Getting help with cleanup costs
The bad news knocked Denver Cain for the
proverbial loop. He only wanted to sell his drycleaning
business in Indianapolis — The Washboard Laundry and
Drycleaning — and retire in peace.
Instead, he was surprised to discover that
his property was contaminated with perc. Cain’s financial
future looked dismal at best. The property’s value was
estimated to be worth $300,000, but cleanup costs were
projected to be between $500,000 and $750,000.
“I spent quite a bit of money with a
law firm,” Cain recalled. “I was getting
nowhere.”
Running out of options, he turned to EnviroForensics for help. The company, founded in 1996, conducts
soil and groundwater investigations and designs and implements
viable remediations. Their speciality is working with
chlorinated solvents.
The environmental engineering firm also
has an ace up its sleeve. Its niche is insurance archeology,
which essentially means it has the resources to search for, and
often find, historical insurance policies that can be used to
fund the prohibitive costs of site cleanups. In fact,
EnviroForensics has private investigators on tap to uncover
policies dating as far back as the 1960s.
Company CEO Steve Henshaw explained the
process. “We’re using old Comprehensive General
Liability policies,” he said. “We’re not
using extra policies that people buy to address contamination.
We’re using the historical policies that they used for
unforeseen risks. Now, the insurance carriers have typically
written in pollution exclusive language, but a lot of the
contamination is not from today’s operations. A lot of
the contamination happens historically.”
Of course, even old spills can affect a
property owner from “cradle to grave” and Cain
feared that the problem would be passed down to other
generations of his family.
“Denver was in the process of
negotiating a sell by the time we got involved with him,”
Henshaw noted. “His money was tied up in an escrow
situation, but we got coverage. We’ve done the
investigation. We are in the process of designing the
remediation and the carriers are participating and paying for
this. Denver has not had any out-of-pocket expenses.”
It almost sounds too good to be true,
which might explain why Dorothy Minder-Forbes was reluctant to
hire the company when she found out that her three drycleaning
properties in Indiana — Glen Park Cleaners, Brunswick
Cleaners and Hobart Cleaners — were all significantly
contaminated with perc.
After being in business since 1957, she
was worried that her lifelong investment would turn into a
staggering debt. About eleven months ago, she took the plunge
and hired EnviroForensics.
“It was quite scary,” she
recalled. “It took a lot of reassuring by Steve. I knew
it had to be done. They worked really hard with me where I
could get it done in a timely fashion because I had a buyer I
was worried about losing.”
Fortunately, Minder-Forbes had kept
detailed records back to the 1980s and before, which sped up
the process. In a little over nine months, EnviroForensics had
secured liability coverage from five different companies.
“This is a significant success
story,” Henshaw emphasized. “Essentially, Ms.
Minder-Forbes has a guarantee and that guarantee is backed by
over $20 million, and the cleanup is not going to cost that
much. The carriers are standing behind her at this point and
putting their money there. She’s in very good hands and
that’s a great position for her to be in.”
In all, Minder-Forbes has paid $5,000 per
site, a figure she was more than happy to spend. “They
worked very hard for me because I needed to sell,” she
said. “Now, they’re starting on a corrective action
plan and they should be cleaning up by the end of
September.”
Though he is quite proud of his
company’s success stories, Henshaw is the first to admit
that not every case is settled so quickly. He also pointed out
that $20 million in liability coverage ranks in the higher
echelon of potential insurance funding. After all, not
everybody is going to have the appropriate coverage.
“We understand the insurance before
we start the process,” Henshaw said. “There are
going to be situations where the insurance is not going to
cover these problems. We have to understand their coverage
before we’d recommend to them to step forward because it
is a big risk. Ultimately, these clients are the ones
responsible for cleanup.
“We take on the responsibility for
investigating the site with the understanding that the
insurance carriers have that responsibility to pay for their
policyholder’s defense,” he added. “So, we
are able to get the site investigated and the legal fees
covered on behalf of these policyholders.”
The best advice Henshaw has to offer for
cleaners considering selling their business is to give
themselves a time cushion that will enable them to deal with
contamination problems should they arise.
If bad news strikes, it is imperative to
hire trained professionals who are familiar with the lengthy,
complicated legal process for environmental cleanup cases. A
cleaner may feel more comfortable with a family lawyer, but if
that attorney is not well-versed in the proper procedures for
remediation claims, liability coverage can be denied just as
easily as it can be granted.
“It’s a nerve-wracking
situation,” Henshaw said. “The reluctance is that
it’s still scary for people. You’re still putting
yourself out there. It is easier for people, in essence, to
bury their head in the sand and not deal with it until they
absolutely have to, than to plan for this.”
On the other hand, the earlier the problem
is addressed, the easier it is to deal with in the long run.
“What we’re trying to get the
industry to understand is that if you’re trying to sell
your business in three years, you should start this process now
because it’s going to take a little time,” he
noted. “The time scale is typically an 18-month period of
time to sort of get the carriers committed to what needs to be
done.”
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