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remediation cost cap policy

One of the simplest means of transferring the risk associated with a known environmental remediation issue is to obtain a remediation cost cap policy. Though the terms and conditions of this coverage have become increasingly restrictive, the policy is effective in capping the costs associated with a known remediation. The policy is written with a buffer of 10–25 percent of the expected remediation costs before the risk transfer layer attaches. The policy provides coverage in the event of a cost overrun associated with any or all of the following:

  • Discovery of higher concentrations of contamination
  • Discovery of a greater spread of contamination
  • Changes in governmental regulations
  • Failure of proposed technology

In this scenario, the environmental liability remains with the property owner, but the owner has capped the expected cost of the remediation.

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