PRINTER'S NO. 1009
No. 807 Session of 2005
INTRODUCED BY ERICKSON, BOSCOLA, GORDNER, WENGER, PIPPY,
RAFFERTY, COSTA, GREENLEAF, ORIE, WONDERLING, LEMMOND,
WOZNIAK, C. WILLIAMS AND PILEGGI, JUNE 24, 2005
REFERRED TO ENVIRONMENTAL RESOURCES AND ENERGY, JUNE 24, 2005
AN ACT
1 Providing for a program for the purchase of certain types of
2 environmental liability insurance and for subsidies for the
3 costs of premiums.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Short title.
7 This act shall be known and may be cited as the Environmental
8 Insurance Program Act.
9 Section 2. Definitions.
10 The following words and phrases when used in this act shall
11 have the meanings given to them in this section unless the
12 context clearly indicates otherwise:
13 "Account." The Environmental Insurance Program Subsidies
14 Account consisting of funds appropriated from the General
15 Assembly or received from Federal grants and loans.
16 "Borrower." Any individual, trust, firm, joint stock
17 company, corporation, partnership, limited liability corporation
18 or partnership, or association that has applied for and in due
1 course will receive the proceeds of a commercial real estate
2 loan, which proceeds will be used exclusively to pay the costs
3 of remedial program activities for a site and site
4 redevelopment.
5 "Commercial real estate loan." Loan documents evidencing an
6 obligation that is secured by real property that is subject to
7 the Environmental Insurance Program and in which the lender
8 relies upon the property as security for the loan and in due
9 course will obtain a perfected mortgage or other security
10 interest in the property.
11 "Damages." Any of the following:
12 (1) Property damage incurred at a site as an unforeseen,
13 unanticipated or unexpected result of a pollution condition.
14 (2) Unforeseen, unanticipated or unexpected remedial
15 program costs incurred at a site for actions taken in
16 implementing a department-approved interim remedial measure
17 work plan, remedial action work plan or postremedial
18 construction operation, monitoring and maintenance work plan.
19 (3) Bodily injury, property damage or remedial program
20 costs sustained or incurred by a third party as a result of a
21 pollution condition at a site.
22 "Default." The failure of a borrower to make any part of a
23 scheduled, periodic or final payment by the due date under a
24 commercial real estate loan or the occurrence of a designated
25 cause or event of default under the terms of a commercial real
26 estate loan.
27 "Department." The Department of Environmental Protection of
28 the Commonwealth.
29 "Eligible borrower." A borrower that has:
30 (1) Entered into a voluntary agreement with the
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1 Department of Environmental Protection for the implementation
2 of an interim remedial measure work plan, a remedial action
3 work plan, or a postremedial construction operation,
4 monitoring and maintenance work plan.
5 (2) Been conditionally approved to receive a commercial
6 real estate loan from a lender the proceeds of which will be
7 used for the remediation of a site in order to allow the site
8 to be redeveloped, subject to obtaining environmental
9 insurance under the program.
10 (3) Committed to the initiation of the redevelopment of
11 the real property within six months of the completion of
12 remedial construction activities.
13 "Environmental insurance." Unanticipated environmental costs
14 insurance or pollution legal liability insurance required by a
15 lender in conjunction with the objectives of the Environmental
16 Insurance Program.
17 "Hazardous waste." A substance or waste that, because of its
18 physical, chemical or other characteristics, may pose a risk of
19 endangering human health or safety or of degrading the
20 environment. The term does not include undisturbed naturally
21 occurring hazardous material unless it will adversely affect the
22 reasonable use of a property after response action is completed.
23 "Insurance company." An insurance company authorized in this
24 Commonwealth to offer environmental insurance and that has an
25 A.M. Best Financial Strength Rating of A+ or better and an A.M.
26 Best Financial Size Category of FSC X or larger, or the
27 equivalent of both as determined by the Insurance Department.
28 "Lender." Any State bank, State banking association, State
29 savings and loan association or State savings bank, any Federal
30 bank, national banking association, Federal Savings and Loan
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1 Association or Federal savings bank or any other institutional
2 lender authorized in this Commonwealth to make commercial real
3 estate loans.
4 "Pollutants." Any solid, liquid, gaseous or thermal irritant
5 or contaminant, including smoke, vapors, soot, fumes, acids,
6 alkalis or toxic chemicals and including waste, hazardous waste,
7 oil, hazardous material and solid waste.
8 "Pollution condition." The discharge, dispersal, release or
9 escape of pollutants into or upon land, the atmosphere or any
10 watercourse or body of water, including groundwater, resulting
11 in the presence of pollutants in concentrations or amounts
12 exceeding maximum levels allowed by applicable environmental
13 laws or by court order, provided such conditions are not
14 naturally present in the environment.
15 "Pollution legal liability insurance." Insurance that covers
16 damages caused by a pollution condition from or at a site that
17 is preexisting and unknown, or was otherwise unknown at the time
18 the insurance is first obtained and at a minimum provides for
19 all of the following:
20 (1) A minimum policy period of three years.
21 (2) A duty to defend and pay for defense costs in an
22 amount at least up to the amount of coverage available under
23 the policy, irrespective of whether an administrative or
24 judicial order requires the insured to compensate any party
25 or pay for the damages, so long as there already exists a
26 legal obligation to pay those damages.
27 For purposes of this definition, "damages" means either property
28 damage incurred at a site as an unforeseen and unexpected result
29 of a pollution condition or bodily injury, property damage and
30 response action costs sustained or incurred by a third party as
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1 a result of a pollution condition at a site. Damages includes
2 the property damage, bodily injury and response costs specified
3 in the preceding sentence, irrespective of whether an
4 administrative or judicial order requires the insured to
5 compensate any party or pay for the property damage, bodily
6 injury or response costs, so long as there exists a reasonably
7 quantifiable legal obligation to pay for those damages.
8 "Program." The Environmental Insurance Program.
9 "Program manager." The person appointed, designated or
10 contracted by the Department of Environmental Protection as
11 manager of the Environmental Insurance Program.
12 "Secured creditor." A lender that originates a commercial
13 real estate loan to an eligible borrower, the proceeds of which
14 will be used within this Commonwealth exclusively to pay the
15 costs of remedial program activities and redevelopment at the
16 site.
17 "Self-insured retention amount." Costs that are in excess of
18 the estimated costs, as accepted and approved by the insurer, of
19 implementing a voluntary agreement and work plan that the
20 borrower is obligated to pay before being eligible to make a
21 claim under an unanticipated environmental cost insurance
22 policy.
23 "Site." The term includes:
24 (1) Property that meets both of the following
25 conditions:
26 (i) The property was previously the site of an
27 economic activity that is no longer in operation at that
28 location.
29 (ii) The property has been vacant or has had no
30 occupant engaged in year-round economically productive
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1 activities for a period of not less than the 12 months
2 previous to the date of application for a loan pursuant
3 to this act.
4 (2) Notwithstanding the foregoing, the term does not
5 include any of the following:
6 (i) Property listed or proposed for listing on the
7 National Priorities List pursuant to section 105(a)(8)(B)
8 of the Comprehensive Environmental Response,
9 Compensation, and Liability Act of 1980 (Public Law 96-
10 510, 94 Stat. 2767).
11 (ii) Property that is or was owned or operated by a
12 department, agency or instrumentality of the United
13 States.
14 (iii) Property that will be the site of a contiguous
15 expansion or improvement of an operating industrial or
16 commercial facility.
17 "Unanticipated environmental cost insurance." Insurance that
18 reimburses a borrower for some or all of the unanticipated
19 environmental costs and shall, at a minimum, provide for all of
20 the following:
21 (1) The costs of remedial program activities required by
22 the Department of Environmental Protection for the site in
23 excess of the estimated cost, as accepted and approved by the
24 insurer, of implementing an approved work plan based on the
25 information available to the insurance company providing the
26 environmental insurance at the time that the insurance is
27 obtained, including the information contained or referenced
28 in the work plan or plans attached to the commitment document
29 or agreement with the department, and minus any prenegotiated
30 buffer layer or self-insured retention.
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1 (2) A policy period of sufficient length to cover the
2 duration of the remedial program activities.
3 "Unanticipated environmental costs." State-required costs
4 that exceed the estimated costs, as accepted and approved by the
5 insurer, of implementing a voluntary agreement and work plan
6 approved by the Department of Environmental Protection based on
7 information available to the carrier at the time the insurance
8 is first obtained or any costs related to the presence of
9 hazardous waste at an affected site that were unknown to the
10 borrower and the department at the time such agreement was
11 approved.
12 Section 3. Account.
13 (a) Establishment of account.--The Environmental Insurance
14 Program Subsidies Account is hereby established in the General
15 Fund to be utilized by the department for the creation,
16 development, administration, management and implementation of
17 the Environmental Insurance Program established under this act.
18 (b) Moneys deposited in account.--All of the following
19 moneys shall be deposited into the account:
20 (1) Federal or State funds or both appropriated by the
21 General Assembly for the purposes of this act.
22 (2) Notwithstanding any other provision of law to the
23 contrary, any interest earned upon money deposited into the
24 account.
25 (c) Continuous appropriation.--
26 (1) Except as provided in paragraph (2), notwithstanding
27 any other provision of law to the contrary, the money in the
28 account is continuously appropriated without regard to fiscal
29 years to the department for the implementation and
30 administration of the program.
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1 (2) The money in the account may be expended by the
2 department for the implementation and administration of the
3 program only upon appropriation by the General Assembly.
4 Section 4. Environmental Insurance Program established.
5 (a) Establishment.--There is established within the
6 department the Environmental Insurance Program.
7 (b) Purpose.--The program shall provide for the creation,
8 development, administration, management and implementation of a
9 program to provide subsidies for environmental insurance
10 premiums in order to facilitate the remediation of contaminated
11 real property as part of a plan for redevelopment of a site.
12 Section 5. Selection of insurance companies.
13 (a) Solicitation of proposals.--The department shall solicit
14 proposals for a package of environmental insurance products from
15 insurance companies. The request for proposal prepared by the
16 department, in conjunction with the program manager, shall
17 identify the objectives of this act and the specific types and
18 coverage limits of the insurance products desired. The
19 department shall require interested parties to submit proposals
20 for environmental insurance that meet those objectives in the
21 most effective and efficient manner. The request for proposal
22 shall require that proposals allow purchasers of the
23 environmental insurance the ability to obtain additional
24 coverage necessary to address the specific needs of an
25 individual insured, and require that the proposal allow a
26 purchaser the opportunity to pay for additional coverage without
27 losing the lower transaction costs structure of the
28 prenegotiated environmental insurance policy.
29 (b) Evaluation of proposals.--The department shall select
30 one insurance company that has submitted a proposal pursuant to
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1 subsection (a) to be the exclusive State-designated provider of
2 environmental insurance under this act for a period of three
3 years. The department, in conjunction with the program manager,
4 shall select the insurance company that has submitted a proposal
5 that best meets the requirements of this section and the
6 objectives stated in the request for proposal. In addition, the
7 insurance company selected by the department shall have
8 substantial experience in environmental insurance underwriting
9 and providing insurance for State environmental insurance
10 programs.
11 (c) Prenegotiated package.--The insurance company selected
12 pursuant to subsection (b) shall offer a prenegotiated package
13 of environmental insurance products to any eligible borrower
14 under any commercial real estate loan to fund remediation costs
15 and redevelopment with a maximum subsidy of $500,000 per site.
16 The insurance company may also provide to any person an
17 unsubsidized environmental insurance similar to that made
18 available under this program.
19 Section 6. Implementation of program.
20 (a) Subsidies.--The department shall use moneys from the
21 account to:
22 (1) Pay the fee of the project manager.
23 (2) Within the limits of appropriations or Federal
24 grants and loans, provide a subsidy up to 50% of the cost of
25 environmental insurance offered pursuant to this section when
26 purchased by an eligible borrower and provide a subsidy up to
27 80% of the self-insured retention amount.
28 Eligible borrowers shall receive subsidies under the program in
29 the order in which their applications are received by the
30 program manager. In the event that an application is received
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1 from an eligible borrower before the department has given final
2 approval to an earlier application, the department may provide a
3 subsidy to the subsequent applicant, provided that it has
4 reserved sufficient funds to provide the subsidy to all eligible
5 borrowers in the order in which their applications are received.
6 (b) Marketing.--The department shall assist the program
7 manager in the marketing of the program to lenders, developers
8 and other potential program participants.
9 (c) Access to information.--The department shall assist the
10 program manager in providing developers and other potential
11 program participants with access to information regarding:
12 (1) The program.
13 (2) Lenders whose borrowers have previously participated
14 in the program or that have expressed interest in
15 participating in the program.
16 (3) The availability and costs of environmental
17 insurance.
18 (4) Environmental risk management issues.
19 (5) Available economic development programs.
20 (6) Other related information.
21 Section 7. Application for subsidies.
22 All applicants for the program shall provide the program
23 manager all information necessary to demonstrate that the
24 applicant is an eligible borrower, and a detailed estimate of
25 the cost of implementing any and all interim remedial measure
26 work plans, remedial action work plans, postremedial
27 construction operation, monitoring and maintenance work plans
28 necessary for the remediation of the site or costs incurred to
29 remove asbestos or lead paint from buildings and structures to
30 be demolished, repaired or renovated.
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1 Section 8. Coordination.
2 The department shall implement this section in consultation
3 with representatives of other appropriate State agencies.
4 Section 9. Rules and regulations.
5 The department may promulgate rules and regulations to
6 administer and enforce this act.
7 Section 10. Effective date.
8 This act shall take effect in 60 days.
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