Case Studies

Case Study No. 6 – The Dump Becomes a Landfill

A plastic product manufacturer owned and operated an offsite landfill for disposal of waste materials generated at a nearby manufacturing facility.  The manufacturing plant was sold to a third party, but the landfill was retained.  The site must be closed under state landfill laws and estimates of the cost for closure and post-closure care are in excess of $3 million.  With this liability, the site has a negative market value.

In exploring possible creative solutions for future uses of this site, the idea of using it for a licensed solid waste landfill was suggested.  Risk issues related to the existing deposits of materials and future use of the site for domestic refuse disposal were standing in the way of an attractive transaction to sell the property to a third party.

Insurance Solution for Case Study No. 6

Insurance was written to cover the liability of the owner of the site for releases related to historic deposits of waste with a limit of $10 million and a ten-year term.  Coverage was also provided under this program for prospective releases related to landfill operations that will be conducted by a third party for a period of ten years.  The policy will also pay for losses due to slope failure of the landfill and/or for liner failure, and for removal of waste to reach the area of an occurrence.  Premature closure and post-closure costs will also be paid for in the event that the site is ordered to shut down earlier than the date specified in the operating plan.  The insurance meets the requirements for state financial responsibility and the policy can be transferred to subsequent purchasers of the site.

With this insurance program in place, the site was sold to a third party for $12 million.  The premium for this policy was $185,000 for the ten-year term.