Real estate

December 5, 2013

Vacant Property’s Environmental Risks

Source:, November 27, 2013
By: Amanda Duncan

Vacancy isn’t the only headache property owners can face: Empty buildings and land can cause pollution-related liability. Learn about possible options to mitigate environmental liabilities through insurance and risk management.

As America’s real estate crisis recovers along with our economy, more than 14 million properties remain vacant or abandoned across the country. Real estate is considered a vacant property when it is not currently occupied or in use. This includes empty lots as well as structures.

Cities like Detroit, Cleveland and Las Vegas are dealing with thousands of undeveloped lots, empty houses and even entire neighborhoods, as well as commercial, retail and industrial properties. This has resulted in an increase in crime and lower property values for surrounding areas. Local communities left to care for these properties by default do not have the time or resources to keep the properties in good condition, thus causing an increase in exposure to risks like vandalism, fire, theft and water damage. In turn, these risks hinder the possibility of resale and revitalization in the future as economic conditions continue to improve, leading to possible setbacks throughout our communities.

Several environmental risks are associated with all types of vacant properties. Older buildings may have existing asbestos insulation and tiles, as well as lead paint and lead piping. All buildings constructed before 1980 have the potential to contain both asbestos-containing materials and lead-based paint. Leaking heating oil tanks, pipes and appliances are prevalent, as well as any chemicals or lubricants stored on premises in garages or sheds.…

May 30, 2013

Commercial Office Space Impacted by Plume

Source: Great American Environmental Division, May 2013

While performing due diligence in the course of selling an apartment building, the owner of the apartment building learned that an underground plume of contaminants from a neighboring property had impacted their site, resulting in vapor intrusion into several of their buildings. Unfortunately, the source of the plume was an orphaned site so the owner of the apartment building was stuck paying the entire cost for the vapor mitigation system and faces the real possibility of future bodily injury claims from tenants.


April 17, 2013

Environmental liability – Beware!

Source: Ottawa Business Journal (Blog), April 15, 2013
By: Jeysa Martinez, Brazeau Seller LLP

Innocent and blameless property owners may be exposed to significant environmental liability risk.

When assessing environmental liability one might think that, if a land owner did not create nor contribute to an environmental spill or contamination, fault and fairness would be taken into consideration before a cleanup order is issued against an otherwise innocent party. In May of 2012, in the case of The Corporation of the City of Kawartha Lakes v. Director, Ministry of the Environment, the Ontario Divisional Court concluded that an innocent party can be held liable for the pollution on their property, even though that pollution was caused by someone else. In this case, the Court upheld the decision made by the Environmental Review Tribunal in 2009. The Court focused on the purpose of the Environmental Protection Act and, although the Court did not go so far as to exclude the fairness factors from being considered (as they were in the Appletex case, a previous decision which set out the “fairness factors”), the Court did confirm that the Ministry of the Environment’s Compliance Policy allows the Ministry to exercise their authority and issue cleanup orders against innocent owners. The Divisional Court further noted that the Environmental Protection Act specifically contemplates that innocent owners can be held responsible for environmental cleanup costs regardless of fault and, accordingly, the Director is not required to consider the fairness factors before issuing a cleanup order to one or more parties.

We have stepped away from the days where the size of the deal dictated the nature and extent of a buyer’s due diligence efforts. As we have learned from the case above, innocent landowner’s may be served with environmental cleanup orders. As a result, now more than ever, a prospective purchaser must always assess the potential risk for environmental liability and cleanup costs and should at all times conduct an Environmental Risk Analysis as part of the due diligence process in order to avoid liability for environmental spills or contamination caused by previous owners.…

March 28, 2013

Protect your Real Estate clients with pollution coverage from XL Group

Source: XL Environmental, eNews, March 20, 2013

Commercial real estate sales volume surged in 2012, according to the CoStar Commercial Repeat Sale Indices (CCRSI). Both the investment grade and general commercial segments were heavily traded as improving market fundamentals and attractive yields relative to other asset classes drove strong investor interest in commercial real estate.

Are your real estate clients protecting their investments from pollution losses? Do you have real estate clients who have environmental exposures they don’t insure? XL Group’s Environmental unit has been a market leader for all types of real estate clients for over 25 years.

We have the capacity and the terms:
  • $50 million limits
  • 10-year terms

and the expertise – we insure:

  • real estate developers
  • property managers
  • REITs
  • portfolio managers
  • remediation contractors
  • brownfields cleanup projects
  • and more
We provide environmental protection that your real estate clients can depend on.

Our coverage includes:

  • cleanup costs;
  • third-party bodily injury
    and property damage;
  • and legal defense costs

Sales volume in commercial real estate is on the rise. Don’t allow your insured to be blind-sided by an uninsured pollution loss setting them back financially as the market continues to gain momentum. Can we get you a quote you can take to your client? Contact your regional underwriting manager today to find out how you can protect your insured’s real estate investment with pollution coverage from XL Group.


July 5, 2012

The “Third Party Defense” to Petroleum Clean-Up Liability Under Florida Law Is Eliminated by Buyer’s Knowledge of Pre-Existing Contamination

Source: JDSupra, July 3, 2012
By: Trenam Kemker Attorneys

A recent decision of the Florida 1st District Court of Appeal has held[1] that a landowner who purchased commercial property with known existing underground petroleum contamination failed to qualify for both the so-called “Innocent Purchaser Defense” and the “Acts of Third Parties” defenses to liability under the Florida Pollution Discharge Prevention and Control Act (PDPCA).[2] Although one might have guessed this outcome, since under the facts of the case the buyer actually knew about the contamination before purchasing the property, the failure of the “Acts of Third Parties” defense under the PDPCA actually wasn’t quite so clear. What does this mean to our clients in the real estate industry?

Let’s begin with some overview. The PDPCA is a strict liability statute; that is, if a covered petroleum or dry-cleaning solvent discharge is found on or under the surface of real property, then, absent a defense to liability under the statute, the landowner is liable for the costs of assessment and clean-up, whether or not the landowner caused the contamination or knew it existed. [3]

Since many Florida commercial sites, especially service stations and shopping centers, are contaminated with petroleum or dry-cleaning solvents, in 1992 the Florida Legislature created a potential defense to the harsh consequences of the PDPCA by enacting an amendment creating the so-called “Innocent Purchaser Defense.”[4] The defense allows the purchaser of a contaminated petroleum or drycleaning site to escape strict liability under the statute if it can show that it (1) acquired title to property contaminated by the activities of a previous owner, operator, or third party; (2) did not cause or contribute to the discharge; and (3) did not know of the polluting condition at the time it acquired title after conducting an appropriate inquiry.…

January 30, 2012

Old landfill complicates city’s plan to sell land

Source: The Wenatchee World (WA), January 26, 2012
Posted on:

An old, buried landfill is hampering Wenatchee’s plans to sell its waterfront property.

The city had hoped to sell the approximately 3-acre site on Worthen Street near the eastern end of Riverwalk Crossing for $1.9 million. It is centrally located in an area that the city hopes will be redeveloped into a commercial and residential district.

But an environmental consultant hired to study the ground contamination has recommended that the city not sell about one-third of the site that sits over an old landfill.

Proceeds from the anticipated sale of the land were earmarked to help pay off short-term bonds used for construction of the city’s public works complex on McKittrick Street.

Steve King, director of public works engineering for the city, told city officials last week that they should consider either leasing the property or legally subdivide it and retain the roughly one-acre portion that’s over the landfill.

He said the city will always retain liability for any damages that could stem from the old landfill, and the cost could be higher if someone buys and develops the land.

“If we were to sell it and some day it was determined it was an environmental contamination site, we’d have to buy it back and tear out any improvements,” he said. “We don’t want to get ourselves in that position.”

The property sits directly north of the old Morse Steel warehouse, which is being proposed for a public market. The city’s public works operation was located there until it was moved to McKittrick Street to make way for waterfront development.

A year and a half ago, the city hired an environmental consultant to do drilling and use ground-penetrating radar to determine the size and extent of the landfill and to determine how much of the city site is suitable for development.

The consultant recommended that the city either lease the land or sell just the portion that isn’t over the landfill. King said the portion that doesn’t sit over the landfill could be used for just about anything. But the part that is over the landfill could be only used for parking or green space. That part of the property fronts Riverfront Park, while the non-landfill portion sits along Worthen Street.

The property has been listed for sale with Sage Real Estate, but the city has not received any offers on it, King said. He said that the real estate company has not been actively marketing the site because of the environmental studies being done.

The city is still working with the state Department of Ecology to determine what steps may need to be taken to monitor the old dump.

King said that while the city had hoped selling the site would pay down its debt, he said leasing it could achieve the same thing. If the city secured a long-term lease, it could sell bonds guaranteed by the lease proceeds and then use the bond proceeds to pay off the short-term bonds that expire in three years.…

July 12, 2011

Former Fairfax video store owners file lawsuit over toxic soil

Source: Marin Independent Journal (CA), July 11, 2011
Posted on:

A couple who formerly operated a Fairfax video store have sued the former owners of the Fair-Anselm Plaza in Fairfax, alleging that the property owners withheld information about toxic dry cleaning chemicals released at the plaza, exposing the couple to serious health risks.

George and Charlene Bianchini, who operated Broadway Video at the plaza from 1994 to 2009, have sued Matthew and Daniel Friedman, the brothers who owned the plaza before selling it to LRG Capital Real Estate Partners in May 2009.

Both the Bianchinis and the Friedmans declined to comment on the pending litigation.

The suit, filed in May in Marin Superior Court, alleges that prior to and during the Bianchinis’ tenancy, dry cleaning business tenants at the Fair-Anselm Plaza spilled and improperly disposed of perchloroethylene, or PCE, a colorless liquid used as an industrial solvent — particularly by dry cleaners — and classified as a probable cancer agent by the U.S. Department of Health and Human Services.…

May 5, 2011

Mold Problems Still Growing for Real Estate Lenders

Source: Mortgage Servicing News, July 3, 2006
Posted on:

The steady growth of mold litigation has not slowed in the commercial and resident real estate industries, according to the Greenguard Environmental Institute, which says this expanding legal gray area has compelled lenders to protect their mortgage portfolios by working with insurers and environmental consultants on new risk mitigation programs.

The recently launched Greenguard Mold Protection Program, which is overseen by GEI, a nonprofit organization, sets guidelines for lenders involved in new construction, including best practices for safeguarding against the damage and resulting losses caused by mold.

“Protecting your portfolio has never been more difficult,” said Carl Smith, chief executive officer, executive director of GEI. “Lender liability concerns have now spread to other loan categories as state legislatures have stepped into the equation, making it possible for multiple lender exposures and potential losses from just one instance of mold contamination.”

In light of the multiplying liability issues, lenders should attempt to prevent the presence of mold. Laws like those in California, which target developers and contractors responsible for structural defects within the first 10 years of occupancy, could mean millions in liability losses for each case of mold contamination, according to GEI.

“The next context of this law has paralyzed many California builders, sending ripples through the community,” Mr. Smith said.

Instead of just worrying about mold’s financial impact on the collateral supporting the mortgage industry, especially new construction, lenders now have to additionally guard against the weakening of their business loans to builders and contractors, he said. “If builders, who borrow money for their business, are hit with mold-related suits under the California law, they can be held liable for 10 years post-construction, therefore affecting their own financial status and the relationship with their lender. And this is just the beginning. We’ve just heard that 17 other states are considering similar legislation.”

If mold dramatically decreases property values, it could force these loans into a “nonperforming” category. Mr. Smith said that classification causes a negative chain reaction from ratings agencies, regulatory authorities and shareholders.…

November 12, 2010

Chartis Expands NextGen ProtectionSM to Additional Industries

Publication Date 11/11/2010
Source: Business Wire

NEW YORK–(BUSINESS WIRE)– Chartis today announced the expansion of industries addressed by NextGen Protection, a suite of environmental insurance solutions developed by its Environmental division.

The additional industry segments within the NextGen Protection suite are:

PLL MuniProtect SM for Municipalities
PLL MuniProtect has been developed to address the environmental exposures associated with municipalities. Unforeseen pollution incidents arising from the operation of schools, parks, roadways, waste water treatment facilities and other services may lead to third-party claims which, if left uninsured, may impact the financial resources of the municipality. As a result, the funds available for these public services may be reduced.

PLL REAL Protect SM for Commercial Real Estate
PLL REAL (Real Estate and Land) Protect has been created to focus on the specific pollution exposures associated with Commercial Real Estate (CRE). Owning or operating CRE, including office buildings, shopping centers, hotels/motels and multi-unit residential buildings, provides exposure to environmental risks, such as those associated with indoor air contaminants, which PLL REAL Protect is designed to address.

Coverage provided by PLL MuniProtect and PLL REAL Protect enhances the Chartis insurers market-leading Pollution Legal Liability (PLL) insurance products. PLL provides protection to insureds for third-party claims for bodily injury, property damage and clean-up costs resulting from pollution conditions. Coverage can be provided for owned locations, transportation exposures, covered operations and non-owned disposal sites utilized by an insured.

The NextGen Protection suite currently includes:

  • PLL Wellness Protect;
  • PLL Campus Protect;
  • EAGLE TopCoat Protect;
  • EAGLE AgriProtect;
  • EAGLE TSDF Protect;
  • EAGLE Personal Care Protect;
  • PLL MuniProtect; and
  • PLL REAL Protect.
September 29, 2010

Colleges Investing in Cheap Land During Economic Downturn

With the economy in a downturn and real estate prices down, many colleges are taking advantage by purchasing cheap land for expansion. University of Dayton in Ohio, University of Delaware, and Columbia University are just some examples. Colleges realize that investing in real estate may be risky but some say “the benefits outweigh the risks.” (Source:

From an insurance perspective, universities need to know what it is that they are buying. As the new owner, they are likely inheriting potential legacy environmental liabilities. This is especially true if the sites being purchased were historically industrial properties. Pollution coverages could limit these potential risks and liabilities by protecting the owners from future claims related to any discovery of legacy environmental exposures.…