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20 NOVEMBER 2020
Owners of contaminated property in New Jersey may soon have a new financial tool
at their disposal as they remediate the sites and prepare them for potential redevelopment.
Following a joint effort by four
firms — including a developer, a law firm, an insurance brokerage and an underwriter — state regulators have cleared the way for a new alternative to the use of escrow accounts and other forms of financial assurance for environmental cleanups. Under newly approved guidelines, property owners may now use an insurance policy in order to secure their long- term obligations for remediating and monitoring a site, freeing up funds that would otherwise be frozen for decades at a time.
“It’s another tool in the toolbox,” said Dennis Toft, a veteran environmental lawyer at Chiesa Shahinian & Giantomasi PC in West Orange. “It reflects requests that a lot of developers were making and it’s
a means of satisfying this obligation without tying up capital. That’s what we have and we just have to work to put it all together.”
The team responsible for securing the first-of-its- kind approval
cap or groundwater monitoring, to ensure those projects are maintained for at least 30 years.
As the group delved into the
issue, they found that owners and responsible parties in New Jersey had placed $1.5 billion in escrow in connection with some 15,000 open cases at the time.
acceptable to the state Department of Environmental Protection has proven elusive. Stakeholders may find themselves “speaking different languages” when it comes to marrying environmental regulations with finance and insurance, Crooker said, creating a barrier to something that may be widely beneficial.
For his part, Smith noted that traditional credit risk underwriters have often shied away from the environmental sector. He also cited a lack of demand in past years for this type of insurance policy, “so to create a new product takes a lot of effort, it takes some resources and you want to make sure there’s enough critical mass to spend that time.”
That began to change in the last two to three years, when “a number of people have come and said, ‘We really don’t like this process of having to put all this cash into a trust or escrow.’”
“(That) has grown by orders of magnitude, so I think the timing was
POLICY PUSH
Industry leaders join forces to secure
new insurance option for environmental cleanups
By Joshua Burd
Dennis Toft
includes Toft and Richard Crooker, general counsel with Advance Realty Investors, along with Ironshore Environmental
“That $1.5
billion was in
our minds as we
thought about:
What might
developers and
other folks do if
that was more
available in a
different form?”
said Crooker, whose firm is based in Bedminster. “That’s what we were talking about.”
Insurance has always been an option under the 2009 law, they said, but crafting a policy that was both practical for underwriters and
President Toby Smith, whose firm
is now offering the policy, and Christopher Alviggi, a senior vice president and environmental practice group leader with NFP. They noted that, since the Site Remediation Reform Act of 2009, the state
has required responsible parties
to provide a financial assurance mechanism for properties that are being cleaned up and subject to long- term engineering controls, such as a
Richard Crooker