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Insurance Recovery

Old insurance policies may cover the costs of third-party liabilities and on-site sources of contamination.

The key to obtaining insurance coverage is assembling the right team, including an environmental consultant with the technical expertise necessary to validate a claim. A consultant's assumptions must be technically defensible and legally sound.

Insurance law varies from state to state. By way of example, a summary of New Jersey insurance law is provided below.

In New Jersey, insurance law is well settled, often making litigation unnecessary. Almost all Comprehensive General Liability (CGL) insurance policies written before 1986 will provide funds for third party liabilities and onsite sources of contamination. The timing of notice to the insurer is immaterial. Under CGL policies, insurers can only deny coverage if they suffer "appreciable prejudice—"a difficult standard to satisfy.

A continuous trigger determines which insurance policies pay for the cleanup. All insurance policies in effect at the time of the contaminant release must pay for the cleanup. The onus is on the insured to prove when the property damage occurred.

A third party liability policy reimburses the insured for offsite property damage, groundwater contamination and soil that is a source of groundwater contamination. In most cases, the Absolute Pollution Exclusion bars coverage for releases occurring entirely after 1986. However, if it is established that only one year of the release was pre-1986, full coverage may be obtained, regardless of when the claim is discovered.

It is not necessary to be in possession of insurance policies—evidence of the policy, such as a cancelled check, is often sufficient to obtain coverage.

Insurance policies are assignable. A buyer can take an assignment of a seller's insurance coverage, with the seller obtaining a hold harmless clause in the contract.

The key to negotiating lump-sum settlements is to contemplate the worst-case scenario in situations where significant data gaps exist. The insurance company may hire an outside consultant to further investigate a claim. It may also choose to base its decision on available data. In either case, negotiations will likely start from both ends of the valuation range.

Percentage payouts rely on the timing of the release. The onus is on the insured to demonstrate that a release occurred within a certain timeframe. An entire discipline, environmental forensics, is focused on applying analytical techniques for the purpose of age-dating releases. The key to using these techniques with a degree of persuasiveness is to construct corroborating lines of evidence in support of a hypothesis.