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.
By Steve Henshaw, P.G., CEO of EnviroForensics, in collaboration with David O’Neill, Director of Investigations, PolicyFind
As seen in Cleaner & Launderer
The dry cleaner had gone to the attic in search of his old business package policies. He explained that he had no idea before visiting an attorney that these old expired insurance policies could be of any use to him. Since they were package policies, they contained more than one line of insurance. Parts of the policy provided coverage against damage to his building, against break-ins, storm damage and even workers compensation coverage. As far as he knew, all of this coverage had long ago expired. Why would he still have copies of these old policies? There was no reason, he thought, that he would have kept them. They would have to be in a box or two that he had neglected to put in the dumpster. He had been told by his attorney to look for that part of the policy that addressed damage to the property of others. Not damage to others he might do in his delivery van. That was covered under the automobile insurance section of the policy. Rather, it was the part of the policy that covered his customers (the slip and fall coverage) that he was looking for. His attorney had told him that that part of the old package policies could provide him the coverage he needed now to address the environmental contamination of his property from perchloroethylene (Perc) spills below ground that had occurred years earlier.
It was these Perc spills that apparently had caused all the trouble. The landlord, a strip mall owner, had been refinancing and the bank required that he conduct a simple environmental audit that had included soil sampling. The samples had shown Perc in the soil at his end of the strip mall. The landlord was going to have to clean this up to get his refinancing. The cleanup would be expensive and the dry cleaner was expected to take care of the bill because he was the one who had inadvertently put the Perc into the soil over the many years of his operation there.
The attorney had assured the dry cleaner that this was indeed legal. The law in his state required that “the polluter” remove the pollution or at least reimburse the landlord if he had to have it done. Up until this time, the dry cleaner had not considered himself a polluter. It was a new role he was going to have to get used to.
His attorney had explained that in his state, as in most states, it took policies issued before 1986 to pay for environmental investigations. This was because the later policies contained pollution exclusions that the courts in his state recognized as barring coverage for Perc spills. Paying the landlord’s environmental experts was likely to be too great for the dry cleaner to handle. After years of operating a successful business, he had significant savings, but these ongoing costs could deplete that savings account in no time. He may even need to consider bankruptcy unless he could find those insurance policies issued before 1986, and successfully file claims that would require his insurers to step in and defend him.
Calling In the Insurance Archeologist
Digging around in the attic, he succeeded in finding one collection of old policies, but these policies dated only to the late 1990s. Telephoning the insurance agent identified on the policies, the dry cleaner found that that insurance agency was no longer in business. Despairing, he reported his lack of success to the attorney, prepared to discuss bankruptcy instead of insurance recovery. However, the attorney suggested another option. He suggested that the dry cleaner hire an insurance archeologist to see what insurance might be located elsewhere.
Working backward from the earliest insurance policy, the insurance archeologist was able to discover that another insurance agency had purchased the defunct agency’s book of business prior to closing. Contacting that insurance agency, the archeologist found that old policy files no longer existed, but that the agent would permit him to review his old accounting files. A review of these files identified some premium notices issued to the dry cleaner in 1985. These notices identified policy numbers, dates and insurance carrier.
The insurance archeologist provided a specimen policy issued by the same insurance carrier to a different dry cleaner in his state from the 1985 policy period. This policy had a pollution exclusion on it but that exclusion, the attorney advised, was not a bar to coverage as long as the Perc releases had not been intentional, and had been “sudden and accidental.”
Using the premium notices and specimen policy together, the dry cleaner’s attorney was able to file a claim with the insurance company. The company stepped in to defend the dry cleaner, paid his attorney fees and paid the landlord’s environmental experts.
The moral of the story? Don’t give up. Get some professional help and look under every rock. Ask your attorney about how insurance archeology can help you locate the records you need to defend against environmental claims.
Steve Henshaw, PG
Entrepreneur and expert on environmental liability, Steve Henshaw has 30 years saving transactions by compelling carriers to cover legal cleanup costs for site owners. Henshaw holds professional geology registrations in numerous states. As CEO, Henshaw has served as a client and technical manager on over 350 projects associated with site characterization, remedial design, remedial implementation and operation, litigation support and insurance coverage matters. These projects include landfills, solvent and petroleum refineries, foundries, metal plating shops, food processors, wood treating facilities, chemical manufacturers and distributors, mines and quarries, heavy equipment manufacturers, computer manufacturers, and transporters. He has experience in a variety of geological settings including soft sediments, fractured bedrock, glacial outwash, wetlands, and landslides. Henshaw’s expertise includes a strong knowledge of past and current industry practices and procedures, and a hands-on, practical understanding of the fate and transport of contaminants in soil and groundwater. He has also served as a testifying expert on liability issues on behalf of individual landowners and facility operators at several sites impacted by industrial activities and continues to provide technical and litigation support services.
David O’Neill, JD
Director of Investigations, PolicyFind
David O’Neill has 30+ years of experience in claims recovery on behalf of corporate policyholders involving environmental property damage and toxic tort and asbestos exposure claims. O’Neill has extensive experience in locating and retrieving insurance coverage evidence on behalf of potentially responsible parties responding to environmental investigation and remediation demands. His former investigative work includes unique matters involving Holocaust victims rights, mergers & acquisitions of a national landfill operator, and on matters involving national archives.
An increasing number of laundries are striving to heighten their ‘green consciousness.’ Many go above and beyond what is necessary for them to maintain environmentally correct facilities. But sometimes, even with the best intentions, a facility can find itself on the wrong side of compliance based upon the actions of companies who previously operated on the land where they are currently located. Continue reading “Reaching Into The Past to Pay”