As defined by the 2002 “Small Business Liability Relief and Brownfields Revitalization Act,” a brownfield is: real property, the expansion, redevelopment or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.
EPA's Brownfields Program
The EPA developed the Brownfields Program to empower states, communities and stakeholders to work together to prevent, assess, safely clean up and sustainably reuse brownfields. Since its inception in 1995, this program has provided both financial and technical assistance for brownfield activities with four main goals in mind:
• Protecting the health and well-being of both people and the environment
• Promoting partnerships essential in the facilitation of brownfield cleanup and reuse
• Strengthening the marketplace by providing financial and technical assistance to bolster the private market
• Sustaining reuse to promote the long-term quality of life in a community
Environmental Liability Insurance
Developed and implemented to quantify and transfer risks related to brownfield cleanup costs and liability, Brownfield insurance has opened the door to a portfolio of insurance products. These products are available to virtually all parties involved in the development of a brownfield site, including:
• Environmental Engineers
• Remediation Contractors
Most Common Types of Environmental Liability Insurance Policies
• Pollution Liability—protects the insured against on-site cleanup costs of unknown, pre-existing and current pollution from ongoing operations. This policy also protects third-party claims arising from pollution conditions (e.g., bodily injury, property damage).
• Cost Cap—protects against cleanup costs that exceed the anticipated cost.
• Secured Lender—protects a lender in the event that a borrower defaults on a loan, which is associated with a pollution condition.
Major Concerns Associated with Brownfield Properties
• The Extent and Cost of Remediation—must be addressed in the context of the proposed site reuse. The extent and cost of remediation is mainly a concern for the potential buyer due to its effect on their purchase/cleanup/redevelop/sell for a profit strategy.
• Third Party Environmental Liability—can result from the ownership of a property where contamination is being or has been remediated.
Common Environmental Solutions
The combination of the following two environmental policies can effectively protect the parties involved in a brownfield transaction:
• Cleanup/Remediation Cost Cap (CCC)—provides certainty to the first party in the ultimate cleanup costs for known conditions.
• Pollution Legal Liability (PLL)—provides for the cleanup of unknown pre-existing conditions as well as third party liability coverage. This can also provide coverage for the continuing expenses or loss of income caused by discovery of unknown conditions during development.