Properties Magazine February 2017 : Page 68

New Tools & Potential Risks in Environmental Due Diligence An examination of environmental insurance and vapor intrusion By Leslie G. Wolfe and David Ricco Walter | Haverfield ost commercial real estate transactions involve some degree of environmental due diligence. Hiring a qualified environmental consultant to conduct a Phase I environmental site assessment (ESA) is a basic but critical step in any property transaction. An ESA can provide vital information as to the nature and extent of existing contamination, the risk of future releases of hazardous sub-stances, the owner or purchaser’s legal exposure, and possible remediation costs. M Beyond the Phase I ESA, how-ever, developers should be aware of new tools for managing and evaluating environmental risks, such as environmental insurance. Additionally, parties to real estate transactions should understand the health and environmental risks of vapor intrusion, which has become a significant concern in Ohio and across the country. Keeping up-to-date on emerg-ing issues in environmental due diligence can increase the likely success of any project. David Ricco Leslie G. Wolfe Environmental insurance An effective way to manage envi-ronmental risks and unknowns at acquisition is acquiring an environ-mental insurance policy applicable to the property to be effective upon clos-ing. Premises Pollution Liability (PPL) policies are available from numerous insurers; policy terms, conditions, exclu-sions and premiums vary widely, so be sure to work with a well-informed broker and with experienced legal counsel. The basic purpose of this type of insurance is to address the property and liability insurance coverage exclusions for pollution releases and/or exposures emanating from or occurring within the property. A properly placed PPL policy can provide money for bodily injury, cleanup costs, property damage, business interruption losses and for legal defense costs. PPL policies are typically single-premium, with a term of five to 10 years; premiums, deductibles and available liability limits vary greatly by insurer. A policy can be acquired for a single site, and portfolio poli-cies are available. Industry-specific and other special endorsements are offered by many insurers, and cov-erage is often available for known conditions in addition to unknown conditions. Also, many policies now include coverage for indoor environ-mental exposure. A PPL policy is often an excellent way to address information gaps in due diligence and to enable financing and other investment when environmen-tal conditions within a property may be unknown and even in certain circum-stances where recognized environmental conditions (RECs) are known to exist. PPL policies are written in a fairly unregu-lated insurance environment, so policy language and terms vary significantly and must be carefully reviewed, and perhaps negotiated, to be sure that the intended coverages are secured. When shopping for a policy, it is important to be repre-sented by legal counsel experienced in environmental matters that is also famil-iar with the property to be insured and experienced with placing environmental insurance policies. Vapor intrusion Vapor intrusion – the contamination of indoor air by volatile chemicals in soil and ground water – is a hot issue in Ohio. It occurs when vapor-forming chemicals migrate from any subsur-face source into an overlying building, 68 Properties | February 2017

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