurance work before you get into a fund, but you should check what your state fund allows. Some state cleanup funds require that you at least give them notice of having made a claim, and you may even have to return money to the fund. That’s how it is in Wisconsin and a lot of other states.  

SKWIEWARSKI: So, if you can’t jump back into the fund you have to consider a few questions: How good is my insurance recovery? What’s the likelihood I’m going to get money from the insurance carrier versus the likelihood I’m going to get money out of the fund? We know that these state cleanup funds are having difficulty staying afloat. 

Learn how a dry cleaner was able to use insurance archeology to fund his environmental cleanup after having trouble with his state cleanup fund 

4. Q: WHAT IF MY STATE HAS UNFAVORABLE CASE LAW? IS ALL HOPE LOST OR DO I HAVE OTHER OPTIONS?
WARPINSKI: You have to determine if there are still arguments that could be made to cover some of the loss even though you may not get, for example, this continuous trigger and sudden accidental pollution exclusion. Do you still have something sudden that you can pinpoint to a policy or that may still get you coverage? Are you being sued by a third party? Is there a risk of there being a third-party claim? And are there other responsible parties out there that we might be able to compel to share your costs?  

SKWIEWARSKI: And if there are, does your state have a law that allows you to sue somebody else and allocate the required cleanup costs between the two of you? Some states have those, some states don’t. If you’re in a state that doesn’t, or if you’re in a state that has a lousy recovery statute, there are federal laws—CERCLA—that allow you to make that same claim. The downside is the litigation fees. Those are not inconsequential in order to make that type of recovery. 

5. Q: I PURCHASED MY DRY CLEANER WITHIN THE LAST 15 YEARS. THERE WAS A DRY CLEANER BEFORE ME. WOULD I BE ABLE TO USE THEIR INSURANCE? AND HOW WOULD I DO THAT?
WARPINSKI: If you can find the evidence of the insurance, arguably, you’re now the claimant against that prior owner. Oftentimes, that forms the basis for making a claim against the prior owner, which may be covered by that policy. You can get an assignment on the rights the prior owner has to that policy as part of a resolution of a claim. Has that prior owner-operator been noticed by their state agency as being a responsible party because there may be a claim that could be tendered on their behalf? Even if we had evidence of coverage for you, we would always look to see if there was evidence for somebody before you. Another issue that I will just touch upon is sharing of costs over years of operation. There are rules in some states about how liability is allocated between responsible parties and across different years of coverage. 

SKWIEWARSKI: I’ll add that you should always check your purchase documents from when you bought the business. In some cases, when someone has bought the business, they have also bought the insurance rights from the previous owner. In that case, you are the successor to those rights and then you can just make a claim directly to the insurance carrier.  

Learn more about funding your environmental cleanup with old insurance coverage. 

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Dru Carlisle, Director of Drycleaner Accounts
For over 10 years, Dru has helped numerous business and property owners facing regulatory action, navigate and manage their environmental liability. Dru has vast experience in assisting dry cleaners in securing funding for their environmental cleanups through historical insurance policies. Dru is a member of numerous drycleaning associations in addition to serving on the Midwest Drycleaning and Laundry Institute (MWDLI) advisory council and on the Drycleaning & Laundry Institute Board (DLI) as an Allied Trade District Committee Member.

What’s worse than a bad neighbor? Different things annoy different people, so the definition of a bad neighbor is a personal thing, but I’m sure you’ve all heard from your neighbors a time or two through the years. What kind of things did they have to say? Most residents don’t take the time to call a neighboring business unless it’s bad news; right? Maybe they don’t like the noise or smell from your operations, it could be that they don’t like all the traffic on their street caused by your new drive-through lane, or perhaps the sight of your back lot with storage and a dumpster is displeasing to them. When an environmental investigation and cleanup is necessary, dealing with neighbor concerns can become a nightmare for everyone since these activities can be temporarily loud, spatially disruptive, and ugly. It’s very easy these days for a negative comment or sentiment from a neighbor to get posted to a social media platform and really cause some trouble. Nobody wants that.

Practically speaking, your neighbors are either residences or businesses. Of course, there could be a farm field, or a park, or a forest, but there is cause for less concern since there isn’t full-time human occupation in these settings. When considering how your neighbors will perceive your environmental project, your environmental team must look at the potential aesthetic impacts, such as noise and ugliness, and how those less severe issues can lead to legal liability.

THE PLANNING AND EXECUTION PROCESS DURING AN ENVIRONMENTAL INVESTIGATION
Starting with the least offensive issue to your neighbors: an environmental investigation can create a small spectacle at your property. The process of collecting soil and groundwater samples from locations across the property requires reasonably large equipment. One of the most common pieces of equipment at an environmental project site is a drilling unit of some type. The hydraulic hammer drives the coring tube into the ground, and then the tube is retrieved, and the soil within is collected. The drilling equipment is either mounted to the back of a truck or a track-driven, remote-controlled unit. This process sounds like a large jackhammer, and it’s loud enough that hearing protection is necessary when near the equipment. The noise can certainly be annoying to nearby people, especially when the sampling event takes all day or multiple days. A heads-up to your neighbors that some temporary noisy construction is on the way before drilling day could help ease any potential problems.

An experienced consultant makes a huge impact during this process. Find out what other things you should consider when looking for a consultant.

ROTARY DRILLING
Another common drilling method is rotary drilling, in which sections of hollow augers are spun into the ground using a dedicated engine mounted to a large vehicle. Drilling with this method can be loud when the engine RPMs are high, and the drilling units have tall masts and are typically quite a bit larger than the direct-push equipment. Again, the neighbors will be curious about what’s going on, and they could be concerned, so some advance notice could keep tensions low. It’s important to be empathetic to your neighbors early on in the investigation process because future activities could be even more invasive as you learn more about the size of the contaminant plume. It is not uncommon for environmental releases from drycleaning operations to create soil or groundwater plumes that extend beyond property lines. That means that at some point, you may be faced with the reality that you will need to ask your neighbors for a favor.

STAKEHOLDER PLANNING
When the need arises to advance the investigation of your contamination across property lines, you’ll work with your environmental consultant and perhaps your environmental attorney to create a plan for approaching your neighbors. There could be a need to have access to their property for one of several types of sampling, and they’ll need to permit you in a written access agreement. Getting permission is an important step of the process that can’t be skipped. Once signed by the property owner, a written access agreement is their permission for you to be on their property doing the sampling described within the document. Sometimes the required sampling is simply collecting some soil samples outside, close to the property line. Sometimes there is a need to install groundwater monitoring wells in their parking lot or yard, which is a bigger deal. It is not uncommon to need to enter someone else’s home or building to collect air samples from within the structure or beneath the floor. These can be tenuous situations, so pay close attention to the advice from your professional team. There is a lot of risk for you when you need to sample on someone else’s property, so a smile and a handshake alone won’t cut it, but hopefully, they’ll help.

CLEANUP ACTIVITIES AND NOISE
Beyond the investigation process, cleanup activities can create another set of potential annoyances for your neighbors. If your contamination is identified on their property, it will need to be addressed. Even if the contamination doesn’t cross onto their property, on-site activities can be large and noisy, which could create tensions. Some soil and groundwater remediation technologies use large electric motors to remove contamination. They need to run as often as possible, preferably 24 hours a day. Timers can be employed to turn them off at night or over the weekend when residential neighbors may be the most sensitive to noise. However, every minute the remediation system is turned off adds to the total length of time the cleanup will take.

Learn more about the different methods of remediation that environmental consultants have in their tool belt.

ADDRESSING YOUR NEIGHBORS
Aside from temporary noise and ugliness, there are more significant concerns that might arise with your neighbors. For example, we know that perc vapors can migrate through the soil from environmental releases, which could seep into nearby structures, and this is called vapor intrusion. Suppose those vapors are present in the breathing air inside your neighbor’s building or home. In that case, there is a very strong probability that vapor intrusion will need to be stopped with the installation of a mechanical system. So, the conversation could go something like this, “Hi, neighbor. The regulatory agency is telling us that it is necessary to install a vapor mitigation system on your home to protect you from vapors emanating from our contamination problem.” Hopefully, you can see how good neighbor relations at the very beginning of the investigation process could help you build up some good rapport with them to help with these difficult conversations.

The environmental investigation and cleanup process is not a fun one for the responsible party, it can be costly, and neighbor relations can be strained. However, the good news is that when you take on the challenge of addressing contamination, you are solving problems. Your neighbor might not want to listen to a drill rig for a couple of days or let you into their building to conduct sampling, or even work with you to develop a long-term remediation schedule that they can live with. However, the fact remains that you would rather tackle these problematic challenges than allowing the contamination to remain in place and cause further harm. When you take that mindset, you have the most reasonable, forthright, and virtuous position possible.

Learn more about how we can help you keep a good relationship with your neighbors during your environmental cleanup activities.

As seen in Cleaner & Launderer