Investment Groups Buys a Refinery with Pollution Problems
For other Case Studies, please visit:
Problem:
An investment group was in the "due diligence" process of acquiring a refinery. The refinery was currently inactive, but had previously been in almost constant use since the 1920s. The site was known to be polluted by petroleum leaks and spills and and there were claims pending against the current owners. If the group were to buy the refinery they would inherit the claims, which threatened to halt the transaction.
Action:
We researched the current owner's liability insurance policies for as far back as they had records. We discovered that for several decades there was actually coverage for pollution claims - from the early 1940s until the mid-1970s. We catalogued the coverage and contacted all the insurers who had underwritten these polcies. Then, working with our client's legal team, we negotiated with these insurance companies to pay their claims to the policy limits, and used this settlement as a fund to pay off the historic liabilites.
We then arranged a new environmental liability insurance program to cover potential future claims. Since this was a risk that no one insurance company was willing to undertake on their own, we arranged a quota-share program involving several insurers with limits of $125 million for a multi-year term, flexible enough to cover all phases of the exposure - from idle through development, retro-fit construction, "hot testing" to an operational refinery.
Results:
The result was that the deal was done!
