Infrastructure projects and the need for environmental insurance

The infrastructure improvement plan backed by President Joe Biden and approved by the US Senate calls for $1.2 trillion to be spent over eight years on roads, bridges, railroads, waterways and other major public infrastructure projects. (Photo: ALM Archive)

The good news is that the infrastructure in the United States has improved over the past few years. The bad news is that it’s still not very good.

The 2021 America’s Infrastructure Report recently released by the American Society of Civil Engineers (ASCE) found that the nation’s infrastructure averaged a “C-,” which was the nation’s highest grade over the past few years. last 20 years. This is an upgrade from the “D+” reported by the ASCE in 2017, according to the Council on Foreign Relations.

Historical spending deficit

The problems lie not only in the country’s aging infrastructure system, but also in the decades-old lack of spending, which in many cases lags far behind investments in other industrialized countries. According to the World Economic Forum’s 2019 Global Competitiveness Report, which is “a broad measure of the quality of infrastructure,” the United States now ranks 13th in the world, a significant drop from 5th place. held in 2002, the Council on Foreign Relations reports.

Subsequently, President Joe Biden’s $1.2 trillion infrastructure plan took a step in the right direction by planning “to spend hundreds of billions of dollars on infrastructure projects, building roads , bridges and highways and (to help) stimulate the economy” over the next eight years. years, reports Reuters.

The road ahead

Developers, municipalities and project owners should begin to prepare for this influx of federal funds and the anticipated insurance requirements that will come with it.

Many will seek to bolster their interests with the most advanced and sophisticated risk management strategies available in the market today. This includes the use of comprehensive solutions designed specifically to protect stakeholders from catastrophic environmental risks associated with the design, construction and repair of hard infrastructure projects such as roads, bridges, airports, railways and the ports.

Hedging solutions

A specific example is the Infrastructure Pollution Policy (IPP) written by an environmental insurance company experienced with this type of coverage and offered exclusively by RT’s Environmental and Construction Professional Practice (RT ECP) Specialties. This one-of-a-kind policy form has been developed to cover cleanup costs, damages and claims from developers, owners, general contractors/main contractors and additional insureds like sub-contractors and government entities. .

In the past, the traditional approach to insuring these types of projects typically involved writing two or more pollution liability policies or balancing the limits between separate policies, and possibly with different carriers, creating a very cumbersome approach to risk management. IPP eliminates these complexities by combining insurance agreements into a single policy form designed to seamlessly cover all stakeholders involved. In addition, IPP complements environmental due diligence by engaging a third-party environmental consulting firm that will highlight the many exposures that typically challenge infrastructure projects.

With respect to the policy itself, the main areas of IPP coverage include four insurance agreements:

Cover A: Coverage of civil liability pollution of contractual services. This part of event-based coverage covers clean-up costs, damages, claims and emergency response in excess of the deductible, in addition to the amount policyholders are legally liable to pay due to pollution-related conditions. . The performance or non-performance of the agreed contractual services provided by or on behalf of the named insured as well as the transport of site materials are insured. Of course, this is only if the pollution condition began on or after the effective date of the policy, occurred during the policy period and was reported to the appropriate entities within seven days following his discovery. Other conditions state that the condition must occur on, on, under or originate from the covered site.

Coverage B: Pollution civil liability insurance for the premises covered. This part of the claims guarantee covers cleaning costs, damage and claims costs above the deductible. This includes the amount the insured is legally required to pay to cover pollution conditions claimed or discovered by the insured and reported in writing to the carrier during the policy period or extended reporting period, if any. It also provides comprehensive coverage for sudden/accidental and gradual pollution for third party bodily injury, property damage (including damage to natural resources), emergency response costs and defence.

Cover C: Pollution civil liability insurance for non-owned premises. Covered are clean-up costs, damage and claim costs in excess of the deductible, which the insured is legally liable to pay due to a pollution claim first filed against the insured and reported in writing to the insurers. during the period of insurance or in the extended period. reporting period. The caveat is that the condition must have occurred on, at, under, or migrated from a non-owned location and on or after the retroactive date and before the end of the policy period.

Cover D: coverage of crisis and reputation management expenses. This portion of coverage is designed to pay for the Named Insured’s crisis management and/or reputation management expenses beyond the deductible when a pollution condition occurs on, in, under or migrates from a covered place or construction site. Covered are unfavorable regional or national news media that reflect negatively on the named insured and crisis management and/or reputational expenses that are reported to the insurer during the period of insurance.

Additional benefits of the IPP Policy include a desktop environmental summary of existing due diligence as well as additional information available in the Environmental Database, which is prepared by a third-party environmental consultant.

Standard PIP information requirements include:

  • Name/address of the first named insured (entity signing the contract);
  • Scope of project works, including construction values ​​and conditions;
  • Project/site location;
  • Environmental due diligence available (i.e. Phase I Environmental Site Assessments (ESAs)/Phase II ESAs; Remedial Action Plan, if applicable);
  • Geotechnical, soil and wetland management reports; and
  • List of key project stakeholders.

The right insurance and risk management solution for the upcoming nationwide influx of infrastructure products will solve construction-related professional liability and environmental liability issues by providing policyholders with a customized solution.

John J. Heft ([email protected]) is Senior Vice President of Environmental and Construction Professional Practice (RT ECP) ​​at RT Specialty. This article is published with permission from RT Specialty and may not be reproduced.

RT ECP is part of the RT Specialty division of RSG Specialty, LLC, a Delaware limited liability company based in Illinois. RSG Specialty, LLC, is a subsidiary of Ryan Specialty Group, LLC (RSG). RT ECP provides wholesale insurance brokerage and other services to agents and brokers. RT ECP does not solicit insurance from the public. Some products may only be available in certain states, and some products may only be available from excess line insurers. In California: RSG Specialty Insurance Services, LLC (License #0G97516). © 2021 Ryan Specialty Group, LLC

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