By Jefferey S. Lejfer, CEO, New Day Underwriting Managers LLC
By its nature, the issue of environmental liability is an ever-changing beast.
Spurred on by the earliest federal regulations in the 1970s that mandate clean air and water, resource recovery, and environmental response, carriers offered insurance lines to manage the associated risks as they developed with the regulations.
By the mid-1980s, standard commercial general liability policies eliminated coverage for pollution liability claims, and the Pollution Legal Liability (PLL) line was born. PLL expanded to cover specific business classes such as manufacturing, commercial and habitational real estate, education, healthcare and hospitality. Through the intervening decades, PLL coverage broadened even further to include the cleanup of viruses and bacteria, biological hazards, and contingent business interruption coverage. Most recently, the 2015 re-emergence of Legionnaires Disease in New York City  put the underwriting spotlight on habitational real estate and healthcare risks.
A Changing Marketplace
Now there has been yet another significant disruption to the environmental insurance marketplace. The PLL line of business has seen decreases in capacity, re-underwriting of books of business resulting in restrictive terms, changes in carrier appetite leading to non-renewal of programs, reduced policy terms and in some instances, the discontinuance of certain programs.
More specifically, as you are probably aware by now, AIG recently began notifying clients who hold its PLL insurance for interests within the United States and Canada that it would no longer underwrite new policies. AIG is also not quoting new PLL business. Effective February 1, 2016, existing PLL policies were being honored, but not renewed. However, AIG continues to offer General Liability (GL)/PLL (EAGLE), Contractors Pollution Liability (CPL), and Storage Tank lines of coverage. AIG was the original writer of PLL insurance some 35 years ago.
Why Buy PLL?
Pollution Legal Liability is the foundation of the environmental insurance marketplace because it touches every industry and marketplace. The drivers to purchase PLL fall into four categories: regulatory, contractual, lender requirement and risk management. These apply to companies that face federal and state regulations for underground storage tanks and hazardous waste units, as well as those looking to ease a real estate transaction with environmental indemnity backing. Coverage enhancements have become available for items like contingent business interruption, cleanup of methamphetamine (meth) labs, PR/crisis response, and strategic management.
PLL is an excellent method for protecting contractors and site owners from environmental exposures. It is an ideal solution for managing the impact of potential risks and removing the financial doubts that can derail real estate deals.
Navigating the Waves
The environmental insurance area will continue to see changes — some small, some big, but always new — in regulations, technologies, chemicals of interest, risks.
While we may see some temporary disruption in the marketplace, it is clear to me that PLL insurance will continue to provide a financial backstop in the U.S. economy.  We have seen an uptick in development, especially residential, which has been late to the game in the economic recovery.  PLL insurance provides protection for developers, contractors, owners and lenders.
Private equity is still very active in all facets of our economy and PLL insurance provides protection to buyers and sellers that facilitate those transactions to occur.
At New Day we are still bullish on the prospects for this marketplace and feel that the vast majority of the carriers providing this insurance will continue to do so.