From 2001 through 2010, some of the most severe claims against firms in our environmental program derived from manufacturing projects, with an average indemnity payment of $220,956. Indemnity payments from office building/bank projects averaged $213,157. Claims stemming from civil engineering projects (highways, bridges, tunnels, and dams) had average indemnity payments of $130,627. The following is an example of a real claim made against an environmental policyholder:
An environmental engineer was retained by a developer to provide a Phase I Environmental Assessment for a property to be developed into a residential subdivision. During construction, the Department of Environmental Protection halted work on the project when hazardous chemicals were found to be contaminating the site. The developer filed suit for the clean-up costs. There were multiple defendants in this case, and the environmental engineer was not considered one of the primarily responsible parties. However, it was alleged that the environmental engineer failed to detect the hazardous materials. The engineer argued that at the time he conducted the assessment several buildings where contaminants were later found were inaccessible. However, an expert hired by CNA felt that the engineer could have been more specific in advising the developer of the need for further sampling at the site. The engineer could have been more specific in advising the developer of the need for further sampling at the site. The engineer faced additional exposure due to the uninsured status of both the firm that conducted the Phase II Assessment and the general contractor.
Compounding the problem was the fact that the general contractor continued demolition even after being warned of the presence of contaminants. The continued demolition spread the contaminants beyond the initial locations. Defense counsel believed that the engineer was facing potential exposure of up to $1 million on both the original claim and a cross-claim from a co-defendant. This claim settled for $234,500, which was much less than defense counsel and CNA anticipated paying on behalf of the engineer. CNA also paid $138,000 in expenses.
For more information including risk management advice, please see our entire environmental claims study
(access limited to policyholders and brokers). This study was updated with current statistics in August, 2011.