Editor : Howard, please tell our readers about your practice with Aon Risk Services Northeast, Inc. and describe your function within the firm.
Tollin: Aon Risk Services provides risk management and brokerage services to commercial clients. I work in the Environmental Services Group and assist Aon clients with identifying their environmental exposures and provide alternative strategies for transferring risk. I often assist lawyers and their clients with drafting the most expansive scope of coverage on an environmental insurance product. Another function I have is to help facilitate the resolution of environmental claims. I regularly receive calls after an environmental claim has been denied under a non-environmental policy.
Editor: Lynda, please tell our readers about your insurance coverage and mass tort practice .
Bennett: I represent corporate clients involved in insurance coverage disputes with their insurers and provide broader consulting services to clients in the placement of insurance. Basically, when a client is sued, we represent the policyholder to secure coverage under commercial general liability, professional liability, fidelity, directors and officers liability policies. I have developed a niche practice in complex and mass tort liability insurance matters.
Editor: Why do you both feel the client is best served, particularly in the environmental area, when the insurance broker and coverage counsel work closely together to decide on the best product?
Tollin: While we use a specimen policy form as a starting point, most of our policies are heavily endorsed with negotiated policy language. Most of the policies that we manuscript combine the expertise of a specialized environmental broker with the knowledge of experienced environmental counsel. Because the engineering, underwriting and legal negotiation over policy language can be complex, a combined team approach results in the best product.
Bennett: I think that the client is best served because the broker and the lawyer are coming at the issue from two different perspectives. The broker is trying to get the best policy for the best price, and the lawyer is evaluating actual and potential legal liabilities and how best to protect against those liabilities through the purchase of an insurance policy.
Editor : What unique qualities do each of you bring to the table in serving your clients?
Tollin : I worked at a large law firm for 12 years, litigating environmental insurance coverage disputes, often involving pollution exclusions contained in general liability policies. While a law firm partner, I began to utilize creative risk transfer products to resolve litigation and real estate disputes. In 2001, I decided to spend 100 percent of my time working as an environmental risk consultant and insurance broker. I understand how to utilize environmental insurance to address the pollution gap with other insurance. I am often surprised that companies do not know that an absolute pollution exclusion is contained in their general liability, property and even Directors and Officers policies. I enjoy working with lawyers who understand the nature of environmental conditions and liability associated with a particular real estate, merger and acquisition or construction deal. If there is a pollution condition, I work closely with counsel to narrowly limit the exclusion to the known cleanup costs, provide coverage for liability and provide re-opener coverage so that the exclusion is deleted when the pollution condition is cleaned up.
Bennett: I've been representing corporate policyholders for fourteen years. The unique quality that a coverage lawyer brings to negotiating the niche environmental and mass tort policies is applying the lessons learned from the coverage disputes that arose out of the old CGL policies. After fighting the environmental and asbestos coverage wars for more than a decade, I know the policy language and exclusions that are most likely to lead to coverage disputes. I typically work with knowledgeable, specialized brokers like Howard to negotiate for clarification and/or removal of those provisions in order to secure the best insurance product for the premium dollar paid.
Editor: Looking at the legislation now pending in Congress about carbon emissions and carbon caps, do you foresee that the policies will have to be written to include more coverage relating to carbon emissions?
Tollin: Absolutely. The climate change and greenhouse gas issues have already led companies to inquire about having blanket environmental insurance protection. We have seen lawsuits directed at companies that were involved in greenhouse gas emissions. We also see damages that potentially have resulted from carbon emissions. Companies that are focusing on their carbon footprint are also conducting due diligence for broader environmental exposures, often to satisfy financial due diligence and meet reporting requirements under Sarbanes-Oxley. Environmental insurance policies presently provide coverage for environmental damage and loss attributable to alleged carbon emissions.
Bennett : Again, this is an instance where the coverage lawyer and the broker should be working together. As coverage counsel I also look at the D&O, first party property and CGL policies a client has in place to determine the scope of coverage that already exists before resorting to incurring additional premium dollars. I also work with clients and brokers to evaluate whether the existing policies may be modified to cover the risk as opposed to purchasing a separate, and typically more expensive, stand-alone policy.
Editor: While the broker knows what underwriting standards are used by each of the insurers, should the attorney be cognizant of when underwriting standards are inadequate in the face of some unforeseen but potential risk?
Bennett: Placing insurance coverage gets more and more complex every year because what used to be a "comprehensive general liability" policy, billed as a one-stop shop for corporate policyholders, now has morphed into a "commercial general liability" policy that is shot full of "absolute" exclusions. Therefore, it is most important for companies to understand the risks that they want insured, and then to work with qualified brokers and coverage counsel to make sure that those risks are addressed either through internal risk management and internal controls, insurance policies and/or other risk transfer mechanisms.
In terms of underwriting standards, I think the most important issue facing policyholders today is taking great care in the policy application process. In the last several years, we have seen insurers take increasingly aggressive and entrenched positions on alleged "misrepresentations" in the application process. While policy rescission is a drastic and difficult remedy to achieve, policyholders are burdened with the time and expense of coverage litigation when extra care is not taking in the application process. Policyholders can avoid those headaches by establishing a stringent internal control process before the application is submitted to the insurer.
Editor: What other types of risk transfers besides insurance have you found useful in working with clients?
Tollin: The amount of risk the client wants to retain can be addressed by deductible, self-insured retention and by utilizing captives. A client should seek to eliminate the uncertainty of cleanup costs by requiring a guaranteed fixed cost contract from its environmental consultant. We work with companies that will purchase another company's known environmental liability. We work with counsel on hold harmless and indemnity provisions to transfer the risk during a corporate or real estate sale. We also closely work with clients and their lawyers on risk control, health and safety and emergency response issues.
Bennett: The work that I do with clients is more of a risk management function. After we have resolved a claim, I recommend to clients that they evaluate whether any internal controls should have been in place to avoid and/or minimize the liability. Avoidance of the liability may be to improve internal processes or to modify reporting procedures. It may also be to evaluate whether the client had the ability to off-load any portion of the liability to one or more third parties involved with the claim. It is all about making sure that lessons are learned to avoid the next claim.
Editor : How do you assist your clients in measuring his risk spectrum when he first comes to you?
Tollin: The nature of risk depends on the industry. For example, health care and real estate clients worry about mold, Legionnaires, lead, asbestos, indoor air quality claims, bioterrorism and business interruption in addition to the typical exposure most clients have with owning and operating a property with contamination in the soil and groundwater from historic operations. For most clients, we measure the risk of pre-existing contamination that may exist but has not been discovered. Claims often arise from underground storage tanks, petroleum products and metals in soil and groundwater, and solvents (VOCs and SVOCs) which create vapor intrusion and indoor air quality issues on-site and off-site. We also work with counsel to evaluate whether any protection is offered in a Purchase & Sale Agreement for environmental and whether the indemnitor is viable and likely to honor the obligation without litigation. If the client is a contractor, a different set of professional services exposures are identified for a contractor's pollution liability policy.
Bennett: I evaluate the client's existing insurance program. I also carefully evaluate the client's contractual relationships. I strongly encourage clients to make sure that they are responsible only for their own negligence and that their contractual liability is limited to the greatest extent possible. In situations where the client may be held responsible for the actions of others, e.g., a general-subcontractor scenario, I strongly encourage clients to secure rights under the subcontractor's policy.
Editor: Do you inspect the subcontractors' policies?
Bennett : Yes. Sometimes that is easier to do than at other times. Unfortunately, most clients do not require production of their subcontractors' policies unless or until a loss occurs. By then, it may be difficult to get a copy of the policy. However, more and more of my clients are applying "lessons learned" by involving counsel earlier on in the contracting process. When given that opportunity, I impress upon company representatives that it is not enough to simply review and secure a copy of the "certificate of insurance." Sometimes that certificate may only report on the insurance that the subcontractor has. The devil really is in the details on the additional insured coverage issues and the importance of paying attention to these issues right up front cannot be emphasized enough.
Editor: Some policies are reputed to be vague as to stating policy limits. Do you both work together to help the client when coverage is denied?
Tollin: I work closely with the client's lawyer to devise our best strategy for dealing with the insurance company. I believe that my reputation and credibility along with Aon's relationships in the marketplace allows us to achieve a satisfactory result in most cases. With respect to policy limits, defense costs are usually within the aggregate limit so the limit can be eroded by the payment of defense costs.
Bennett: The client's interest is usually best served when the broker tries to keep the claim handling on a calm, non-adversarial level. Typically, I get involved in the process when that effort breaks down.
Editor: How do you benchmark certain limits based on a catalogue of risks?
Tollin: We benchmark with other clients in the industry. We also work with counsel to assess likely claims scenarios for the particular risk and potential damages. Often the amount of damages will depend on the chemicals previously and currently used and venue. For example, some states pursue natural resource damage claims and some states have strict groundwater and indoor air quality objectives.
Editor: What measures should clients use in first seeking out an insurance broker and insurance counselor?
Bennett: I think specialty in the particular area of risk that you are trying to insure against is most important. The benefit that a client gets from using someone like Howard is that he knows all of the underwriters and has well established relationships with them. I know the case law and the issues that insurers typically raise in a claim denial scenario. Niche policies, in particular, need to be carefully parsed word-by-word, to be sure that the policy will provide coverage against the risks that are intended to be insured.
Tollin : I cannot emphasize enough how important it is to find an insurance broker who specializes in environmental insurance and an insurance counselor, such as Lynda, who has experience with the new pollution products. These products and insurers frequently change and only specialized professionals who do this every day can keep apprised of the latest developments to effectively protect the client from catastrophic loss.