In the fall of 2013, regulations governing Phase I Environmental Site Assessment Services (ESA) were amended to include a requirement to conduct a vapor screen. This significant regulatory development should have prompted real estate owners to ask several questions:
- Did I acquire properties before the regulatory change? No – Good. You can stop reading. Yes – You better continue.
- Were the properties I purchased screened for potential vapor intrusion? Yes – You know your status and can deal with it accordingly. No – You’re flying blind with potential for problems.
- What is the downside of owning properties where no vapor intrusion screen was completed? This is a catch 22 – If there is no vapor intrusion, there is no downside; but if no vapor screen was completed you won’t know whether there’s a problem. An undocumented vapor issue could lead to significant problems at the time of a refinance or during a subsequent Phase I ESA.
- Does my environmental insurance cover this issue and for how long? Does your current environmental insurance policy cover any problems (claims) that may arise if vapor intrusion is discovered on your property? How long will that coverage last? And will an insurance provider require a vapor screen when it is time to renew your policy? If a vapor screen is required and vapor encroachment or intrusion is discovered, how will that affect your premiums or will your insurance provider exclude coverage for vapor related issues as a pre-existing condition?
It’s possible that if you purchased a commercial or industrial property before the regulatory change in the fall of 2013, and a vapor intrusion screen was not conducted, your environmental policy at that time covered the potential liabilities associated with vapor intrusion. It is highly likely that your insurance provider will require a vapor screen on each property that was not previously assessed before they will renew coverage.
If a subsequent vapor screen identifies a potential problem, are you 100% sure your insurance provider will renew your coverage?
If your answer is yes – and you can afford the premiums – you may not have a problem.
If your answer is no – or I don’t know – you will stand to benefit by being proactive, and develop a vapor screen independent of your insurance company.
The information obtained from a screen might indicate there is no Recognized Environmental Condition and that data could then be submitted at the time of your insurance renewal. Conversely, if screening data suggests a problem may exist, the screening data might be used as the rationale for conducting field tests to determine if there is any real impact at the site.
Furthermore, field data confirming a significant problem might suggest another course of action, such as applying for a state voluntary cleanup program if you have existing insurance coverage for costs incurred (minus any deductible amount and fees) to investigate and remediate a vapor problem.
Voluntary cleanup programs and cleanup standards vary from state to state. Because of the regulatory and scientific complexities attendant to vapor investigations, we recommend you obtain the advice of an environmental professional before initiating any vapor screening or field sampling activities.
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