environmental liability buyout
A third-party contractually assumes the ownership of the known environmental
conditions in a given property. In exchange for a cash payment to a third party,
the third party will assume all obligations for remediation and liability associated
with known conditions. The assuming party will then complete all required remedial
activities, negotiate with the Environmental Protection Agency (EPA) or other regulatory bodies, and provide a
full indemnity to the "seller." Procedurally, the contractual assumption typically
requires that the assuming party purchase an environmental insurance policy
to backstop their indemnity. Thus, the ceding company will be protected in the
event of the failure of the indemnitor. To protect the funds transferred to
the third party, the contract's insurance provisions typically dictate the use
of a finite risk insurance policy.