Case Studies

Case Study No. 5 – Insurance Replaces 397 PRPs at Superfund Site

A former waste disposal facility is being cleaned up and closed under a state superfund program.  Of the 2000 PRPs that contributed materials to the site, 397 are responsible for costs of more than $16 million for cleanup, closure and post-closure monitoring.  These PRPs have been involved in nearly fourteen years of litigation at this site and they are now looking at being involved in another thirty years of writing checks for costs as they are incurred for cleanup and closure.  There is also a possibility that third party claims will be filed against the PRP group for bodily injury, property damage and cleanup of contamination that migrates from the superfund site. 

One of the cleanup contractors that was asked to provide a proposal for site remediation and closure of the landfill has offered to take over the liability of the PRPs and to be responsible for all activities at the site through the closure and post-closure care periods.  While the PRP group is prepared to accept this offer, the state is reluctant to release the parties responsible for the original contamination from liability for known and unknown future costs.

Insurance Solution for Case Study No. 5

With a very comprehensive site characterization and approved closure and remediation plans, application is made for an environmental insurance program to support the promise of the contractor to take over the responsibility of the PRP group for site closure and post-closure monitoring.  A policy is written for a thirty-year term to pay all closure and post-closure care monitoring costs ($16 million).  The policy also covers cost overruns for these activities with a limit of $30 million.  Liability coverage is provided for bodily injury, property damage, cleanup and defense costs, also with limits of $30 million per occurrence and $30 million aggregate.  The policy also will pay for Natural Resource Damage claims and for diminution of property values (for third party properties).

The PRPs paid their allocated portions of the cleanup and closure costs (not discounted for the present value of money).  With the excess funds, the contractor purchased the environmental insurance that provided an additional promise that the site would be managed in accordance with the approved closure plan.  The state has approved the transfer of liability for this site to the contractor (and the insurance company).