Easing risks of developing old industrial sites.

While the challenges of re-using old industrial sites are many, the prospects of turning these locations into revenue-producing "green" properties offers tremendous incentives to real estate developers, according to Mark Vuono, executive vice president of ECS Underwriting, Inc, the Exton, PA-based worldwide provider of environmental insurance.

Vuono addressed a gathering of Pennsylvania real estate developers attending an industrial site re-use seminar held recently at Penn State's Great Valley Campus in Malvern, PA.

"Viable properties often lie dormant or underutilized because developers are reluctant to take on the high cleanup costs to comply with strict environmental laws or to take on the environmental liability associated with the property," said Vuono.

According to Vuono, today's sophisticated environmental insurance marketplace is helping perspective buyers, developers, and lending institutions meet the environmental liability challenges in industrial site re-use.

"In re-developing contaminated industrial sites, developers are exposed to a variety of environmental risks during the assessment, evaluation and remediation of the property," Vuono explained. "Developers also could be held responsible for future environmental claims."

"At present, there are several policies available in today's market to address existing contamination. The most common insurance product is the Pollution and Remediation Legal Liability (PARLL) policy, which provides a stop-loss provision to limit on-site cleanup costs and also protects the insured from third-party bodily injury and property damage coverage," Vuono noted.

According to Vuono, another benefit of the PARLL program is the ability it provides to site owners for utilizing traditional risk management mechanisms to handle the retention or cleanup amount, while rolling it into a seamless insurance product.

"This approach is an alternative to true risk transfer and is referred to as a finite risk program," Vuono explained. "These programs combine a fund, paid into by the client, with a layer of true insurance - the PARLL policy. The fund addresses known cleanup expenses and the insurance component is structured to address catastrophic losses and cost over-runs."

Vuono noted that after the remediation is completed, the PARLL policy can also be transferred to the new site owner to ensure that future claims arising from an incomplete cleanup or other unknown conditions are covered.

According to Vuono, other policies available to assist in industrial site reuse activities include Contractor's Pollution Legal Liability, Consultant's Environmental Liability, Professional Liability and a variety of fixed site pollution coverages that protect owners, tenants, and lenders from ongoing pollution exposures. A combined professional/pollution "wrap up" policy is available to cover pollution conditions arising from remediation activities and the liability of all contractors, consultants or individuals with financial interest in the property.