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New Policies Insure Against Tainted Land : Emerging specialty may be one way to clean up cities and farms faster than the EPA.

March 03, 1994|RICHARD KAHLENBERG | SPECIAL TO THE TIMES

Until recently, I would never have thought to turn to an insurance broker for help in saving the planet. But it turns out they might be playing a more important role in this effort than one might expect.

John Theiss, a Westlake resident, is a liability insurance executive who deals with places as big as the L.A. subway and as small as a trailer park. His specialty is the new field of "environmental liability transfer insurance"--policies designed to give real estate owners and their bankers some peace of mind when they're worried they might get stuck with toxic turf on their hands.

"Very few (commercial sellers) are sitting on property that isn't contaminated," Theiss says, referring to American business's messy past.

For us regular folks who aren't burdened with any real estate to sell, this new wrinkle in the insurance business is nevertheless of interest. It just might be the way to clean up America's environmentally damaged cities and farms faster than government agencies like the Environmental Protection Agency.

Theiss and other local experts I consulted say some newly available real estate insurance policies "allow for the funding of cleanup," as he put it. Such policies until recently were hard to get and prohibitively expensive. But, according to Theiss, since the industry has turned to biologists, chemists and other scientists--instead of lawyers and statisticians--to calculate risks, they have been able to get realistic estimates of costs. Now insurance companies don't have to charge sky-high premiums out of fear of the unknown. Several new firms have appeared, specializing in this type of insurance. One company in Wisconsin is even called Planet Insurance Co.

Driven by the public's demand that we not be gassed, toxified or irradiated by negligent neighbors, legislatures have passed environmental laws with teeth in them--but held back on public funding for such cleanups.

And as a result of U.S. Supreme Court decisions this year, owners and their mortgage bankers--even if they themselves did not do the dirtying--may have to pay for environmental cleanup instead of leaving the job to the taxpayer.

Canny buyers these days won't take possession of certain kinds of real estate until they know they're covered by one of these new policies. They are demanding that the seller either clean up environmental messes beforehand or provide appropriate insurance. Real estate sellers will be provoked into environmental virtue by the threat of never finding a willing buyer.

Theiss was one of many people I contacted who predicted that this is going to be an element in almost every future real estate transaction.

According to Eric Voulgaris, an industrial property specialist with the realty firm Grubb & Ellis in Oxnard, environmental insurance will "probably be more important than title insurance eventually." Meaning: It may be more important that you prove you have clean land than clean title.

Once sellers have gone through these hoops and dealt promptly with whatever environmental issues turn up, they can even get reasonably priced insurance against future, unforeseen, environmental problems.

According to one expert, Jim Fitzpatrick of PHW Environmental Risk Services in the rust belt city of Troy, Mich., "This (trend) is even heading toward the residential area--to protect the value from collapsing due to an environmental exposure."

Patt McDaniel of McDaniel Insurance Services in Ventura cautioned about announcing an environmental millennium, however.

"The (new) policy forms are not standardized . . . and there are important differences in the policy features offered by various companies . . . and an environmental risk assessment survey is required."

But, she said, one thing is certain: If a property is purchased and turns out to have an environmental problem, it may be too late to obtain coverage to clean it up.

Details

* FYI: Environmental insurance for real estate, covering such things as liability and cleanup, is now becoming available. Consult your insurance broker. Other sources are McDaniel Insurance Services, (805) 658-1084; Jim Theiss, (818) 548-7500; ERIC Underwriters Agency, (800) 234-9221; and United Coastal Insurance Co., (203) 223-5000.

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