Finding Money to Finance Environmental Investigation and Remediation

05 Sep Finding Money to Finance Environmental Investigation and Remediation

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The cost of environmental services is a serious issue, especially in these harsh economic times. After 35 years in the industry, ESA has yet to meet a client who says, “I polluted this piece of property and I feel terrible about having done so, therefore I want to clean it up. Do whatever is required to remediate this situation and I don’t care what it costs!” Regardless of how environmentally conscientious someone may be, our clients are always concerned about cost! Rich or poor; industrial, commercial, or residential, our clients want ESA to do a good job for the least cost possible. Knowing this, we do whatever we can to help each client obtain Other People’s Money (OPM) to fund their environmental investigation and remediation projects.

OPM is money, as the name implies, derived from sources other than one’s own accounts or assets. Typically, OPM can come from one of three generic sources: insurance policies, tax appeals, and state grants and loans. A fourth potential source of OPM, litigation, is beyond the scope of this article.

Using Old Insurance Policies to Pay for Environmental Investigation and Remediation

Virtually all general liability policies written prior to ~1986 paid for environmental remediation. In 1986, to stanch massive outlays for large environmental claims, the insurance industry instituted the “absolute pollution exclusion” (APE). Following the creation of this clause, new environmental claims came to a screeching halt. Subsequently, any company that wanted to insure against environmental losses had to buy a specially written environmental claims policy. Even today, some insurance companies write environmental pollution policies that cover claims for investigation and remediation of pollution incidents.

Finding money to pay for environmental remediation using old insurance policies is easier than you might think. A surprisingly large number of ESA’s clients have successfully accessed this source of OPM. To trigger an old claim, you need proof that you (or a former property owner) were insured. It is always preferable that you have the actual insurance policy (or policies) in hand. You can and should file claims against multiple policies whenever possible. If the actual policies are unavailable, the next best thing is cancelled checks that contain insurance policy numbers. Lacking that, contact your insurance broker for information. If none of these options are viable, you can always retain an insurance archeologist. These specialized insurance professionals are skilled at locating old policies.

Never file an environmental insurance claim on your own. ESA strongly recommends that you retain an environmental attorney who has experience filing environmental insurance claims. Insurance companies dislike paying claims on very old policies. Accordingly, they will do anything in their power to reject your claim and thwart your efforts at insurance recovery. An experienced environmental attorney will know how to skillfully argue the claim on your behalf.

A few more facts about filing an environmental insurance claim:

• If you can prove that the environmental event occurred when the former policy was in force, you can make a claim. It is very important that your environmental consultant be aware of your insurance recovery strategy in the earliest stages of a project so they can look for environmental evidence when conducting their field work. (Note: your consultant should apprise you of this, not the other way around!). Waiting until after a file is claimed will make it more difficult for your environmental consultant to identify potential impacts that could support your claim.
• The ownership of the old policy may be irrelevant. That is, there are ways to make claims against old policies owned by former property owners.
• You can file a claim against more than one old insurance policy.
• Even though contemporary policies have an APE, they still cover certain third-party environmental claims. For example, if you have an underground storage tank that impacted your neighbor’s property, it is possible that your contemporary insurance policy may fund the entire environmental remediation of the neighbor’s property. In addition, the state owns the groundwater that lies beneath your property, making groundwater pollution another third-party claim. Soil impacts are deemed a first-party claim and, as such, are not covered by contemporary general liability policies.

Tax Appeals for Environmental Impacts

Most people know about the tax appeal process, but most people are unaware that an appeal can be made due to environmental impacts. This can be done for either commercial or residential properties. And it can save you a lot of money that can be put towards the environmental remediation of the impacted property. Here is what you need to know:

• Impacted soil and groundwater may diminish property values, thereby lowering the property’s assessment
• In New Jersey, court decisions have clearly established that environmental impacts must be taken into account when analyzing a property’s assessed value
• If your property is near a highly contaminated site, a tax appeal can be filed based on “stigma.” The mere perception of an environmental impact can stigmatize a property. Stigma is determined by more than just measurable contaminant levels. Perception, disruption, and fear all contribute to stigma. And a stigma may be present when an adjacent property is contaminated or if your site has previously undergone a cleanup
• Properties with wetlands may be eligible for a successful tax appeal
• Property tax appeals for a given tax year must be made by April 1st of that year.

Most tax attorneys will analyze a property for no charge. Cases are typically taken on a contingency basis; if the appeal is successful, they will send you a check. Additionally, the entity paying the taxes has standing for getting an appeal. You don’t need to actually own the property. Even if you’ve filed a successful tax appeal recently, you are not precluded from making another appeal if environmental conditions warrant a further reduction.

Accessing Grants and Loans to Pay for Environmental Investigation and Remediation

New Jersey has some very interesting and worthy grant and loan programs that provide money for environmental remediation projects. ESA spoke with the Underground Storage Tank Fund to get the latest information on this program and here is what we learned. Sadly, this once great fund is depleted and of little immediate value to the citizens of New Jersey who may be very deserving of financial assistance:The program is funded with $13-15 million annually. Most of this money is going to larger remediations on commercial properties.

This amount is insufficient to fund the program, leaving homeowners in a lurch.

Applications from all parties are still being accepted. Currently 2,000 applications are backlogged. NJDEP predicts that applications submitted now will not be addressed until sometime in 2016.

Regulated (privately held) sites have funding priority over homeowners. However under the current situation even applications for regulated sites are being backlogged.

People eligible for reimbursement (including homeowners) can execute their projects now with their own money then submit their receipts and invoices for potential reimbursement. While the following statement may be obvious, I will nonetheless state that reimbursement is always predicated upon having your grant request approved. Moreover fronting the money for remediation will not accelerate reimbursement from the fund. You will enter a queue along with all other applicants. Thus reimbursement will not happen for several (four?) years.

There is one other important consideration. If you know that you have a leaking tank or some other contamination issue, delaying a project can exacerbate the situation. This is especially true if you have a massive leak. For example, ESA is privy to a homeowner in north Jersey who suddenly lost 275 gallons of heating oil from an above ground tank in the basement. After five years she has taken no action. This large pool of oil now lies entrenched, beneath her house and the cost of remediation exceeds the value of her property. Had this problem been addressed immediately the outcome might have been very different.

For more on the topic of funding environmental investigation and remediation, check out these articles.