Category: Insurance Archeology

How Do Changing Laws Affect Dry Cleaners?

Posted on by Jeff Carnahan

Written by Stephen Henshaw, P.G., CEO of EnviroForensics
As seen in Cleaner & Launderer

Over the years, I’ve written about the opportunity to utilize historical Comprehensive General Liability (CGL) insurance policies to assist in funding legal work, site investigation activities and remediation in response to claims made by environmental agencies and landlords. When I first started meeting with dry cleaners to discuss the notion that historical insurance policies were valuable assets, most business owners wouldn’t acknowledge that they had accidental spills of cleaning solvents which contaminated or may have contaminated their site. Early on, the regulatory agencies were not aggressively focusing on the dry cleaning industry as a central theme in regional and local groundwater pollution problems. The agencies were not trying to phase out PERC, and indoor vapor intrusion from dry cleaning solvents was more of a hypothetical discussion than a regulated action.

Today, the wheels continue to turn as agencies have tightened their grip on phasing out PERC and are evaluating potential risks to residences and workers where solvents have been detected in soil gas and indoor air. Court decisions involving complex environmental liability matters continue to change. Where certain state and federal courts once construed the law to allow dry cleaners to use general liability insurance policies to defend against environmental liability claims, those rulings are today being distinguished so as to reduce their precedential authority. While the occasional state court decision favors the policyholder, the rulings now usually favor the insurer’s argument that it has no duty to defend, or if they do, they are limited as to the time period in which they insured the business.

Also, when you consider the current state of the insurance industry, which is constricting by merger and acquisition, plus some disturbing findings regarding the solvency of some of the carriers, it becomes apparent that dry cleaners need to think proactively about how to address the problem of long-tail environmental liability.

In March 2010, an article in Business Insurance forecast the liquidation of Kemper Insurance Company within the next few months. When Kemper officially goes into a state-managed run-off, there will be a small window of time in which policyholders will be allowed to file claims to qualify for cents on the dollar in coverage. Following the end of this run-off period, there will be no coverage under these policies. They will effectively have gone from valuable to valueless in a matter of months.

What will this mean for dry cleaners? Kemper Insurance Company’s lead insurance unit, Lumbermen’s Mutual Casualty Company, marketed its special multi-peril and general liability insurance policies to the dry cleaning industry quite successfully in the 1970s and 1980s. Lumbermen’s Mutual policies were sponsored by dry cleaning associations in various states. Some state dry cleaners associations like the former California Fabricare Institute even purchased a master policy from Lumbermens Mutual for its members and then issued subscriptions to individual dry cleaners. If those dry cleaners covered under these policies wait until their landlords or neighboring landowners discover groundwater contamination traceable to their former operations, it will likely be too late for them to use these historical insurance policies to obtain defense against these claims. They will be required to pay legal fees, and environmental engineering costs out of their own pockets.

Self-preservation requires that dry cleaners act now to pull together their historical insurance policies; that they act now to determine whether contamination in soil or groundwater exists on their business properties. This dangerous environment also demands that they associate themselves with environmental consultants with knowledge of these matters, professionals who know how to guide and assist them in using all the resources at their disposal now to prevent catastrophes from overwhelming, even bankrupting their businesses.

It’s a Good Idea to be Proactive!

Posted on by shenshaw

Written by Steve Henshaw, President & CEO, EnviroForensics in collaboration with Justin Gifford, General Counsel, EnviroForensics
As seen in the January 2010 issue of Western Cleaner & Launderer

PDF Version

Opening up Google, a newspaper, turning on the radio or catching the evening news is sure to expose you to the national debate over health care and insurance. Through that exposure, most of us have gained at least a passing familiarity with the issue of “pre-existing conditions.” Insurers either refuse outright to cover a person with a pre-existing condition or exclude that condition from the coverage, leaving the insured to pay for it out of his pocket. Environmental liabilities and using historical insurance to offset those liabilities are not the focus of a lively national  debate, yet the costs incurred by drycleaners each year due to a similar problem are staggering.

We receive calls on a regular basis from drycleaners or property owners already engaged in defining the size of a spill or actively remediating it at the “request” of regulatory agencies asking for our help locating historical insurance to pay for the investigation and cleanup. Often times, we are able to locate that insurance to fund the clean up…but just as often, the twenty, thirty or   hundred and fifty thousand dollars already spent by our client cannot be recovered from the insurer even though the spending was necessary to comply with the regulator’s orders.

Continue reading “It’s a Good Idea to be Proactive!”

Good Housekeeping Includes Good Record Keeping

Posted on by shenshaw

Written by Steve Henshaw, President and CEO of EnviroForensics and PolicyFind
As seen in the December 2009 issue of Western Cleaner & Launderer

PDF Version

You can tell a lot about a drycleaner’s operation by the way that he conducts housekeeping. That is to say that if a drycleaner keeps a clean store, he probably handles chemicals in a manner that minimizes environmental releases. However, good housekeeping alone may not keep you out of hot water with the regulatory agencies.

There are some simple, effective and inexpensive ways to protect your business and your assets from liability by keeping good records. If you’ve ever watched one of the procedural crime dramas, the plot usually turns around “the evidence.” Creating, organizing and maintaining records can be the evidence that keeps you out of trouble. Hazardous waste manifests, perc purchase/disposal records, transporter license numbers and treatment facility identification numbers are all examples of things you should (or, in some cases, must) keep records of. However, those records aren’t just in case of a major problem. They can help you identify a minor problem before it gets serious. Continue reading “Good Housekeeping Includes Good Record Keeping”

Using Old Insurance to Cover Investigation and Clean-Up Costs

Posted on by shenshaw

Written by Steve Henshaw, P.G., President & CEO, EnviroForensics
As seen in the September 2009 issue of Cleaner & Launderer

PDF Version

I heard from some readers that my last few articles were a little too technical and in addressing those comments, I’ve decided to go back to basics. That is to say, what are basic concerns that dry cleaners have? Since this is the Environmental Corner and staying with that topic, it is my experience that one of those basic concerns that dry cleaners might have deals with the questions,“How am I going to pay for an environmental investigation and clean-up?” Old insurance policies may be an answer.

For years I’ve espoused that business owners need to find their old comprehensive general liability (CGL) policies and store them in a safe, dry and fireproof place. CGL policies were purchased by business owners to cover them against all liability exposures of a business unless specifically excluded. Coverage includes products, completed operations, premises and operations, elevators, independent contractors, to name a few. Note the key words, “unless specifically excluded.” These words are very important in determining whether an individual or businesses old insurance policies can be used to pay for environmental investigations and clean-ups.

Continue reading “Using Old Insurance to Cover Investigation and Clean-Up Costs”

Locate And Keep Old Insurance Policies Safe to Protect Assets

Posted on by shenshaw

Written By Steve Henshaw, P.G., President and CEO of EnviroForensics and PolicyFind
Drycleaners News June 2009 Issue

PDF Version

How many drycleaners do you know who own their business and building? Some drycleaners may have thought they had an asset, only to find out that the building is contaminated and cleaning it up will cost a lot of money.

Many drycleaners have always followed the law and managed a clean and respectable business, but they later find out that the rules they had followed for years have become more stringent. Other drycleaners would like to eventually pass the business on to their children but are afraid of handing them an environmental liability. Continue reading “Locate And Keep Old Insurance Policies Safe to Protect Assets”