Brownfields Law and Practice: The Cleanup and Redevelopment of Contaminated Land

Older (generally, pre-1985) liability insurance policies can be used to finance brownfields projects. New “environmental” insurance products can facilitate property cleanup and redevelopment. Any real estate today – unless it has always been protected wilderness – may have environmental issues. Even “virgin” agricultural land may be contaminated with pesticides, weed-killing herbicides, concentrated animal waste or petroleum products (See Ch. 32) Much of this real estate, however, can qualify for redevelopment and special treatment under state and federal “Brownfield” initiatives.

Owners, sellers, buyers and developers of actually or potentially contaminated property can tap recent and historic insurance policies – of all kinds – to finance brownfield redevelopment or simply manage cleanup costs. When contemplating property transactions always:

• Research the existence and terms of any insurance policies which could cover property damage, including those of predecessors in interest;
• Consider rights to historic insurance assets, their value and how to structure property and corporate transfer transactions accordingly; and
• Do not overlook brownfield incentives (see Ch. 27) and the utility of the latest environmental insurance products to solve potential problems by effectively managing risk.

This chapter deals with the significance to brownfields transactions of existing insurance policies that can provide coverage for environmental liabilities. There are two types of such policies. First, there are “older” policies (pre-1985 Comprehensive General Liability or Property insurance policies, etc.) which implicitly cover damage to property; these are addressed in Section 28.01. Second, there are “newer” insurance policies, such as pollution legal liability, finite risk policies and other specialty insurance products, that explicitly provide “environmental” coverage for known or unknown conditions or financial assurance obligations, etc.; these are discussed in Section 28.02, Section 28.01, titled “Insurance Policies Sold in the Past Can Finance Brownfield Cleanups,” explains that historic insurance policies are an important source of potential remediation financing. The problem for the brownfield redeveloper seeking financing is how to recover historic insurance assets. This may require overcoming, and even litigating, corporate assignment, missing or incomplete policy documentation, notice and other potential coverage hurdles. Environmental coverage claims, however, do not necessarily involve litigation and may be settled separately or in conjunction with the acquisition of newer environmental insurance products.

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