O An abandoned mattress factory in 

Somerville, MA. 

Environmental Insurance Helps 

Ensure Redevelopment 

Environmental Insurance 

continued 

“[Environmental 

insurance] makes a 

brownfields deal seem 

less risky, provides

comfort to the decision

makers, and lets people

sleep well at night.” 

—Lynn Tracy Nerland 

Assistant City Attorney, 

Emeryville, California 

JUST THE ACTS: 

The protection afforded by environmental

insurance is available in a number of 

different policy terms and types of 

coverage: 

• Cleanup Cost Cap coverage provides 

the developer with protection against

the possibility that actual cleanup costs

exceed original estimates. 

• Pollution Liability Protection covers 

developers and long-term owners of 

redeveloped brownfields, up to 

specified amounts, in the event that

users of those properties make claims

based on continuing pollution conditions. 

• Through Secured Creditor policies, 

lenders 

repayments in the event that a borrower 

defaults on loan payments, or if

collateral value is lost, due in some way,

to the pollution condition. 

bstacles that include unanticipated cleanup costs and fears of 

unforeseen liability often dissuade otherwise interested developers from 

investing in brownfields. 

capable of limiting both of these barriers. 

seem less risky, provides comfort to the decision makers, and lets people 

sleep well at night,” explains Lynn Tracy Nerland, Assistant City Attorney 

for Emeryville, California. , communities like Emeryville and 

other EPA Brownfields Pilots/Grantees are including environmental insurance 

as a tool in their multifaceted approaches to brownfields reuse. 

The protection afforded by environmental insurance is available in a number 

of different policy terms and types of coverage. 

the University of Louisville and Director of the EPA Region IV Environmental 

Finance Center, and Professor Kristen Yount of Northern Kentucky 

University, have collaborated to complete extensive research on the industry. 

Through their research, Meyer and Yount distilled various environmental 

insurance policy types into three categories of coverage: Cleanup Cost Cap, 

Pollution Liability, and Secured Creditor. 

developer with protection against the possibility that actual cleanup costs 

exceed original estimates. 

and long-term owners of redeveloped brownfields are provided with coverage, 

up to specified amounts, for users of those properties who make claims 

based on continuing pollution conditions. 

repayments through Secured Creditor policies in the event that a borrower 

were to default on loan payments or if collateral value is lost, due in some 

way, to the pollution condition. 

Across the landscape of abandoned sites and the Brownfields Pilots/Grantees 

that address them, these types of insurance policies are protecting those 

with a stake in brownfields redevelopment. 

Brownfields Pilot, for example, created its own form of Cleanup Cost Cap 

coverage to facilitate redevelopment of an abandoned mattress factory. 

F

are guaranteed loan 

Environmental insurance is one of the few tools 

“It makes a brownfields deal 

Increasingly

Professor Peter Meyer of 

Cleanup Cost Cap provides the 

Through Pollution Liability Protection, developers 

Lenders are guaranteed loan 

The Somerville, Massachusetts 
The South Bayfront industrial site 

in Emeryville, CA. 

Though interested in converting the mattress facility into a full-service assisted living 

facility, the Visiting Nurses Association (VNA) was discouraged by fears that cleanup 

costs might exceed estimated estimates. 

lead, petroleum, and barium contamination that would cost at least $225,000 to 

remediate. 

City of Somerville used a portion of its U.S. Department of Housing and Urban 

Development (HUD) Community Development Block Grant funds to finance 

$100,000 in Cleanup Cost Cap coverage. With confidence that cleanup costs 

to the VNA would not escalate beyond the original estimate, the Visiting Nurses 

Association proceeded with redevelopment plans. 

the cost overrun protection, and the VNA’s new 97-unit, assisted-living facility 

opened in June 2000. . 

This $14 million redevelopment project brought more than 45 new jobs to the 

city. 

In Emeryville, California, a bustling community situated to the east of San Francisco, 

demands for housing are high. Additionally, the Emeryville community desired a 

mixed-use downtown center. The City’s South Bayfront area, once the location of 

a paint factory, pesticide production facility, and drum reconditioning factory in the 

1920s, became the planned site of a 350-unit residential, 250-room hotel, and 400,000-

square-foot retail development in 1999. With a history of chemical production and a future of 

overnight accommodations and long-term residences, developers and the Emeryville Redevelopment 

Agency needed to feel comfortable and protected if they were going to invest in the South Bayfront 

area. 

policy would help everyone sleep well at night. 

This policy protected the redevelopment agency during remediation from certain additional cleanup 

costs and bodily harm to workers. 

primary insured. As such, the developers have up to $10 million in liability protection for a 10-year 

period, which includes physical harm to residents or occupants should they be affected by the 

project. According to Ms. Nerland, the redevelopment agency, the site’s developers, and the 

insurance underwriter conducted an extensive due diligence review of past uses, contaminants, 

and cleanup results. 

million in private investment has been leveraged and more than 700 jobs have been created as a 

result of the project. 

housing units is planned to begin in the Fall of 2003. 

insurance, stakeholders and investors feel protected, the South Bayfront site is being redeveloped, 

and housing, jobs, and a town center are being created. 

Soil and groundwater assessments revealed 

Recognizing the multiple benefits of this redevelopment project, the 

No claims were made against 

Every unit was occupied by the end of that summer

The redevelopment agency and developers decided that a $10 million Pollution Liability 

When cleanup was completed, the developers became the 

The Emeryville Department of Economic Development reports that $85 

These numbers are expected to increase as construction of more than 300 

In Emeryville, thanks in part to environmental 

Brownfields Success Story Solid Waste EPA500-F-03-232 

Environmental Insurance and Emergency July 2003 

Response (5105T) www.epa.gov/brownfields/ 
CONTACTS:

For more information contact 

US EPA-Region 1 (617) 918-1424 

U.S. EPA-Region 9 (415) 972-3188 

Or visit EPA’s Brownfields Web site at: 

http://www.epa.gov/brownfields/ 

Brownfields deals have also been sealed with Secured Creditor Policies. 

these policies, insurers provide reimbursement if a borrower defaults and 

compensation to the lender for collateral value loss caused by a pollution 

condition. 

beginning to explore the use of secured creditor coverage, this coverage 

is already prevalent in many redevelopment financing packages. 

Matthews of AIG Environmental, a national provider of Secured 

Creditor Policies, explains that, “we will often be asked to provide 

coverage on a pool of loans for multiple redevelopment projects.” 

Insurance carriers such as AIG Environmental, XL Environmental, Inc., 

Kemper Environmental, and Zurich-American, which provided input for a 

1999 EPA study of the industry, are among the small group of carriers currently providing 

environmental insurance. 

insurance products, since particular projects most often necessitate highly tailored insurance policies. 

This spirit of adaptability and innovation is characteristic of local and state brownfields programs 

as well. 

Phoenix, Arizona, the city provides them with a Brownfields Information Resource Package that 

includes information about environmental insurance policy types and brokers serving the Phoenix 

area. At the state level, Massachusetts provides a subsidy of 25 percent of the environmental 

insurance premium cost to developers who redevelop brownfields. 

not only lowering pre-development costs, but also reducing the amount of up-front work needed 

to obtain coverage. 

The environmental insurance field continues to grow. According to Professors Meyer and Yount, 

the industry has evolved rapidly—and with the allowance of environmental insurance as an eligible 

use for funds under the new federal brownfields law, environmental insurance is 

likely to proliferate. 

are fitting environmental insurance into their revitalization strategies. As 

Ignacio Dayrit, Emeryville Pilot Director, commented, “It’s one piece of 

the redevelopment puzzle. 

from uncertainty.” 

More information on environmental insurance can be obtained at 

http://www.epa.gov/swerosps/bf/insurebf.htm or by contacting EPA’s 

Office of Brownfields Cleanup and Redevelopment at (202) 566-2777. 

The assisted living facility built on the former 

mattress factory site in Somerville. 

Under 

While Brownfields Pilot/Grantee communities are just 

Kevin 

These companies recognize the value in adapting and innovating their 

When developers and lenders express interest in redeveloping an abandoned site in 

The policy is pre-negotiated, 

Brownfields initiatives at the national, state, and local levels 

It is not the silver bullet, but it is protection 

Brownfields Success Story Solid Waste EPA 500-F-03-232 

Environmental Insurance and Emergency July 2003 

Response (5105T) www.epa.gov/brownfields/