Environmental Insurance: Insurance as a Means of Transferring Risks in Environmental Liability Transfers

This article is the third in a trilogy of articles on Environmental Liability Transfers in this publication. Each of the previous articles identified insurance as a key consideration in the effective transfer of environmental liability from Seller to Buyer in these transactions. The Seller’s key consideration is to ensure that the transferred liabilities do not revert to Seller if the Buyer cannot fulfill its ongoing and future environmental obligations. Similarly, the Buyer must ensure that it complies with any obligations imposed by the policy as Buyer remediates and then sells or develops the property. As a result, parties wishing to utilize insurance as a tool regarding their deal must carefully negotiate an acceptable policy with the insurers. Environmental Liability Transfers (particularly those that are “upside down” as described in the previous articles) present some unique challenges for insurance coverage. However, because each deal is unique, the parties must understand the basic applicability and availability of insurance products in order to determine their applicability to their particular transaction.

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