remediation cost cap policy

A remediation cost cap policy is one of the simplest means of transferring the risk associated with a known environmental remediation issue.

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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, and 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.