PRP Shield: A Solution for Potentially Responsible Party (PRP) Environmental Risk

A first-of-its-kind solution to a decades-old problem that bundles pollution legal liability (PLL) coverage and a cost cap solution. 

Bundled Solution Addresses Environmental Cleanup Risks

Addressing cleanup costs is often a vexing challenge for companies and investors named as potentially responsible parties (PRPs) by the Environmental Protection Agency (EPA).

Parties that are wholly or partially responsible for the contribution of pollutants to a particular site or receptor can be found liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, also known as Superfund). These include current and past owners and operators of a facility, generators of hazardous waste and parties that arranged for the disposal of that waste, and transporters of hazardous waste who are notified of their PRP status through 104(e) letters from the EPA.

Once named, PRPs must self-insure this risk. But cleanup costs and allocations often exceed initial forecasts, causing a financial drain for organizations and making it difficult to plan ahead. And aside from cleanup costs, a PRP could also be held liable for damages to natural resources and injunctive relief, potentially leading to additional costs. 

To address this challenge, Marsh has launched PRP Shield, a first-of-its-kind solution to a decades-old problem that bundles pollution legal liability (PLL) coverage and a cost cap solution.

A New Way to Cover PRP Costs

If PLL coverage is already in place before a 104(e) letter is received, it can be used to cover claims. But if a company does not have PLL coverage, the site and the insured’s liability would be considered a “known condition” and is almost always uninsurable or excluded from PLL coverage.

Working with Axis, a leading insurer with an A+ AM Best rating, Marsh is addressing this issue by incorporating a cost cap solution within PRP Shield, providing:

  • An attachment point, above which the insurance pays, and which is structured to cover worst-case scenarios.
  • Coverage for cost overrun and allocation uncertainty.
  • Premiums in line with historical cost cap averages.
  • Coverage manuscripted to the client and site-specific requirements.
  • Coverage assignable with carrier approval.
  • Available insurance capacity in excess of $30 million when including other excess markets.
  • A policy term up to 10 years plus an extended reporting period.

The new solution can be applied both during transactions to facilitate deals and manage post-transaction risk, and also where there may be PRP sites or potential future PRP liability within an operating company’s portfolio.