Digging up dough for
clean-ups
with insurance archeology
In this article, Stephen Henshaw,
president of EFI (Environmental
Forensic Investigations), a
national environmental engineering firm specializing in
remediation for small and medium businesses, including
drycleaners, answers question about Insurance Archeology and
how it can help drycleaners find money for costly cleanups.
Q. What is insurance archeology, and why
is it beneficial for drycleaners?
Insurance archeology is a term used to
describe the process of locating and finding historical
insurance policies that covered individuals and businesses.
Historical insurance can be a huge benefit
to drycleaners as old policies can be used to pay for costs
associated with soil and groundwater contamination
investigations, legal representation and even the cleanup of
contaminated sites.
Q. When should drycleaners consider
investigating their historical insurance coverage?
Right away. Finding historical insurance
policies can be like finding hidden treasures or lost money.
Business and property owners, even former
business owners and operators, should make it a high priority
to search, locate and securely store all of their old insurance
policies and any evidence that may support that they had
historical insurance.
Many drycleaners wait until it is time to
sell a business to figure out what they are going to do about
contamination. At that point, there may be questions about the
value of the property because of contamination.
In order to have the value of the business
at its peak, a drycleaner should look for insurance coverage
now as a way to reduce personal liability and maintain the
value of their business.
Q. How can drycleaners begin
reconstructing the historical insurance coverage of their
businesses?
The first step to reconstructing your
insurance coverage is by reviewing your old business files and
personal files. It isn’t uncommon when I talk with
drycleaners to learn that they have thrown away their old
records.
Many people only keep records for seven
years, as this is the customary time that the IRS tells us we
need to keep records for audit purposes
In these cases, we need to dig
deeper. We need to focus on looking for companies and
individuals that may have required proof that you had coverage,
for example landlords, legal counsel and mortgage companies.
Another approach is to call EFI. There are dozens of avenues we
pursue in an effort to locate your historical coverage.
Q. Who is responsible for covering the
cost of investigations and clean ups?
In many cases, EFI can assist drycleaners,
as policyholders, with obtaining a defense from their old
insurance policies.
The site investigations of a drycleaning
business can be considered defense against claims because the
investigations quantify liability and exposure for the insured.
EFI can also build a case for the drycleaner to obtain a site
cleanup by using the insurance company’s defense
obligation.
Q. What kind of coverage do drycleaners
want to find in old policies?
Drycleaners should look for all insurance
policies they can remember purchasing. The best policies would
generally be the historical comprehensive general liability
(CGL) policies.
Other valuable policies would include
umbrella policies and excess liability coverage.
Often times, finding workman’s
compensation policies, auto policies or other specialty
policies can lead you to finding other coverage, because past
brokers often provided drycleaners with bundled policy
packages.
Q. How can drycleaners tender claims to
insurance companies so that old policies kick in?
Often times, finding just one year of
coverage can be the catalyst to finding more coverage. This is
because one year of coverage may be enough to obtain a defense
and this defense could include finding other responsible
parties, including past owners and operators of the drycleaning
business, and their insurers, as well as other carriers that
covered you.
Q. What states have the best laws for
insurance coverage?
We believe that the states with laws that
best protect policyholders include, Indiana, Colorado, Oregon
and Washington. However, most states have laws that help the
policyholders with defenses, which can include costs for site
investigations and legal representations.
Q. What are typical costs of remediation
and legal expenses associated with contamination?
The cost estimates with investigating
contamination associated with drycleaners can range between
$30,000 and over $500,000 — depending on the extent of
the site contamination, the site geology and the ultimate use
of the ground water beneath the drycleaning businesses. Legal
expenses can often times go into the six figures, while site
remediation can cost between $50,000 and over $1,000,000.
In one case, we have worked on an
individual project in excess of $44 million, which we helped
settle successfully. Sometimes there are as many as 200
additional parties responsible in some manner for the cost of
cleanup. But this is an extreme case.
Q. How does insurance archeology help
drycleaners obtain site closure?
In short, insurance archeology is the term
given to finding old insurance policies. These old policies,
used appropriately, can pay for the costs of site
investigation, including soil and groundwater contamination
studies, responsible party searches, assessing the cleanup
costs and developing the facts of the case. In many cases the
insurance will pay for the site cleanup or other suitable
settlements.
Additionally, though the insurance
companies actually pay for the defense related costs, it is the
policyholder that gets credit for spending the money for
cleanup. For most clients, reaching the end of contamination
begins with finding the policies.
Stephen Henshaw, a registered geologist
for 20 years and President of EFI, has worked on a hundred
drycleaning sites, in addition to thousands of other
businesses, to remediate contamination in the most
cost-effective manner. His firm boasts a 100% win ratio on
insurance coverage claims. EFI operates a national customer
service department for drycleaners, toll-free (866) 888-7911.
Information is also available on the firm’s web site:
www.henshawassoc.com.
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