Case Study 1: Liability Transfer
Willis helped our client, a market-leading engineering firm, to assume the liability of almost 400 parties potentially responsible for pollution (PRPs) in relation to one of the largest uncontrolled, hazardous waste sites in the U.S. Superfund cleanup program. Site operations terminated in 1988 – nearly eight years after the owner filed for bankruptcy, leaving a series of lagoons filled with hazardous materials.
Willis worked with our client to structure a fixed cost Liability Transfer solution that allowed the PRPs to obtain a full statutory release from the state. The engineering firm became the sole responsible party for the site, receiving all settling PRPs’ rights to contribution from non-settling parties. Both the federal and state government approved the transfer of liability through a consent decree.
Willis arranged a long-term blended insurance program to fund the expected cleanup costs as well as transfer the risk of cost overruns and associated environmental liabilities. The final cost to the PRPs was below the original project cleanup cost expectations.
Case Study 2: Mergers and Acquisitions
A top-tier U.S. private equity company acquired a large multinational auto parts manufacturer. In addition to the environmental risk associated with the target’s daily operational exposure, the target company had over the years acquired and divested many other manufacturing companies, both foreign and domestic. Despite their rigorous due diligence processes, the private equity company was concerned about legacy environmental liability associated with those transactions.
Willis crafted an environmental insurance policy with several specific program enhancements.
Case Study 3: Development Project
Willis helped various parties, including a major sports team, a municipality and a public sports authority, to manage their exposure to various environmental liabilities in the development of a major open-air luxury sports stadium. The proposed location was a historic industrial area with an active freight railroad line and near a major waterway.
Willis placed an owner-controlled project wrap-up Contractor's Pollution Liability policy to cover pollution arising out of remediation and construction activities by various contractors and subcontractors. A Pollution Legal Liability (PLL) policy was also placed to cover discovery of unknown historical pollution conditions at the property and any new pollution conditions from future operations of the facility. Both policies included coverage for mold, Legionella, terrorism (NBCR) and pollution events arising out of a railcar release from the adjacent line.
Case Study 4: Global Placement
A Willis client with mining operations throughout the world sought a comprehensive pollution liability program. Prior to Willis’ involvement the client had no pollution liability coverage for its international operations and only “sudden & accidental” coverage for its U.S. locations. The client’s risk management division wanted a global environmental program to help serve as a platform for growing operations around the world.
Assessing the risk and providing sufficient information for each of the various countries was a significant challenge. Willis coordinated the underwriting process and facilitated the review and evaluation underwriting information in many languages.
The resulting program involved a global master policy (dictating terms and conditions worldwide) with local policies, written in local languages where necessary and appropriate. It was administered locally through Willis offices in the relevant territories. The coverage was highly tailored to meet the client’s specific requirements.
Case Study 5: Successor Liability
A Willis client wanted to acquire certain assets from a bankrupt company that operated an assembly plant where there were known pollution conditions. Our client was not interested in the assembly plant, which was specifically excluded from the purchase-sale agreement. Our client remained concerned however that the government would deem them a successor under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), leaving them responsible for the pollution at the plant.
Willis developed a solution to manage this contingent, successor liability by heavily manuscripting a pollution liability policy. The policy covering the supplier as the named insured for preexisting known and unknown conditions, with no exclusions for known conditions, for a 10-year term.
Case Study 6: Terrorism Exposure
A Willis North American client in a significant service-related industry had concerns about first- and third-party risks related to terrorist events – particularly a nuclear, biological or chemical attack. The client’s facilities included a high-profile building in a large city with HQ functions and retail customer operations. The client shared the building with third-party tenant occupants, including government entities.
The client’s Property and Casualty insurers were not prepared to cover pollution liabilities related to a potential attack and would not cover property damage (physical or business interruption) due to terrorist acts. Willis was able to use the pollution markets to provide a long-term, high-limit solution through a combination of environmental insurers. The program provided pollution liability coverage for cleanup costs and third-party liability for bodily injury and property damage. In addition, however, the program provided first-party Business Interruption and Extra Expense cover (including loss of use due to civil authority from TRIA and non-TRIA events) at the main location and affected satellite locations. It also included first-party Property Damage for repair and replacement of insured's property arising out of the event itself.
Case Study 7: Construction Project
A Willis client finalized plans to construct a high-rise, multiuse building in the downtown area of a major U.S. city. The client approached Willis to review environmental exposures associated with the project, and to discuss the possible need for environmental insurance. Complicating matters was the fact that older structures at the project site had to be demolished before construction could start.
Based upon a detailed review of the demolition plan, environmental reports, construction plans, and related data, Willis identified several exposures.
- Asbestos and lead-based paint exposures during demolition
- Disturbance of historically contaminated urban fill material at the site during subsurface and grading activities
- Pollution conditions associated with facility construction activities
- Completed operations exposure for indoor air quality problems, including mold
As a further consideration, the downtown location of the project meant that third-party exposures were high due to constant pedestrian traffic around the work site.
To mitigate loss associated with the environmental exposure, Willis placed an Owner-Controlled Contractors Pollution Liability policy for the client as first named insured. All contractors and subcontractors at all tiers were scheduled as additional named insureds, ensuring that all entities associated with the project were covered under the environmental insurance program. Mold coverage was added as a policy enhancement because future site use included high-end, residential condominiums.