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Insuring Success

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Knowing the land's

history is the key

to the property's

environmental success

by Jan K. Allen

SBJ Contributing Writer

Risks from environmental hazards

have never been greater, but state and

federal governments have met the issue with tougher rules and regulations, and in certain instances, with clean-up assistance.

Hazards are numerous and diverse and can affect soil, water and air quality, with far-reaching ramifications.

Property owners are ultimately responsible for hazardous waste on their land whether they have generated the waste or not, according to Leroy Schaefer, president and co-owner of Sunbelt Environmental Services Inc.

When a person or a business buys a piece of property that has not been previously subdivided into residential lots and developed for housing, the lender usually requires at least a phase I environmental inspection of the property, Schaefer stated.

Phase I entails visual inspection of the property and research into the background to determine any usage that might have produced hazardous waste or left hidden underground storage tanks.

If something in the history of the property raises suspicion, then possibly a phase II inspection will be ordered to determine if a problem exists. This includes water and soil testing, Schaefer said.

Schaefer noted the list of harmful substances is long. There are flammables, toxics, corrosives and reactives. Older residential areas may have lead-based paint or asbestos present.

Abandoned wells or underground storage tanks can cause problems that only become evident after water quality has already been affected.

The federal government maintains a Superfund to aid in clean-up operations, but this does not eliminate expenses to the property owner.

"It's pretty expensive to clean up when leaks occur," said Kristine Ricketts, chief of the tanks section for the state of Missouri.

Ricketts said that the state has a petroleum-tank insurance fund, but the responsibility usually falls on the land owner, or former owner, if he or she can be found. The fund's purpose is narrow in scope. It is limited only to petroleum products, excludes fuel oil and has a $10,000 deductible.

The primary purpose, according to Ricketts, is to cover instances where old storage tanks are found, previously unbeknownst to the current property owner, and the original source of the problem is lost in history.

As with the federal Superfund, the state will pick up part of the tab, up to $1 million, then seek the party responsible for reimbursement.

Susan Gonder, geologist with Environmental Works Inc., said facilities that generate or store certain chemicals or hazardous waste have to file with government agencies.

This is part of the paper trail used by environmental consultants to determine if a property may have hazardous waste hidden underground.

Companies at risk, including the environmental inspection and testing firms themselves, can have hazardous waste coverage in policies specially designed for the type of risks peculiar to their industries.

Standard liability and property damage insurance excludes environmental risks, said Charles Thomison, president of Thomison Insurers.

Coverage is available through companies that specialize in environmental hazard insurance, but it is expensive, and not all businesses need it, Thomison said.

People buying property, particularly property that has been used for commercial or industrial purposes, should beware, Schaefer said.

A buyer's incentive to find things out about a property is pretty obvious, since they've bought the liability, according to David Vaughan, geologist with Environmental Works Inc.

This does not relieve the seller of responsibility, however.

"It is never a cost savings to be in noncompliance," Vaughan said.

The American International Group

Inc., AIG, is one insurer that specializes in coverage for environmental firms and companies at risk for environmental hazards.

Coverage can be purchased for pollution liability, and errors and omissions insurance can be obtained for professionals in the field and in laboratories.

Liability insurance can offer site-specific coverage and transportation of hazardous waste. The policy can be utilized to meet state and federal standards and cover contingencies not available in the government clean-up funds.

Specialty policies are also available through AIG to cover lead abatement contractors and asbestos risks in older structures.

Policies may include third-party bodily injury and property damage, specifically covering areas of risk excluded in most general liability policies, according to Joe Norton, director of public relations for AIG.

PHOTO CAPTION:

David Vaughn, geologist with Environmental Works Inc., said property buyers should find out about the history of the property, since they will be buying into the liability. Jan K. Allen's story on insurance for both land owners and clean-up technicians appears on page 19.[[In-content Ad]]

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