THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY ERICKSON, PIPPY, ORIE, TOMLINSON, BROWNE, FERLO, RAFFERTY, BAKER, BRUBAKER, O'PAKE AND WONDERLING, JANUARY 30, 2009

REFERRED TO ENVIRONMENTAL RESOURCES AND ENERGY, JANUARY 30, 2009  

AN ACT

Establishing a program for the purchase of certain types of

environmental liability insurance and for subsidies for the

costs of premiums; and providing for powers and duties of the

Department of Environmental Protection.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the Environmental

Insurance Program Act.

Section 2.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Account."  The Environmental Insurance Program Subsidies

Account consisting of funds appropriated from the General

Assembly or received from Federal grants and loans.

"Borrower."  Any individual, trust, firm, joint stock

company, corporation, partnership, limited liability corporation

or partnership, or association that has applied for and in due

course will receive the proceeds of a commercial real estate

loan, which proceeds will be used exclusively to pay the costs

of remedial program activities for a site and site

redevelopment.

"Commercial real estate loan."  Loan documents evidencing an

obligation that is secured by real property that is subject to

the Environmental Insurance Program and in which the lender

relies upon the property as security for the loan and in due

course will obtain a perfected mortgage or other security

interest in the property.

"Damages."  Any of the following:

(1)  Property damage incurred at a site as an unforeseen,

unanticipated or unexpected result of a pollution condition.

(2)  Unforeseen, unanticipated or unexpected remedial

program costs incurred at a site for actions taken in

implementing a department-approved interim remedial measure

work plan, remedial action work plan or postremedial

construction operation, monitoring and maintenance work plan.

(3)  Bodily injury, property damage or remedial program

costs sustained or incurred by a third party as a result of a

pollution condition at a site.

"Default."  The failure of a borrower to make any part of a

scheduled, periodic or final payment by the due date under a

commercial real estate loan or the occurrence of a designated

cause or event of default under the terms of a commercial real

estate loan.

"Department."  The Department of Environmental Protection of

the Commonwealth.

"Eligible borrower."  A borrower that has:

(1)  Entered into a voluntary agreement with the

Department of Environmental Protection for the implementation

of an interim remedial measure work plan, a remedial action

work plan or a postremedial construction operation,

monitoring and maintenance work plan.

(2)  Been conditionally approved to receive a commercial

real estate loan from a lender the proceeds of which will be

used for the remediation of a site in order to allow the site

to be redeveloped, subject to obtaining environmental

insurance under the program.

(3)  Committed to the initiation of the redevelopment of

the real property within six months of the completion of

remedial construction activities.

"Environmental insurance."  Unanticipated environmental costs

insurance or pollution legal liability insurance required by a

lender in conjunction with the objectives of the Environmental

Insurance Program.

"Hazardous waste."  A substance or waste that, because of its

physical, chemical or other characteristics, may pose a risk of

endangering human health or safety or of degrading the

environment. The term does not include undisturbed naturally

occurring hazardous material unless it will adversely affect the

reasonable use of a property after response action is completed.

"Insurance company."  An insurance company authorized in this

Commonwealth to offer environmental insurance and that has an

A.M. Best Financial Strength Rating of A+ or better and an A.M.

Best Financial Size Category of FSC X or larger, or the

equivalent of both as determined by the Insurance Department.

"Lender."  Any State bank, State banking association, State

savings and loan association or State savings bank, any Federal

bank, national banking association, Federal Savings and Loan

Association or Federal savings bank or any other institutional

lender authorized in this Commonwealth to make commercial real

estate loans.

"Pollutants."  Any solid, liquid, gaseous or thermal irritant

or contaminant, including smoke, vapors, soot, fumes, acids,

alkalis or toxic chemicals and including waste, hazardous waste,

oil, hazardous material and solid waste.

"Pollution condition."  The discharge, dispersal, release or

escape of pollutants into or upon land, the atmosphere or any

watercourse or body of water, including groundwater, resulting

in the presence of pollutants in concentrations or amounts

exceeding maximum levels allowed by applicable environmental

laws or by court order, provided such conditions are not

naturally present in the environment.

"Pollution legal liability insurance."  Insurance that covers

damages caused by a pollution condition from or at a site that

is preexisting and unknown or was otherwise unknown at the time

the insurance is first obtained and at a minimum provides for

all of the following:

(1)  A minimum policy period of three years.

(2)  A duty to defend and pay for defense costs in an

amount at least up to the amount of coverage available under

the policy, irrespective of whether an administrative or

judicial order requires the insured to compensate any party

or pay for the damages, so long as there already exists a

legal obligation to pay those damages.

For purposes of this definition, "damages" means either property

damage incurred at a site as an unforeseen and unexpected result

of a pollution condition or bodily injury, property damage and

response action costs sustained or incurred by a third party as

a result of a pollution condition at a site. Damages includes

the property damage, bodily injury and response costs specified

in the preceding sentence, irrespective of whether an

administrative or judicial order requires the insured to

compensate any party or pay for the property damage, bodily

injury or response costs, so long as there exists a reasonably

quantifiable legal obligation to pay for those damages.

"Program."  The Environmental Insurance Program.

"Program manager."  The person appointed, designated or

contracted by the Department of Environmental Protection as

manager of the Environmental Insurance Program.

"Secured creditor."  A lender that originates a commercial

real estate loan to an eligible borrower, the proceeds of which

will be used within this Commonwealth exclusively to pay the

costs of remedial program activities and redevelopment at the

site.

"Self-insured retention amount."  Costs that are in excess of

the estimated costs, as accepted and approved by the insurer, of

implementing a voluntary agreement and work plan that the

borrower is obligated to pay before being eligible to make a

claim under an unanticipated environmental cost insurance

policy.

"Site."  The term includes:

(1)  Property that meets both of the following

conditions:

(i)  The property was previously the site of an

economic activity that is no longer in operation at that

location.

(ii)  The property has been vacant or has had no

occupant engaged in year-round economically productive

activities for a period of not less than the 12 months

previous to the date of application for a loan pursuant

to this act.

(2)  Notwithstanding the foregoing, the term does not

include any of the following:

(i)  Property listed or proposed for listing on the

National Priorities List pursuant to section 105(a)(8)(B)

of the Comprehensive Environmental Response,

Compensation, and Liability Act of 1980 (Public Law

96-510, 94 Stat. 2767).

(ii)  Property that is or was owned or operated by a

department, agency or instrumentality of the United

States.

(iii)  Property that will be the site of a contiguous

expansion or improvement of an operating industrial or

commercial facility.

"Unanticipated environmental cost insurance."  Insurance that

reimburses a borrower for some or all of the unanticipated

environmental costs and shall, at a minimum, provide for all of

the following:

(1)  The costs of remedial program activities required by

the Department of Environmental Protection for the site in

excess of the estimated cost, as accepted and approved by the

insurer, of implementing an approved work plan based on the

information available to the insurance company providing the

environmental insurance at the time that the insurance is

obtained, including the information contained or referenced

in the work plan or plans attached to the commitment document

or agreement with the department, and minus any prenegotiated

buffer layer or self-insured retention.

(2)  A policy period of sufficient length to cover the

duration of the remedial program activities.

"Unanticipated environmental costs."  State-required costs

that exceed the estimated costs, as accepted and approved by the

insurer, of implementing a voluntary agreement and work plan

approved by the Department of Environmental Protection based on

information available to the carrier at the time the insurance

is first obtained or any costs related to the presence of

hazardous waste at an affected site that were unknown to the

borrower and the department at the time such agreement was

approved.

Section 3.  Environmental Insurance Program Subsidies Account.

(a)  Establishment of account.--The Environmental Insurance

Program Subsidies Account is established in the General Fund to

be utilized by the department for the creation, development,

administration, management and implementation of the program.

(b)  Moneys deposited in account.--All of the following

moneys shall be deposited into the account:

(1)  Federal or State funds or both appropriated by the

General Assembly for the purposes of this act.

(2)  Notwithstanding any other provision of law to the

contrary, any interest earned upon money deposited into the

account.

(c)  Continuous appropriation.--

(1)  Except as provided in paragraph (2), notwithstanding

any other provision of law to the contrary, the money in the

account is appropriated on a continuing basis, without regard

to fiscal years, to the department for the implementation and

administration of the program.

(2)  The money in the account may be expended by the

department for the implementation and administration of the

program only upon appropriation by the General Assembly.

Section 4.  Environmental Insurance Program.

(a)  Establishment.--The Environmental Insurance Program is

established within the department.

(b)  Purpose.--The program shall provide subsidies for

environmental insurance premiums in order to facilitate the

remediation of contaminated real property as part of a plan for

redevelopment of a site.

Section 5.  Selection of insurance companies.

(a)  Solicitation of proposals.--

(1)  The department shall solicit proposals for a package

of environmental insurance products from insurance companies.

The request for proposal prepared by the department, in

conjunction with the program manager, shall identify the

objectives of this act and the specific types and coverage

limits of the insurance products desired.

(2)  The department shall require interested parties to

submit proposals for environmental insurance that meet those

objectives in the most effective and efficient manner.

(3)  The request for proposal shall require that

proposals allow purchasers of the environmental insurance the

ability to obtain additional coverage necessary to address

the specific needs of an individual insured and require that

the proposal allow a purchaser the opportunity to pay for

additional coverage without losing the lower transaction

costs structure of the prenegotiated environmental insurance

policy.

(b)  Evaluation of proposals.--

(1)  The department shall select one insurance company

that has submitted a proposal pursuant to subsection (a) to

be the exclusive State-designated provider of environmental

insurance under this act for a period of three years.

(2)  The department, in conjunction with the program

manager, shall select the insurance company that has

submitted a proposal that best meets the requirements of this

section and the objectives stated in the request for

proposal.

(3)  The insurance company selected by the department

must have substantial experience in environmental insurance

underwriting and providing insurance for State environmental

insurance programs.

(c)  Prenegotiated package.--

(1)  The insurance company selected pursuant to

subsection (b) shall offer a prenegotiated package of

environmental insurance products to any eligible borrower

under any commercial real estate loan to fund remediation

costs and redevelopment with a maximum subsidy of $500,000

per site.

(2)  The insurance company may also provide to any person

an unsubsidized environmental insurance similar to that made

available under this program.

Section 6.  Implementation of program.

(a)  Subsidies.--The department shall use moneys from the

account to:

(1)  Pay the fee of the project manager.

(2)  Within the limits of appropriations or Federal

grants and loans, provide a subsidy up to 50% of the cost of

environmental insurance offered pursuant to this section when

purchased by an eligible borrower and provide a subsidy up to

80% of the self-insured retention amount.

(b)  Method of awarding subsidies.--

(1)  Eligible borrowers shall receive subsidies under the

program in the order in which their applications are received

by the program manager.

(2)  In the event that an application is received from an

eligible borrower before the department has given final

approval to an earlier application, the department may

provide a subsidy to the subsequent applicant, provided that

it has reserved sufficient funds to provide the subsidy to

all eligible borrowers in the order in which their

applications are received.

(c)  Marketing.--The department shall assist the program

manager in the marketing of the program to lenders, developers

and other potential program participants.

(d)  Access to information.--The department shall assist the

program manager in providing developers and other potential

program participants with access to information regarding:

(1)  The program.

(2)  Lenders whose borrowers have previously participated

in the program or that have expressed interest in

participating in the program.

(3)  The availability and costs of environmental

insurance.

(4)  Environmental risk management issues.

(5)  Available economic development programs.

(6)  Other related information.

Section 7.  Application for subsidies.

All applicants for the program must provide the program

manager all information necessary to demonstrate that the

applicant is an eligible borrower, and a detailed estimate of

the cost of implementing any and all interim remedial measure

work plans, remedial action work plans, postremedial

construction operation, monitoring and maintenance work plans

necessary for the remediation of the site or costs incurred to

remove asbestos or lead paint from buildings and structures to

be demolished, repaired or renovated.

Section 8.  Coordination.

The department shall implement this act in consultation with

representatives of other appropriate State agencies.

Section 9.  Rules and regulations.

The department may promulgate rules and regulations to

administer and enforce this act.

Section 10.  Effective date.

This act shall take effect in 60 days.