Magazine article Risk Management

Insurance Market Conditions Improving: Promoting Environmental Awareness

Magazine article Risk Management

Insurance Market Conditions Improving: Promoting Environmental Awareness

Article excerpt

Discussions of environmental issues often evoke images of manufacturing facilities with large smokestacks or hazardous chemicals, but the exposure can hit close to home for many companies with apparently benign operations. According to Michael Lezynski, vice president of Acordia Northeast in New Jersey, almost any company can face unanticipated costs. Because of the severity of the potential exposure and competitive market conditions, many mid-size employers are re-evaluating their environmental insurance needs.

"A lot of business owners are not as aware of this exposure as they should be," says Mr. Lezynski. "Many business owners are understandably focused on their bottom lines and competitive issues. They may not think they need to include environmental coverage in their insurance programs or that the coverage is too expensive, but those perceptions are changing."

Although many companies involved directly in environmental issues-such as remediation consultants and contractorsare likely to be familiar with their exposures, other companies involved in manufacturing or distributing operations that don't appear to entail environmental hazards may be unaware of the potential issues.

"Any company that owns property has a potential environmental exposure that it may not be aware of," Mr. Lezynski says. "A lot of attention is focused on companies with easily identified hazards, but a company that has owned a commercial office building for 15 years can suddenly face an expensive clean-up bill."

Environmental expenses, such as remediation costs or regulatory fines, can result from past contamination committed by a previous owner of a building site. Similarly, a company can be held responsible by regulators for the costs associated with hazardous materials generated from a nearby location. "A company could be next to an old gas station and think nothing of it unless pollution seeps onto their property from an old underground tank that's leaking," Mr. Lezynski says.

In many instances, a company can be made aware of its potential environmental exposure by its insurance carrier or broker during a coverage review or policy negotiation, or by its bankers when it is arranging financing. Once a company acknowledges that it may face a potential environmental problem, the insurance marketplace can provide several risk management solutions.

"There is a perception among many middle market companies that the cost of environmental insurance is prohibitive, but when they ask underwriters to look at their facilities and actually investigate the cost, the coverage is usually less expensive than they thought. …

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