Bruce,
Perhaps I shouldn't have mentioned Monte Carlo. My experience is
that, in order to properly underwrite cost overrun coverage, you essentially
have to redo the whole process of estimating the cleanup costs based on
very detailed information about costs and their relation to an approved remedial
plan. Insurers frequently rely on outside engineering companies to do the
re-analysis, which is expensive as well as time consuming. Underwriters
previously used to provide the coverage for small sites under site pollution
liability policies using a high deductible -- this is called "embedded cost cap
coverage" -- but they are no longer allowed to do so by reinsurers because
of the many hits that were taken under such policies since underwriters were
providing the coverage based on insufficient information. There is
one company, AIG, that will provide embedded cost cap coverage but only
in limited situations for certain clients and because AIG does not have to
put all its losses under its reinsurance.
Basically -- and perhaps I should have made this clearer -- I just think
that most cost cap underwriters would disagree that cleanups at large projects
pose greater risks than those at small ones. They would say that, at least for
them, the risks are just as high, if not higher because the small
sites are seldom as well characterized as the large ones yet can be just as
complex. There is an answer to this problem, however; increasingly,
insureds are obtaining guaranteed fixed price remediations to cover cost overrun
risks, and purchasing SPL policies to cover the other risks.
Sue
Susan Neuman,
Esq., Ph.D. Environmental Insurance Agency, Inc. 138 Chatsworth Ave.,
Suite 2 Larchmont, NY 10538 914-833-5100 (phone) 914-833-5102
(fax)
www.enviroinsurance.com
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