Environmental Insurance For Real Estate Transactions In Canada
Environmental Insurance For Real Estate Transactions In Canada typically pays on behalf of the Insured for Bodily Injury, Property Damage and Cleanup, resulting from a Pollution Condition:What Does Environmental Insurance For Real Estate Transactions In Canada Cover?
- on, at, under or migrating from a Covered Location
- arising out of Covered Operations
Note: most policies will or can also have additional insuring agreements for business interruption, disposal, transportation, etc.
Why Is Environmental Insurance For Real Estate Transactions In Canada Needed?
The Issue: All urban Real Estate is contaminated (fill, chloride from de-icing/salting, metals from car emissions). If your business owns/leases land – you have environmental liability issues. If you buy a business, you are buying environmental liabilities. See McQuiston v. Ontario (MOECC)Investigation and Cleanup Order issued to: Accountant given power of attorney to sell Site; and Real estate agent retained to sell Site
How Does Environmental Insurance For Real Estate Transactions In Canada Work?
An environmental insurance policy can be used to backstop liability assignment provisions. The Policy can cover the Buyer or the Seller, as needed (typically one or the other, not both). The Policy term (maximum of 10 years), limit (maximum of $XM) and triggers can be manuscripted to match the relevant agreement provisions.
Real Canadian Case Study:
- A buys a Site from B for $5M. A and B agree that $1M will be placed in escrow to ensure the Site is cleaned up (i.e., B gets $4M now; gets the additional $1M once cleanup is complete).
- Cleanup will take 5 years.
- Financial Impact to B: B must fund Cleanup and has $1M in capital tied up in escrow fund (@3% interest, this represents ~$160K in lost interest alone).
- Instead of placing $1M in escrow, B buys an Environmental Policy that will Cleanup the Site if B fails to do so.
- Cost of Policy is ~$75K ($1M limit, 5 year term).
Policy Benefits of Environmental Insurance For Real Estate Transactions In Canada:
B receives $5M at closing (not $4M) and has no capital tied up in escrow.
A receives an environmental policy (A+ carrier, experienced in deal with environmental cleanup) that can be triggered in the event B does not Cleanup Site.
To Discuss Environmental Insurance For Real Estate Transactions In Canada Or To Get A Quote For Environmental Insurance For Real Estate Transactions In Canada Connect With One Of Our Canadian Insurance Brokers Today at 1-866-287-0448
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