Abstract
The last two chapters detailed the determination of a risk, namely asbestos in existingfacilities, as insurable and marketable. The discussion described the performance of the resulting new insurance coverages. In this chapter, we examine insurability issues related to three other types of environmental risk, also tested in the market: (1) Property owner liability for environmentally contaminated property, (2) underground storage tanks, and (3) lead-based paint abatement. Only coverage for property owner liability is being successfully marketed. The other two risks encountered significant insurability and marketability issues during product development efforts.
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Notes
Freeman, Paul K., “The Risk Manager and Property Transfer Environmental Ghosts,” Risk Management, Risk and Insurance Management Society, February 1992.
Zolkos, Rodd, “Lending Banks a Hand on Superfund,” Business Insurance, Crain Communications, Chicago, October 2, 1995, pp. 17–20; and Hector, Gary, “A New Reason You Can’t Get A Loan,” Fortune, September 21, 1992.
Sibley, Glen E., “Environmental Insurance,” Urban Land, ULI-The Urban Land Institute, Washington, D.C., July 1992.
American Society for Testing and Measurement, “E 1527-94,” Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process, ASTM, Philadelphia, PA, 1994.
See an article regarding the study in: “Site Assessment: Insurance Sets Standards,” Engineering News Record, Mc-Graw Hill, June 17, 1991; and Feder, Barnaby J., “Making a Difference: New Policy on Pollution,” The New York Times, June 9, 1991.
“Site Assessment: Insurance sets standards,” Engineering News Record, Mc-Graw Hill, June 17, 1991; and Freeman, Paul K., “The Risk Manager and Property Transfer Environmental Ghosts,” Risk Management, Risk and Insurance Management Society, February 1992.
University of Tennessee Hazardous Waste Remediation Project. Waste Management Research and Education Institute, Stale and Private Sector Cleanups, University of Tennessee, Knoxville, TN, December 1991. p. 19.
See Gallagher, Mary Ellen, “Insuring Success: Focus Groups Guide Creation of Environmental Insurance Product,” Quirk’s Marketing Research Review, December 1991.
Subsequent general survey results have confirmed the trends identified in the market research work. See Bennett, Mark J., “Survey Shows Lenders’ Widespread Adoption of Environmental Risk Management Policies,” Real Estate/Environmental Liability News, May 10, 1993, (Part 2).
“Credit Review,” Commercial Mortgage Securities, Standard & Poor’s, March 8, 1993, p. 9.
Based on sales reports.
Note that correlative risk does not become a problem in portfolio coverage, insofar as properties within the portfolio are diversely located. Environmental insurance underwriters will use location diversity as a criteria of insurability when assessing a portfolio risk. The correlative risk for a portfolio exists when, for example, several independently insured properties (with independent limits of liability) are located above the same aquifer. In this example, a single contamination discovery may trigger several policies at once.
See Standard & Poor’s Real Estate Finance, Insurance Requirements, Property Insurance, Environmental Insurance. See also Standard & Poor’s, Credit Review, Standard & Poor’s Corp. Executive and Editorial Offices, New York, March 8, 1993, p. 9.
“USTs: A Busy Decade Ahead,” Environmental Times, Nov. 1992, p. 31.
Bodgett and Copeland, 1985.
Shalowitz, Deborah, “EPA Cuts Coverage Rules for Underground Tanks,” Business Insurance, October 31, 1988.
General Accounting Office, Hazardous Waste: An Update on the Cost and Availability of Pollution Insurance, GAO, Washington, D.C., 1994, p. 13.
Cowans, Deborah Shalowitz, “State Assurance Funds Faltering: Recent Developments Cast Doubt on Reliability of Funds,” Business Insurance, October 2, 1995, pp. 1–21.
University of Tennessee, Hazardous Waste Remediation Project. Waste Management Research and Education Institute, Underground Storage Tanks: Resource Requirements for Corrective Action, University of Tennessee, Knoxville, TN, December 1991. p. 88.
Ibid. p. 57 (d).
Villani, John, Daniel E. Ingberman and Howard Kunreuther, “The Development of Underground Storage Tank Regulations,” Wharton Risk and Decision Processes Center, University of Pennsylvania, Philadelphia, July 31, 1991.
Cowans, Deborah Shalowitz, “State Assurance Funds Faltering: Recent Developments Cast Doubt on Reliability of Funds,” Business Insurance, October 2, 1995, pp. 1–21.
Ibid. MUSTFA approved $67 million in payments by August 31, 1995, but is only able to pay approximately $1.5 million per month.
Ibid.
Ibid.
Boyd, James and Howard Kunreuther, “Retroactive Liability and Future Risk: The Optimal Regulation of Underground Storage Tanks,” Wharion Risk Management and Decision Processes Center Working Paper, Wharton School, University of Pennsylvania, Philadelphia, PA, September 1995.
In numerous states, SGFs are financed through taxes on gasoline. In this case, the cost of coverage to UST owners is effectively zero.
See “UST Funds,” Environmental Alert Bulletin, June 1995, p. 2.
United States Environmental Protection Agency, Office of Prevention, Pesticides and Toxic Substances, “EPA Proposes National Training, Certification, Accreditation and Standards Programs for Individuals and Firms Engaged in Lead-Based Paint Activities,” Environmental Fact Sheet, September 1994, p. 1, “Health Effects of Lead.”
United States Department of Housing and Urban Development, Comprehensive and Workable Plan for the Abatement of Lead-Based Paint in Privately Owned Housing: Report to Congress, Office of Policy Development and Research, Washington, DC, December 7, 1990.
United States Department of Housing and Urban Development, Task Force on Lead-Based Paint Hazard Reduction and Financing, Putting the Pieces Together: Controlling Lead Hazards in the Nation’s Housing. Report, (HUD-1547-LBP), July 1995, p. 36.
United States Department of Commerce and Department of Housing and Urban Development, 1991 American Housing Survey, Washington, DC, 1991.
Pirkle, J.L. et al., “The Decline of Blood Lead Levels in the United States,” Journal of the American Medical Association, July 27, 1994, pp. 284–291.
Brody, D.J., et al., “Blood Lead Levels in the U.S. Population,” Journal of the American Medical Association, July 27, 1994, pp. 277–283.
United States Department of Housing and Urban Development, Task Force on Lead-Based Paint Hazard Reduction and Financing, Putting the Pieces Together: Controlling Lead Hazards in the Nation’s Housing, Report, (HUD-1547-LBP), July, 1995.
The regulations HUD issued in response to this Act are in 24 C. F. R. Part 35.
United States Department of Housing and Urban Development, Task Force on Lead-Based Paint Hazard Reduction and Financing, Putting the Pieces Together: Controlling Lead Hazards in the Nation’s Housing, Report, (HUD-1547-LBP), July 1995.
Ibid., p. 3.
Ibid., p. 60.
Ibid., p. 111.
29 C.F.R. Part 1926.55
29 C. F. R. Part 1910.1025
59 Fed. Reg. 170.
The rule involves the addition of section 62 to 29 C. F. R. Part 1926.
58 Fed. Reg. 84.
Final form would be promulgated as 40 C. F. R. Part 745.
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Freeman, P.K., Kunreuther, H. (1997). Insuring Other Types of Environmental Risk. In: Managing Environmental Risk Through Insurance. Studies in Risk and Uncertainty, vol 9. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-5360-7_9
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