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.