Joseph D. Picciotti Presented on “Environmental and Transactional Risk Insurance: Managing Legal Challenges in 2018” at a national webinar hosted by The Knowledge Group. The webinar covered  determining when to purchase environmental insurance for a transaction and the key issues to resolve to determine the nature of the coverage to purchase. Key elements in his presentation included:

• Identify early in the transaction process (at the formal offer stage where basic terms are discussed and offer sheets are being exchanged) the nature of potential environmental issues (i.e. will these issues have a material impact on the value or use of the property or assets subject to the transaction), and what level of due diligence will be required to ascertain the nature of the risk (will sampling likely be required, what type of information may be available including previous sample results etc.).
• Identify tools available to address the risks identified; will there be adequate time to not only complete due diligence, but to have the seller address any issues (clean up) before closing; will an adjustment to the purchase price address concerns, and/or is indemnification available and if so, how will the indemnity be secured so as to it is available when and if needed with a letter of credit, or a hold back pending clean up.
• If it appears that any remedial work to address concerns cannot be completed prior to closing, and price adjustment and other tools, like indemnity or hold backs  will  not be sufficient to manage the risk associated with the transaction, the purchase of environmental  impairment liability (“EIL Coverage”)  may be an option to close the gap and provide the parties the assurance against potential environmental liability they need to move forward with the transaction,  but the right coverage with the appropriate terms must be secured.  As important, if EIL Coverage is an option, it is important to obtain quotes covering pricing and terms before extensive phase 2 or sampling etc. activities are undertaken—as if such work is completed while coverage is being priced and quoted, it may affect the ability to secure coverage
• What EIL Coverage is available how to purchase it?  Not all EIL coverage is created equal—in fact almost none is, as generally speaking, EIL insurance is written on a manuscript type form, meaning terms and conditions are somewhat unique and negotiable. Further, EIL Coverage is written on a claims made and reported basis; usually 7 to 10 year limit and a paid up (front) premium, and has significant deductibles. Tailoring the type of EIL Coverage to future use of the property is essential.