How Insurance Archeology Can Assist Dry Cleaners When Environmental Contamination Claims Threaten Their Business

Posted on July 23, 2019March 22, 2024 by shenshaw

LEARN HOW OLD INSURANCE POLICIES CAN BE USED AS FUNDS TO PAY FOR ENVIRONMENTAL INVESTIGATION, REMEDIATION AND LEGAL COSTS.

BY: STEPHEN HENSHAW & DAVID O’NEILL

Once I met with a dry cleaner who said he had gone to the attic in search of his old business package policies. He explained that he had no idea before visiting an attorney that these old expired insurance policies could be of any use to him. Since they were package policies, they contained multiple lines of insurance. Parts of the policy provided coverage against damage to his building, against break-ins, storm damage and even workers compensation coverage. As far as he knew all of this coverage had long ago expired. Why would he still have copies of these old policies? There was no reason, he thought, that he would want to have kept them. They would have to be in a box or two that he had neglected to put in the dumpster.

LEARNING THE VALUE OF OLD COMMERCIAL GENERAL LIABILITY POLICIES IN ENVIRONMENTAL CLEANUPS

He had been told by his attorney to look for that part of the policy that addressed damage to the property of others. Not damage to others he might do in his delivery van. That was covered under the automobile insurance section of the policy. Rather, it was the part of the policy that covered his customers (the slip and fall coverage) that he was looking for. His attorney had told him that part of the old package policies could provide him the coverage he needed now to address the environmental contamination on his property from perchloroethylene (Perc) spills below ground that had occurred years earlier.

THE IMPACT OF PERC SPILLS WHEN REFINANCING A PROPERTY

It was these Perc spills that apparently had caused all the trouble. The landlord, a strip mall owner, had been refinancing and the bank required that he conduct a simple environmental audit that had included soil sampling. The samples had shown Perc in the soil at his end of the strip mall. The landlord was going to have to clean this up to get his refinancing. The cleanup would be expensive and the dry cleaner was expected to take care of the bill because he was the one who had accidentally put the Perc into the soil over the many years of his operation there. The attorney had assured the dry cleaner that this was indeed legal. The law in his state required that “the polluter” remove the pollution or at least reimburse the landlord if he had to have it done. Up until this time, the dry cleaner had not considered himself a polluter–it was a new role he was going to have to get used to before this nightmare would be over.

UTILIZING OLD CGL POLICIES TO FUND ENVIRONMENTAL CLEANUP

His attorney had explained that in his state, as in most states, it took policies issued before 1986 to pay for environmental investigations. This was because the later policies contained pollution exclusions that the courts in his state recognized as barring coverage for Perc spills. Paying the landlord’s environmental experts was likely to be too great for the dry cleaner to handle. After years of operating a successful business, he had significant savings, but these ongoing costs could deplete that savings account in no time. He may even need to consider bankruptcy unless he could find those insurance policies issued before 1986, and successfully file claims that would require his insurers to step in and defend him.

Learn more about old CGL policies by visiting Historical Commercial General Liability (CGL) Policies 101

CALLING IN THE INSURANCE ARCHEOLOGIST

Digging around in the attic, he succeeded in finding one collection of old policies, but these policies dated only to the late 1990s. Telephoning the insurance agent identified on the policies, the dry cleaner found that that insurance agency was no longer in business. Despairing, he reported his lack of success to the attorney, prepared to discuss bankruptcy instead of insurance recovery. However, the attorney suggested another option. He suggested that the dry cleaner hire an insurance archeologist to see what insurance might be located elsewhere.

Direct of Investigations at Policyfind David O'Neill conducting insurance archeology in office — Dave O’Neill, JD, Director of Investigations at PolicyFind, reviews historical policies.

Working backward from the earliest insurance policy, the insurance archeologist was able to discover that another insurance agency had purchased the defunct agency’s book of business prior to closing.

Contacting that insurance agency, the archeologist found that old policy files no longer existed, but that the agent would permit him to review his old accounting files. A review of these files identified some premium notices issued to the dry cleaner in 1985. These notices identified the policy numbers, dates and insurance carrier.

The insurance archeologist provided a specimen policy issued by the same insurance carrier to a different dry cleaner in his state from the 1985 policy period. This policy had a pollution exclusion on it but that exclusion, the attorney advised, was not a bar to coverage as long as the Perc releases had not been intentional, and had been “sudden and accidental.”

Using the premium notices and specimen policy together, the dry cleaner’s attorney was able to file a claim with the insurance company. The company stepped in to defend the dry cleaner, paid his attorney fees and paid the landlord’s environmental experts.

THE MORAL OF THE STORY

Don’t give up. Get some professional help and look under every rock. Ask your attorney about how insurance archeology can help you locate the records you need to defend against environmental claims.

To find out if you have historical assets, contact us for a Confidential Insurance Archeology® consultation.

As seen in Cleaner and Launderer

Stephen Henshaw, Founder at EnviroForensics & PolicyFind has over 30+ years of experience and holds professional registrations in numerous states. Henshaw serves as a client manager and technical manager on complex projects involving contaminated and derelict properties, creative litigation, deceased landowners, tax liens, non-performing banknotes, resurrecting defunct companies and cost recovery. Henshaw’s expertise includes a comprehensive understanding of past and current industry and waste handling practices and the fate and transport of chlorinated solvents in soil and groundwater. He has served as a testifying expert for plaintiffs and defendants on high profile cases involving causation and timing of releases, contaminant dispersion, allocation, damages, past costs, and closure estimates. He has a strong knowledge of state and federal regulations, insurance law, RCRA, and CERCLA. He has managed several hundred projects including landfills, solvent and petroleum refineries, foundries, metal plating shops, food processors, dry cleaners, wood treating facilities, chemical distribution facilities, aerospace manufacturing facilities, and transporters and provides strategy instrumental in funding projects and moving them to closure.

David O’Neill, JD, Director of Investigations at PolicyFind has 30+ years of experience in claims recovery on behalf of corporate policyholders involving environmental property damage and toxic tort and asbestos exposure claims. O’Neill has extensive experience in locating and retrieving insurance coverage evidence on behalf of potentially responsible parties responding to environmental investigation and remediation demands. His former investigative work includes unique matters involving Holocaust victims rights, mergers & acquisitions of a national landfill operator, and on matters involving national archives.

A Dry Cleaner’s State Funding Challenges Solved by Insurance Archeology

Posted on July 17, 2019March 22, 2024 by Jackie Cabrera

Insurance archeology solves funding issues for a dry cleaner who was distressed by the lack of effectiveness of his state’s environmental response fund.

This is the story of a Wisconsin dry cleaner who wanted to retire, but his property was plagued with environmental contamination and funding challenges despite his enrollment in Wisconsin’s Dry Cleaner Environmental Response Fund (DERF). Here’s how he found a way to get his unsellable property clean and ready for redevelopment.

The Discovery of PERC Contamination

The dry cleaner was in operation from 1968-2001 and throughout that time tetrachloroethene (PERC), a dry cleaning chemical, was used to clean its customers’ clothes. PERC became a common dry cleaning chemical in the 1930s and is now less frequently used in dry cleaning operations due to concerns for worker health and the environment.

Engaging the DERF

In 2001, the dry cleaner decided to retire and utilize the Wisconsin DERF so he could sell his business. The fund was contributed to through a license fee and a solvent fee by dry cleaners. Luckily, the dry cleaner owner contributed to the DERF program while in business and was eligible to utilize the funds for his investigation and remediation.

In hopes of selling his dry cleaning business to a buyer, he had to conduct an initial environmental investigation to begin the environmental due diligence process and gain access to his DERF reimbursements.

Working with the State’s Environmental Response Trust Fund

From 2002-2011, the dry cleaner paid for his clean up activities out-of-pocket while waiting for his reimbursements to come through from the DERF program. He contracted an environmental firm to conduct Phase I and Phase II Environmental Site Assessments (ESA), but the environmental firm’s work was constricted to a very slow pace due to the slow payments from DERF.

By 2014, the dry cleaner was well into his retirement and was no longer running his business, but he still needed to clean up the environmental contamination in order to sell the property. After spending roughly $250,000 out-of-pocket for his environmental investigation and remediation work, he had completely run out of personal funds. He could no longer pay for any additional work upfront and he could no longer wait on reimbursements from DERF.

Learn how state-funded environmental cleanups programs are being phased out.

Contacting local dry cleaning association for help

After the frustration the dry cleaner experienced with the DERF program, he contacted the Wisconsin Fabricare Institute (WFI), part of the national Drycleaning and Laundry Institute (DLI), for help on how to get him through this predicament. WFI recommended contacting EnviroForensics and its insurance archeology division, PolicyFind to find alternative funding sources.

Engaging with EnviroForensics

PolicyFind conducted insurance archeology to locate the dry cleaner’s old insurance policies. They evaluated the dry cleaner’s historical commercial general liability (CGL) policies and developed an insurance claim strategy to access funding that could be used to complete the environmental investigation and remediation–so he could finally sell his property.

To recap, in order to solve the dry cleaner’s financial challenges, PolicyFind:

Conducted Confidential Insurance Archeology® to find the insurance coverage that would pay for the cleanup.
Tendered the insurance claim with the insurance carrier, which led to the carrier confirming that the insurance would pay for the environmental work.

The switch from using DERF funds to historical insurance coverage to pay for the environmental work allowed the dry cleaner to finally clean up his property, which was a precursor for being able to sell his property.

The environmental investigation and remediation process

Once the insurance archeology funds were secured, EnviroForensics completed the remaining site investigation activities which included soil and groundwater delineation as well as vapor intrusion assessments. The results showed that there was soil contamination, which required additional remediation to gain site closure. Geologists and engineers developed a remediation plan to demolish the building and remove the existing contamination. EnviroForensics conducted a soil excavation and removed approximately 400 pounds of PERC and 670 tons of contaminated soil.

The amount of perc and contaminated soil from one dry cleaner is shown in the above two graphics. It’s astonishing to see the physical evidence from three decades of small and accidental releases of perc from a dry cleaner.

After the remediation, EnviroForensics completed a Phase I ESA to prepare the property for resale and helped the former dry cleaner find an investor to purchase the property, who took on the remaining environmental liability, which included ongoing environmental monitoring.

EnviroForensics helped find a buyer

Since the majority of the environmental work was complete and the CGL insurance policies had enough funding for the ongoing environmental monitoring, the investor felt comfortable working with EnviroForensics to settle the environmental claim and continue cleaning up the property.

Map overview of the former dry cleaner in Appleton, Wisconsin.

A New Life for the Property

The ongoing site work facilitated the sale of the property and future redevelopment plans are underway for potential reuse as a commercial office building.

The former dry cleaner site is nearing the end of its investigation and remediation work. The closure of the site, under the Wisconsin Department of Natural Resources (WDNR), is anticipated after minor investigation follow-up activities and continued environmental monitoring by 2021.

EnviroForensics is the most trusted environmental consultant in the dry cleaning industry. Learn more about our services for dry cleaners.

EnviroForensics^® is a full-service environmental consulting firm that has cleaned up more dry cleaning sites than any other firm. We’re the only firm that focuses on finding the money to pay for investigation, cleanup, and legal fees. We restore the value of your property while protecting you from regulatory and legal issues.

Environmental Investigations 101: Understanding PCE Contamination

Posted on July 16, 2019March 22, 2024 by admin_envir

PRELIMINARY SITE INVESTIGATION AND CHARACTERIZATION EFFORTS CAN COST A LOT OF MONEY AND TAKE SEVERAL MONTHS TO COMPLETE. HOWEVER, IT’S STILL COMMON FOR DRY CLEANERS TO FEEL LIKE THINGS ARE MOVING TOO FAST, ESPECIALLY IF THEY HAVEN’T YET FULLY GRASPED THE SCIENTIFIC BASIS OF WHAT IS HAPPENING.

BY: JEFF CARNAHAN

We talk a lot about environmental investigations and the types of important decisions that dry cleaners need to make during the environmental cleanup process. Some dry cleaners have dealt with the environmental investigation and remediation process before, and others haven’t had to deal with it up to this point. For those of you who haven’t yet become a reluctant expert in the field, it’s helpful to consider some entry-level investigation concepts.

UNDERSTANDING THE ENVIRONMENTAL INVESTIGATION PROCESS IN 3 STEPS
In recent articles, we’ve discussed the difference between Phase I and Phase II investigations, and that they are a part of a systematic approach to determining if the potential exists for environmental contamination during a commercial real estate property transaction.

Key terms:

- A Phase I Environmental Site Assessment (ESA) is the due diligence evaluation that addresses the past land uses of a property or group of properties and identifies the potential for environmental concerns to be present.

A Phase II ESA generally includes an initial or preliminary subsurface investigation, with sample collection, to determine whether or not the soil, soil gas or groundwater beneath the subject site is contaminated with metals, petroleum hydrocarbons, chlorinated solvents or other chemicals of concern, based on the past land uses identified in the Phase I.
A Nature and Extent (N&E) Investigation is performed if, during the Phase II ESA, contamination is detected in soil, soil gas or groundwater samples. When a regulatory agency conducting oversight (for example, the Regional Water Quality Control Board, the California Department of Toxic Substances, or local county agencies) requires the responsible party to fully remediate the contamination, they will first require that the responsible party get their arms around the magnitude of the problem in its entirety.

For dry cleaning sites, defining the Nature and Extent of the contamination is often tackled in a series of several steps.

STEP 1: Determine how far the contamination has spread away from the likely source area(s) laterally. Source areas are the location(s) where dry cleaning solvents first entered the subsurface. We commonly see that these source areas are the location of the existing and former dry cleaning machines, the waste storage areas, and the sewer system, but can also include storm drain systems, delivery bays or roof downspouts.

This graphic is an example of a source area with a subsurface view from a dry cleaning business.

The thing to remember about source areas at dry cleaning facilities is that the area where the release to the soil and groundwater occurred can be relatively small as compared to the size of contamination plume overall. This can make finding the source difficult. If you’ve hired an experienced consultant using the tips I gave you in last month’s “5 Considerations When Selecting an Environmental Consultant” article, you have a better chance of success in this effort.

STEP 2: Determine how deep the contamination has migrated. In cases where the groundwater table is very deep, the contamination found in the soil may not have reached that far down. If that is the case, consider yourself lucky because once a chlorinated solvent plume reaches the groundwater it can migrate pretty far away from the source.

Let’s talk about how groundwater plumes move. Sometimes when I teach people about the presence of groundwater and how it moves in the subsurface, they get a vision of an underground lake or river. That’s not it at all. Probably the best way to imagine groundwater is by visualizing a bucket of dry sand. That sand represents the subsurface geologic materials (rocks, sediments) beneath your dry cleaner.

Sand Bucket Illustration with Perc — Illustration of perc creating a common pathway through the sand and down to the water in the bottom of the bucket.

Now, if you fill that bucket half-way with water, the portion of the sand that is saturated with water is equivalent to the “aquifer”, and the top of the saturated part of the sand is the “water table”. You can imagine that if a very small quantity of perc is dropped at the very top of the bucket of sand, it would quickly be absorbed by the dry sand and none of it would reach the water table below. If that small drop of perc is repeated time and time again, a larger portion of the dry sand would contain perc until at some point the perc would saturate a common pathway to reach the depth of the water table in the bucket. This is how many releases of perc can eventually reach the groundwater beneath a dry cleaner.

Illustration of groundwater movement — This graphic illustrates the concept below, which explains how groundwater moves away aquifers or “recharged” areas and moves towards areas where an aquifer “discharges” or loses water, such as streams.

If perc contamination has actually reached the groundwater, it will start to move along with the subsurface groundwater and will migrate at a rate that can be calculated. It is interesting to consider how and why groundwater moves. Conceptually, consider that groundwater moves away from areas where the aquifer is “recharged”, or takes on water, and toward areas where the aquifer “discharges” or loses water.

A simple way to demonstrate this is by visualizing a grassy field where rainwater seeps into the soil and adds water to the groundwater aquifer. This is a recharge zone. A common discharge zone is a stream some distance away, at a lower elevation, that receives a portion of its water from the groundwater table. So, in this scenario, groundwater would flow from the grassy field toward the stream. If a dry cleaner site has released PERC into the soil near the grassy field and the contamination plume makes its way down to the depth of the groundwater table, the perc could migrate to the stream as well. It’s certainly not a fast process, but since most dry cleaner releases are decades old, it’s possible. That is why environmental consulting firms hire licensed professional geologists and engineers who understand these types of processes.

STEP 3: If groundwater samples need to be collected, the cost-effective approach is to first collect “grab” samples. Grab samples are samples collected one time and at specific locations and depths. They provide an inexpensive snapshot of the groundwater quality. Grab samples are typically collected through a steel rod that has been advanced from a drilling rig or percussion drilling device. It is necessary to also collect appropriate quality control samples during the sampling activities.

The sampling locations and sample results for both soil gas and groundwater samples are then placed on a map as shown in Figure 1 (below) and on a cross-sectional diagram, as shown in Figure 2 (below).

Soil gas and groundwater sample locations — Figure 1 is a map that shows soil gas and groundwater sample locations.

The cross-section (Figure 2) actually gives you a picture of the geological layers beneath the property and how far the contamination has spread laterally and vertically. If you haven’t yet had any exposure to the environmental investigation process, this is how your consultant will communicate the information to you and the regulators.

Geological layers beneath a contaminated property — Figure 2 shows the cross-section of geological layers beneath the contaminated property, which includes soil and groundwater.

If groundwater has been impacted, you will be required to install permanent monitoring wells, from which groundwater samples can be collected over the course of a year or two to get a better understanding of the groundwater quality. Groundwater levels, or the depth of the groundwater table in each well, are also collected to determine the groundwater flow direction. Depending on how much rain is received during the measurement interval, the depth of the groundwater table moves up or down. Tests can also be conducted using the monitoring wells to develop an understanding of the hydraulic conductivity of the water-bearing unit. These results assist in determining the groundwater velocity and how fast the contaminated groundwater moves over time. While it may not be necessary to have the site fully characterized before implementing remedial activities, it is common to need these types of site characterization tests to design the appropriate remediation plan.

NEXT STEPS FOR YOUR ENVIRONMENTAL INVESTIGATION
These preliminary site investigation and characterization efforts can cost a lot of money and take several months to complete, not including long-term stewardship monitoring. It is not uncommon, however, for the responsible party to feel like things are happening way too fast, especially if they haven’t yet fully grasped the scientific basis of what is happening.

I hope my 101 on environmental investigations is helpful for current or future investigations. As always, don’t hesitate to contact me if you’d like to discuss your unique situation and circumstances. I can be reached at jcarnahan@enviroforensics.com or (866) 888-7911.

As seen in Cleaner & Launderer

Jeff Carnahan, LPG, has 20+ years of environmental consulting and remediation experience. His technical expertise focuses on the investigation and interpretation of subsurface releases of hazardous substances for the purpose of evaluating and controlling the risk and cost implications. He has focused on being a partner with the dry cleaning industry for the past decade, and he’s a frequent contributor to the national dry cleaning publication Cleaner & Launderer. He is an industry leader in understanding that environmental risk includes not only cleanup costs, but also known and unknown third-party liability.

Top 10 Resources for Drycleaners

Posted on July 9, 2019March 22, 2024 by Elizabeth Hemingway

THE FABRICARE INDUSTRY DOESN’T HAVE IT EASY THESE DAYS. INDUSTRY CHANGES THAT ARE FORMING ON THE HORIZON WILL COME TO PASS–FASHION, INCOME, AGE, SOCIETAL TRENDS, AND DISRUPTIVE BUSINESS MODELS WILL CONTINUE TO SHAPE THE DEMANDS OF CUSTOMERS.

Dry cleaners will continue to evolve and adjust to the market just like they’ve done for over a century. If you’re one of the 33,000 dry cleaners in the United States, it can feel like trying times. But you’re not alone. In fact, you have a large community of dry cleaners–as evident by the 11,000 attendees at this year’s Clean Show–and resources at your fingertips.

From government resources and associations to publications and thought leaders, here’s a list of the top 10 resources available to dry cleaners.

1. NATIONAL AND REGIONAL DRY CLEANING ASSOCIATIONS

Here’s a few of the dry cleaning association logos.

Drycleaning & Laundry Institute International (DLI) is a membership-based organization aimed to empower drycleaning entrepreneurs and their staff to offer the best quality and customer service in the industry.

DLI has a network of thousands of dry cleaners. DLI’s blog regularly shares industry best practices on all dry cleaning and laundry topics from clothing drop off processes to removing stains, cleaning, finishing, and packaging. DLI also offers valuable business information including employee relations, hiring, firing, governmental and running a small business.

DLI’s School of Drycleaning Technology offers several courses throughout the year, online certification testing and renewals, and courses across the US.

Check out some of the associations available to dry cleaners throughout the U.S.

Mid-Atlantic Association of Cleaners (MAC) serves Washington DC, Maryland, Virginia, and West Virginia
California Cleaners Association (CCA) serves California
South Eastern Fabricare Association (SEFA) serves Alabama, Florida, Georgia, South Carolina, and Tennessee
Midwest Drycleaning and Laundry Institute (MWDLI) serves Indiana, Kentucky, and Ohio
North East Fabricare Association (NEFA) serves Maine, Vermont, New Hampshire, Massachusetts, Rhode Island, Connecticut, New York, and New Jersey
Southwest Drycleaners Association (SDA) serves Arkansas, Kansas, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, and Texas
Minnesota Dry Cleaners Association (MCA) serves Minnesota
Wisconsin Fabricare Institute (WFI) serves Wisconsin

2. CLEANER AND LAUNDERER

Cleaner and Launderer has been around since 1960. Originally, the publication was called “Western Cleaner & Launderer,” and served industry news and information to dry cleaners throughout California. Now, readership and distribution have grown exponentially with copies of the monthly edition landing in mailboxes across all 50 states. In 2007, the name was changed to “Cleaner and Launderer” as the brand expanded its reach in digital and social networks. Helpful articles in Cleaner and Launderer run the gamut from industry updates and employee morale tips to monthly columns, such as:

Word From the Street, where John Leano shares business management.
the Environmental Corner, where EnviroForensics’ Jeff Carnahan shares educational content on environmental contamination and cleanup, advice on addressing environmental liabilities, and tips for finding the funds to pay for environmental cleanups and legal fees
Show Your Customers Your Expertise, where Kenny Slatten provides textile treatment insights and tips.

The front page of Cleaner and Launderer’s July 2019 issue.

3. AMERICAN DRYCLEANER

American Drycleaner is one of the leading dry cleaning publication in the country. Distributed in both print and digital format, the magazine boasts a wide variety of resources for both small and large dry cleaning business owners. Their mission is to help dry cleaners run their businesses better, with up-to-the-minute information on industry news, events and trends. Other valuable resources on their website include:

Expert Management Advice
Marketing and Production
Insights on Equipment and Supplies

Don’t miss our president’s recent interview, Sprout Out: Talking about Site Remediation, with American Drycleaner editor Tim Burke.

4. NATIONAL CLOTHESLINE

National Clothesline is a free publication for dry cleaners and is read by close to 20,000 cleaners and suppliers across the country and around the world. The newsletter provides news and information needed by garment care professionals to be successful in a rapidly changing industry. On the National Clothesline website, along with its digital edition, you will also find a “Resources” page that includes:

An online forum for dry cleaners
A directory of business consultants
A list of courses and seminars provided to dry cleaners
Books, DVDs, and other forms of helpful media
Government regulations for dry cleaners

The front page of the National Clothesline’s July 2019 issue.

5. FABRICARE MAGAZINE
DLI publishes the Fabricare magazine on a quarterly basis and provides resources and education to dry cleaners. This magazine features educational, management and industry resources and covers topics like

The cover of Fabricare’s 2019 second quarter issue.

6. ENVIROFORENSICS BLOG

As the dry cleaning industry’s most trusted environmental consultant, EnviroForensics’ Blog aims to empower dry cleaners with a host of helpful articles, educational content, and informative posts about the different issues, process and questions that dry cleaners encounter when they’re addressing their environmental liabilities.

Recent blog posts cover topics like:

EnviroForensics also hosts educational webinars, such as How to Use Old Insurance to Pay for Environmental Cleanup.

7. POLICYFIND BLOG

PolicyFind is an insurance archeology firm that locates historical insurance policies for business and property owners, municipalities, attorneys and private equity firms. So, if you’re looking for your old insurance policies to help pay for an environmental investigation and cleanup, PolicyFind™, is a great resource. PolicyFind’s blog is a helpful resource, too, with educational content and case law updates.

8. U.S. ENVIRONMENTAL PROTECTION AGENCY

Environmental laws vary from state to state but ultimately echo the laws at the federal level. The United States Environmental Protection Agency has its guidance on common dry cleaning solvents like PERC posted to their website, alongside thousands of peer-reviewed studies and other archives.

To find more information on your state’s health and environmental agencies, environmental topics and laws and regulations, visit the EPA’s Health and Environmental Agencies of U.S. States and Territories.

The EPA’s webpage on tetrachloroethylene (Perc, PCE).

9. UNITED STATES DEPARTMENT OF LABOR: OSHA REGULATIONS FOR DRY CLEANERS
It’s important for dry cleaners to up to date on occupational safety and health. The Occupational Safety and Health Administration (OSHA) has it’s set standards for dry cleaners along with resources for hazard recognition on their website as a resource for dry cleaners.

The OSHA standards resource webpage for dry cleaners.

10. SMALL BUSINESS OWNER MARKETING TOOLS
Drycleaners are small business owners and they have to run an entire business while maintaining their drycleaning operations. It’s a lot to handle and it isn’t for the faint of heart. How can drycleaners keep up with the digital demands on small business owners? They can use marketing tools to help get the word out about their business and share their unique selling points in a way customers will want to engage with your business.

Wix and Squarespace are helpful for website development and management.
Mailchimp is a great tool for email marketing. You can update your clients on discounts, news or best practices for taking care of their clothes.
Canva is an easy graphic design tool for social media graphics, posters, flyers, and brochure templates.
Hootsuite and SproutSocial are good tools for social media scheduling and management.

State-Funded Environmental Cleanup Programs for Dry Cleaners are Endangered–What is Taking Their Place?

Posted on July 5, 2019March 22, 2024 by Alex Miller

STATE TRUST FUNDS INTENDED FOR CLEANING UP DRY CLEANER SITES HAVE BEEN GREAT TO RELY ON. HOWEVER, MANY HAVE FALLEN ON HARD TIMES.

BY: DRU CARLISLE

Some Funds are either running out of money or have already sunset. What is the dry cleaning industry turning to for the money needed to respond to environmental liability? Dry cleaners are increasingly using their historical insurance policies to pay for environmental cleanup claims—protecting their business from financial ruin or bankruptcy.

The dry cleaning industry has seen more than its fair share of costly and complicated environmental contamination issues. In the past, eligible dry cleaners in almost 25% of the United States have been able to use money from state trust funds that were established solely for this purpose. Unfortunately, these state trust funds have proven to be not sustainable in most situations, and the number of available funds is declining. In the coming years, it’s anticipated that those looking to the state fund programs will experience even more delays in reimbursement of money already spent out-of-pocket, and or will lose the fund altogether.

Who is potentially impacted by this news? Any dry cleaner in Alabama, Connecticut, Illinois, Florida, Kansas, Missouri, North Carolina, Oregon, South Carolina, Tennessee, Texas, or Wisconsin.

This is frightening news for dry cleaners in these states, who are liable for cleaning up environmental contamination caused by cleaning solvents like PCE (Perc) or TCE. However, another financial solution is still available to dry cleaners—their historical Commercial General Liability (CGL) insurance policies. By finding their historical insurance policies, dry cleaners can use them as assets to help pay for their environmental investigation and cleanup. Those residing in states without trust funds have been doing it for years.

HOW CAN DRY CLEANERS USE HISTORICAL INSURANCE POLICIES TO PAY FOR ENVIRONMENTAL CLEANUPS?
Historical insurance policies are valuable assets that you can use to get money to pay for resolving environmental issues.

Commercial general liability (CGL) policies provide coverage to businesses for bodily injury, personal and property damage caused the business’ operations, products, or injury that occurs on the business’ premises. Most every business has old CGL policies since they are commonly purchased as a necessity to cover potential costs incurred by defending and reasonably resolving suits seeking to hold them liable for alleged bodily injuries or property damage.

Historical Commercial General Liability (CGL) policies from before 1985-86 typically don’t have a clause that disallows coverage for releases of contaminants. This means that if a dry cleaner can find their or their predecessor’s old insurance assets, then those policies can pay for the environmental investigation and cleanup required by the state’s environmental regulatory agency. Additionally, the policies would likely protect dry cleaners from any neighbors who decide to sue them for damage to their property. These policies also entitle dry cleaners to hire an environmental defense attorney at no charge and receive insurance payments immediately without upfront payments, unlike most state trust funds.

Once triggered historical commercial general liability (CGL) policies can be used to recoup or pay for 1) site investigation, 2) remediation/cleanup, 3) interim remedial measures, 4) building a legal case, 5) responsible party search, 6) interfacing with agencies, 7) defense against legal claims, and 8) legal fees. To learn more about CGL policies, visit How Does It Work? CGL Policies and Insurance Archeology.

HOW DO YOU FIND OLD INSURANCE POLICIES?
Insurance archeologists conduct insurance archeology to find lost or misplaced liability insurance policies that can defend and indemnify policyholders against claims such as environmental property damage claims.

EnviroForensics® is the nation’s leader in finding and using historical insurance coverage. Our insurance archeology division, PolicyFind™, has decades of experience identifying and locating lost, mislaid, or destroyed liability insurance policies for policyholders.

First, insurance archeologists retrace the genealogy of historical insurance coverage to identify past owners and operators who may have contributed or caused personal injury or environmental damage.

Next, they use an extensive specimen policy library to help confirm terms and conditions, research data services, and physical file searches to follow leads and locate evidence of old insurance policies.

And finally, the results of the insurance archeology process are assembled into insurance coverage charts, which visually reconstruct the CGL insurance policies.

This is an example of a typical Insurance Coverage Chart that has reconstructed historical insurance policies from 1960 to 1990. The policies include general liability policies and excess/umbrella liability policies. This particular coverage shows property damage aggregate limits per policy period and what carriers are liable for from the policyholder’s coverage period.

The rebuilding of historical land use and insurance can limit the liability of individual clients. Initiating coverage from these policies thereby creates an alternative funding source, which can protect a business from severe financial loss and even save a company from bankruptcy.

“If historical insurance policies are lost or misplaced, PolicyFind’s expert insurance archeologists will find the needed evidence of their existence and create a legally defensible historical insurance coverage chart—saving a dry cleaner’s livelihood,” says Jeff Carnahan, President of EnviroForensics.

Once identified and brought to light, the coverage provided by old insurance policies can be used to hire an environmental consulting firm with specialized expertise in serving the dry cleaning industry by cleaning up its historical environmental pollution problems.

HOW ENVIROFORENSICS CAN HELP
EnviroForensics® is the nation’s leading environmental engineering firm serving dry cleaners. EnviroForensics is the only full-service environmental firm that performs insurance archeology to locate money to pay for environmental investigation, cleanup, and legal fees. EnviroForensics helps clients get their cleanups paid for without significant cost to the clients or their businesses while restoring their property to fair market value.

To find out if historical insurance assets are an available funding avenue for you, contact us for a confidential consultation.

Dru Carlisle, Director of Drycleaner Accounts
For over 10 years, Dru has helped numerous business and property owners facing regulatory action, navigate and manage their environmental liability. Dru has vast experience in assisting dry cleaners in securing funding for their environmental cleanups through historical insurance policies. Dru is a member of numerous drycleaning associations in addition to serving on the Midwest Drycleaning and Laundry Institute (MWDLI) advisory council and on the Drycleaning & Laundry Institute Board (DLI) as an Allied Trade District Committee Member.

Jeff Carnahan talks environmental remediation in American Drycleaner

Posted on June 25, 2019 by Alex Miller

Jeff Carnahan shares his experience on environmental remediation for dry cleaning industry with American Drycleaner’s editor Tim Burke. In the interview, Jeff discusses

Environmental remediation for perchloroethylene, also known as Perc (a common drycleaning solvent)
Three different types of subsurface contamination at dry cleaning sites
Reasons to start an environmental investigation
Five common dry cleaning environmental scenarios
Insurance archaeology as an alternative funding source
And Jeff’s biggest tip for dry cleaners

To read the Q&A article, download it here.

5 Considerations When Selecting an Environmental Consultant for Dry Cleaners

Posted on June 19, 2019March 22, 2024 by Alex Miller

SELECTING THE RIGHT ENVIRONMENTAL CONSULTANT IMPROVES THE QUALITY OF YOUR DECISIONS AND THUS THE SUCCESS OF YOUR PROJECT. CONSIDER THESE PIECES OF CRITERIA WHEN SELECTING AN ENVIRONMENTAL CONSULTANT FOR YOUR DRY CLEANING BUSINESS.

BY: JEFF CARNAHAN

Environmental contamination from past dry cleaning operations negatively affects many businesses, properties, communities and individuals across America. Dealing with environmental contamination has become a routine part of running a dry cleaning business–it’s even changed the standards for conducting environmental due diligence when buying or selling commercial property. I’ve compiled a list of five things dry cleaners need to consider when choosing an environmental consultant.

1. REACH OUT TO YOUR PEERS FOR ADVICE AND REFERRALS, BUT DO YOUR DUE DILIGENCE

You are certainly not the first dry cleaner in your area to deal with an environmental release. There are many excellent national and regional dry cleaner associations, and some of their members have been through this before. Sometimes, just a conversation about someone else’s experience with the unknown can be enough to set one’s mind at ease, or at least give some level of comfort. One of the first things that anyone who has dealt with environmental contamination issues will tell you is that you need to hire a good consultant and a good attorney.

If you get a referral, evaluate the business situation of the person who gave you that referral. Be sure to ask:

What was their business situation?
What was the extent of their contamination?
What was their end goal?
How much did they spend out-of-pocket on costs?
Did they achieve their goal?
Was their property value restored to fair market price?

Remember each situation is unique. Be careful that you don’t fall into selecting an environmental consultant based upon close proximity or perceived to be the cheapest.

Selecting the right environmental consultant is one of the most important business decisions you’ll face and there are important differences between environmental consultants. If a business owner doesn’t know that there are differences between environmental consultants, countless hours and dollars may be wasted, projects could drag on for years and site closure or settlement may not be achieved.

2. FIND AN ENVIRONMENTAL CONSULTANT THAT IS RIGHT FOR YOUR UNIQUE CIRCUMSTANCES

An environmental consultant is typically a scientist or an engineer who has received specialized training about the way contamination behaves in the soil, groundwater, and air and possesses an understanding of the regulatory climate under which contamination issues are governed. Given the wide variety of geological conditions across the planet, the vast numbers of different types of contaminants in the world today, and the complex network of local, state, regional and national regulatory agencies; it’s a pretty tall order for one person to be an expert at them all. That’s why most businesses facing environmental issues hire an environmental consulting firm, which includes a number of individual professionals with expertise across many scientific and regulatory disciplines. This way you get the benefit of all this expertise for one price.

Your consulting firm must have demonstrated experience with successful investigations and cleanups of subsurface chlorinated solvents releases, like PCE and TCE

From an investigation perspective, it can be challenging to identify the true source areas of a Perc release, to determine the timing of when the release occurred, know where to look for downgradient portions of migrating groundwater plumes, and anticipate what caused the release.

From the cleanup perspective, chlorinated solvents, like perc, have chemical and physical properties that make it much more complicated to clean-up and achieve regulatory closure. It doesn’t breakdown in most natural subsurface environments and pockets of pure Perc product that hasn’t yet dissolved can be mobilized if appropriate care and skill aren’t exercised, which can create a bigger problem than already exists. I’d say a consultant who hasn’t yet managed over a hundred Perc dry cleaner sites probably doesn’t yet have a good feel for the unique complexities these sites hold.

PRO TIP: BE SURE TO INTERVIEW POTENTIAL CONSULTANTS TO FIND OUT WHAT THEIR AREA OF EXPERTISE IS. ASK FOR A VARIETY OF CASE STUDIES AND REFERENCES THAT DEMONSTRATES THE CONSULTANTS’ SUCCESSFUL EXPERIENCE. REMEMBER THAT ONE TYPE OF CONTAMINATION IS NOT LIKE THE OTHER AND THAT ANY LACK OF SPECIFIC EXPERIENCE WITH PERC IS A POTENTIAL RED FLAG.

Download our Environmental Consultant Interview Questionnaire to help you during the interview process.

3. FIND AN ENVIRONMENTAL CONSULTANT WITH EXPERIENCED VAPOR INTRUSION EXPERTS

For many dry cleaner sites, vapor intrusion issues are typically at the forefront of concerns. Perc, a common dry cleaning chemical, has a high degree which means the volatility of the chemical almost always results in subsurface vapor or vapor intrusion. Since vapor intrusion is common at dry cleaner sites, you’ll want to find a vapor intrusion experts who also understand Perc sites.

Not all environmental consulting firms have vapor intrusion experts. Some firms shy away from the vapor intrusion work even though they do soil and groundwater sampling work on Perc or TCE sites. Firms without their own vapor intrusion experts often subcontract those services, which can dilute the internal communications with the client. A firm with demonstrated expertise in all forms of Perc contamination ensures that the vapor intrusion investigation, mitigation, and risk management can remain a strategic component of the entire site closure approach.

4. FIND AN ENVIRONMENTAL FIRM WITH SKILLED RISK COMMUNICATORS

When subsurface contaminants that have originated at your dry cleaner site migrate to off-site properties in the soil, groundwater or vapors, there are difficult yet necessary conversations ahead. Sometimes there are even conversations that need to be had with your own on-site employees, on-site tenants, or neighbors. Each of these communications regarding how contamination, that you are responsible for, has impacted their property, or potentially even exposed site occupants above health-based screening levels, is a high-risk of liability for you. Your environmental attorney is going to be intimately involved in these conversations, but a good environmental consultant is going to employ professionals who are highly skilled in explaining these situations to affected persons or communities.

In my experience of representing dry cleaners for over 20 years, I routinely need to convince next door neighbors to allow access for sampling on their properties and even explain how there may need to be restrictive covenants outlining a contract or agreement for their properties following regulatory closure.

Your environmental consultant should engage their professionals who have specific training and experience in risk communication and public relations to hold public meetings or interface with the occupants of buildings where vapor intrusion exposure issues are known to exist. Trust me, when you have a consultant walking into an elementary school gymnasium full of anxious parents to discuss a vapor intrusion concern on your behalf, you want them to have expertise in more than just the science of the matter.

5. FIND A FIRM WITH PROVEN ALTERNATIVE FUNDING EXPERTISE

The financial liability can be huge for a release of perc, and your ability to manage it is directly related to your ability to find the money to pay for it. Therefore, you need to find an environmental consulting firm with expertise in funding resources. A consultant who is truly looking out for your best interest is going to put your financial concerns near the top of the list of importance.

At my environmental consulting firm, we use your historical commercial general liability (CGL) insurance policies to help pay for the cost of environmental investigations and cleanup, among other sources.

Infographic illustrating the what commercial general liability policies can be used to pay for, such as environmental and defense costs. — Once triggered historical commercial general liability (CGL) policies may be used to for legal fees, defense against claims, site investigation, remediation/cleanup, interim remedial measures, building legal case, potentially responsible parties (PRP) search, interfacing with agencies and prior costs be may be retroactively recovered.

To learn more about historical CGL insurance policies and how to find, read How Does It Work? Insurance Archeology and CGL Policies

There are also other funding strategies that may be of assistance, such as state trust funds or cost recovery through litigation if there are other responsible parties. It’s important to be careful about relying too heavily on state trust funds. There are reports of state dry cleaning environmental programs having a lack of sustainability and delays in reimbursement, adding even more emphasis to the need for strategic financial planning. There may be municipal or state incentives available, should you find yourself in a position to partner with redevelopers. Financial planning, just like clean-up strategies, should be custom-tailored to your specific situation and needs.

PRO TIP: DISCUSS WITH THE CONSULTANT WHAT YOUR FINANCIAL RESOURCES ARE, BECAUSE IF YOU CANNOT AFFORD TO GET TO THE END GAME, YOU MAY BE BETTER OFF NOT STARTING AT ALL. YOU NEED TO KNOW WHAT YOU ARE FACING SO THAT YOU’RE NOT SURPRISED. THIS MEANS YOU MAY HEAR THINGS YOU DON’T WANT TO HEAR.

IN SUMMARY

Selecting an environmental consultant may be the biggest decision for your business, so treat it very seriously. Select your consultant the same way you’d select your doctor. You wouldn’t want a foot doctor working on your heart and you shouldn’t have a tank removal contractor working on a solvent spill.

DO:

Evaluate the consultant’s experience
Download our Environmental Consultant Interview Questionnaire to help you evaluate your potential environmental consultant during your interview process
Find out how many sites they have worked on
Find out how many they have closed
Find out if there are alternative sources of funding other than just your business. If the consultant doesn’t have a clue as to what you are asking, run the other direction.
Ask tough questions about the investigation and remediation process.
Understand why you are doing the work and whether you need the site closed to sell the property or the business.
Ask for a roadmap and plan of action.

DON’T:

Select an environmental consultant based on a referral alone.
Choose a consultant on price alone.
Choose a consultant because they tell you what you want to hear.

Take all of these considerations and use them as evaluation criteria during your search for the environmental consultant. I always tell dry cleaners that your environmental consultant works for you and you need someone in their corner looking out for their well-being. If the environmental consultant you’re considering doesn’t feel right, it’s probably not right.

Have questions? Contact EnviroForensics today. As seen in Cleaner & Launderer

Jeff Carnahan, LPG, has 20+ years of environmental consulting and remediation experience. His technical expertise focuses on the investigation and interpretation of subsurface releases of hazardous substances for the purpose of evaluating and controlling the risk and cost implications. He has focused on being a partner with the dry cleaning industry for the past decade, and he’s a frequent contributor to the national dry cleaning publication Cleaner & Launderer. He is an industry leader in understanding that environmental risk includes not only cleanup costs, but also known and unknown third-party liability.

Q&A: EnviroForensics Answers Questions from Dry Cleaners

Posted on June 12, 2019March 22, 2024 by Alex Miller

The process of finding a client’s old insurance policies, tendering claims, and utilizing those available funds to clean up environmental contamination is a complex one. EnviroForensics’ President, Jeff Carnahan, LPG, and Director of Accounts, Dru Shields have extensive experience successfully guiding dry cleaners through the process. At the end of a recent webinar, we had a Q&A session full of interesting and frequently asked questions. Here are the responses.

Watch the webinar “How to use old insurance to pay for environmental cleanup,” to see the recorded presentation and Q&A session, and download the slideshow

This Q&A session has been lightly edited for clarity.

1: What if the insurance company is no longer in business?

Jeff Carnahan: We do actually see that periodically. We hope that that’s not your only insurer historically, but if it is, we have seen situations where now a defunct insurance carrier sets up some roll-off funds in order to provide certain amounts of dollars on the coverage. It’s not a great situation, to be honest, but in that type of a scenario, we would want to look at some other potential funding options. You might be in a state where there’s a dry cleaner trust fund, but there are also some other potential funds available. Maybe by working with your local municipality, there can be some low-interest loans available, and some other financial resources that might be able to help out.

2: What could I do if a delivery company that spilled the PERC was part of the contamination and that company is no longer in business?

Carnahan: So, there are a few different parts to this answer. First of all, let’s just say that there was another party responsible for part of the contamination. Let’s start there. So, one of the things we do during the investigation phase — or typically during the defense stage — is we try to evaluate all the potential sources of contamination. And, if we identify, or if there’s actual proof or anecdotal evidence of another source, we typically will start to use the science and use the analytical data to allocate responsibility for the contamination in the ground. If, let’s say, the trucking company was not defunct, you would file a claim. We would work with your carrier and they would likely file a claim directly against that transportation company’s, or they would put a claim in on their own insurance company. Whenever that company is out of business, I like to say that there’s a difference between “dead” and “dead and buried.” So, if a company is out of business, there are still avenues of access to their old policies, and we can work with counsel to actually file a claim against that company who is now no longer viable against their insurance companies, presuming that they’re viable.

3: How do you make claims when the insured has no records of coverage but recalls the specific insurance companies he bought policies from?

Dru Shields: That is the whole purpose of hiring an insurance archeologist. It’s very difficult to go to the insurance carrier and say, “I know that you covered me. Will you please provide a defense?” That’s why you need to be able to show proof that a policy existed for the insured. Even if you don’t have old business records, there are efforts that insurance archeologists can implement as far as locating proof of policies, but you will need to be able to have that proof; some sort of evidence to show that you were insured by a specific insurance carrier to require them to defend.

4: I completed a cleanup and it was at great expense. Who can I talk to look into historic insurance?

Shields: You would need to be able to locate and prove that there were policies in place that would defend. Again, it kind of also depends on state case law as far as how those insurance policies would apply. You may not be able to recoup all costs of what you’ve spent on a cleanup, but you’d be able to recover some of those costs.

Carnahan: I think that falls into the category of a “cost recovery claim”, and we’ve certainly helped clients do that as Dru mentioned. There’s no guarantee that we will recover 100% of what they spent but a good chunk can be available.

5: On average, how long does it take to look for old insurance policies?

Shields: We typically allow 90 business days for our insurance archeologists to complete a search for insurance policies. There are rush options available, too.

To learn more about insurance archeology and CGL policies, read How Does It Work? Insurance Archeology and CGL Policies

6: Is there any liability on behalf of sewer districts? A lot of contamination comes from the fact that sewers were designed to leak.

Carnahan: I just saw a couple of days ago that, in California, there was a suit decided saying that the municipality did have some responsibility. It’s going to have to be proven up pretty significantly, but it can certainly be done. From the dry cleaner’s perspective, sewer releases are very common. I’ve seen situations where there’s been no release on the property itself. The cleaner had no idea there was a problem until sewer work was done about a quarter of a mile downstream, and they found a release and actually went back and pointed the finger at the dry cleaner. Those are the types of situations where we recommend partnering with a good defense attorney; that’s where that strategy is going to come from. We work very closely with defense counsel to help devise litigation and a scientific strategy that’s going to help prove your case. And then, we’ll just go after other potentially responsible parties.

7: Do you work on an hourly or contingency fee basis?

Carnahan: It’s more common for us to work on an hourly basis. We do time and materials invoices, and we provide our invoices directly to the carriers. And, our invoices are extremely detailed. They look like a law firm’s invoices if you’ve seen those before, which I’m sure most of you have as business owners. So, it’s time and materials. We provide that to the insurance carriers, and then we take the initiative on making sure that it gets paid, and we do the arguments. Now there are some situations like the cost recovery case that was brought up a little earlier, that we could potentially do on a contingency basis. Also, I’ve had dry cleaner clients who had multiple sites (multiple stores) and after having a problem, they want to cash in their old CGL policies. That’s also a possibility. We have done that for dry cleaner clients and we can also do that on a contingency.

Shields: We also do insurance archeology on a time and materials basis. That one, we don’t typically do on contingency, but it would be something we could talk about on a one-on-one basis.

8: What is the average cost of a Phase I and a Phase II?

Carnahan: Phase I Environmental Site Assessment are required by lenders before they will loan on property sale or use the property as collateral when lending. Phase 1’s are also required in order to obtain Bone Fide Prospective Purchaser (BFPP) status when purchasing a contaminated property. The requirements for conducting a Phase 1 has increased over the years, however, the cost has remained relatively constant. The true price of a Phase 1 is about $4,500, but because they are considered a commodity by banks and small consulting firms and one-person shops compete for this work, the prices can be as low as $2,500. There is a lot of liability in the Phase 1 ESA investigation and reporting, so going cheap may not be the best decision in the long run.

Phase II’s, on the other hand, are designed to give an understanding as to whether or not soil and groundwater have been impacted at the subject property. A Phase II may give the consultant an understanding as to the magnitude of an environmental problem, but it will not necessarily be the final investigative work required to determine the extent of a problem. A Phase II can be in the range of, say $15,000 to $30,000. It could be even less if everything looks clean on the Phase I –except for the fact that there is, in fact, a dry cleaner involved. As many of you may know, the current standard established for conducting Phase I’s says that if it is a dry cleaner site or it is adjacent to a dry cleaner, there must be Phase II sampling.

9: How does a dry cleaning business owner start the insurance archeology and environmental cleanup process if there hasn’t been a lawsuit or a sale to trigger a defense?

Carnahan: If you don’t have a lawsuit or a sale to worry about, it’s the perfect time to start pulling things together. Have a quick look at your business records and see what you can pull together. Give Dru a call at 866-888-7911 to start talking about some insurance archeology services. And, if you are planning on selling off the property, but keeping the stock of the company, that means you’ll retain the insurance policies, and that’s a good thing.

For insight on how to handle environmental contamination situations, read Fear, Hope and Determination: A Tale of Two Dry Cleaners

10: Who makes the final determination that a site has been sufficiently cleaned up?

Carnahan: At first blush, the regulatory agency makes that decision. Again, the cleanup standards are typically based on human health exposure criteria, and that’s what they use to establish the cleanup objectives. So, once the state regulatory agency is comfortable that you’ve reduced contamination at the site to concentrations that are deemed to be safe to human health and the environment, they can provide you a closure.

The second part of the answer is that the property owner has the right to determine what that land use is going to be. There are different sets of cleanup standards for commercial land use or industrial land use, residential land use, and even recreational land use. Typically, if the owner of the property has plans of future residential usage, there will be stricter cleanup objectives that need to be met. The standards are a little less strict if the property is going to be used for commercial purposes. So, it’s sort of a hybrid answer in that the regulatory agencies will have final say based on the land use that’s established by the property owner.

For tips on making financially sound environmental remediation decisions, read How Clean is Clean Enough? Regulatory Closure vs. Environmental Cleanup

11: If I purchase my dry cleaning shop after 1986, and an environmental issue pops up, is there still a way to utilize the policies of past owners of the same business/properties?

Shields: Yes, you can, and as I mentioned before when I was discussing insurance and through the process of insurance archeology, we are looking for policy information for any potentially responsible party. So, any of that past ownership we would be looking to find policies for those entities. In that instance, typically what you will need to do is hire legal counsel to help pursue responsible parties for those insurance policies to kick in and pay for any investigation and remediation.

Carnahan: Most of the time those can be very friendly arrangements. Those don’t have to be litigious situations. They can be, but they don’t have to be.

Shields: And even if those entities are deceased or bankrupt, they are still usable at that point, too.

12: Will PERC naturally degrade over time if nothing is done?

Carnahan: No. Perc is actually considered a recalcitrant compound, and what that means is that under normal conditions, perc will not break down naturally. The twist is that “normal conditions” assumes that the aquifer and/or the subsurface has oxygen available, and in an oxygen rich environment, perc does not break down. One of the things we do whenever we inject chemicals is to try to create an oxygen-depleted environment, so certain types of microbes can flourish, which will then break down the PERC. If it’s a mere surface release in the absence of anything creating an oxygen-depleted environment, the stuff just hangs around. We deal with a lot of dry cleaner sites where releases occurred fifty or sixty years ago, and other than being bigger and more spread out, the perc just hasn’t broken down at all.

To learn more about PERC contamination, read What Makes Cleaning Up PERC Spills So Expensive?

13: What if contamination is found on my property, but money is not available for me to clean it up? Can I be shut down?

Carnahan: The regulatory agency can demand a cleanup, but the first thing they’re going to do is determine if there are any potentially exposed parties. In other words, if someone next door has a vapor intrusion problem caused by the contamination at your site. You might not necessarily – right out of the gate – be looking at millions of dollars here, but you could easily be looking at tens of thousands of dollars to make sure that no one is being exposed as time goes on. It’s not a perfect situation, but like I said before, we should at least look into other potential funding sources available that could help out.

Do you have questions? Contact us

Dru Shields has over 10 years of account management experience in the environmental consulting and engineering industry. She manages a team of account executives who work across the country. Shields is a member of numerous regional dry cleaning associations in addition to serving on the board of the Midwest Drycleaning and Laundry Institute (MWDLI). Shields has extensive experience in assisting clients in securing funding for their projects through historical insurance policies. As Director of Accounts, Shields helps business and property owners facing regulatory action to navigate and manage their liability.

Environmental Forensics: Why dry cleaners need to know about it

Posted on May 15, 2019March 22, 2024 by Alex Miller

ENVIRONMENTAL FORENSICS CAN HELP US DETERMINE WHO IS RESPONSIBLE AND LEGALLY LIABLE FOR A CONTAMINANT RELEASE

BY: JEFF CARNAHAN

In my role as President of an environmental consulting firm, I have the opportunity to meet new people and introduce our company to folks outside of the environmental industry. It’s common to get quizzically raised eyebrows from new acquaintances as I tell them that the name of our company is EnviroForensics. The wheels in their heads start turning and I can see they’re attempting to get a grip on what it is that EnviroForensics does.

The word forensics often takes people’s thoughts immediately to their favorite crime show, or even back to Quincy M.E. Personally, I’m a Quincy guy. The use of forensic science is a major part of these shows, as the crime lab scientists tease out the intricacies of the unobvious, and often microscopic facts that lead them to break the case. Environmental Forensics is pretty similar to that. We use scientific intricacies of the unobvious, and often microscopic facts to solve complex environmental who-dunnits.

DEFINING THE LEGAL LIABILITY

According to Merriam-Webster, the word forensic literally means “relating to or dealing with the application of scientific knowledge to legal problems”. In the world of environmental contamination, those who are responsible, and those who are being blamed, are in a legal situation. The liability that gets assigned by environmental regulators, other affected property owners, and perhaps those that have suffered health effects from contact with contamination is a legal liability. In these civil matters, the primary impact of legal liability is money; money to pay for environmental cleanup, money to offset a reduced value of an impacted property or even money to offset health effects or injuries of exposed people.

The risks are high for potentially responsible businesses, which is why a good environmental attorney is necessary for almost every contamination issue. This is also why a good environmental consultant with specific skills and expertise in environmental forensic science, such as subsurface investigation and cleanup, is crucial if you find yourself in the cross-hairs of an environmental contamination problem. So, how do you solve this problem?

ENVIRONMENTAL FORENSICS CAN SOLVE THE CASE

Let’s set up an example of a typical scenario, in which a dry cleaner has been identified as a potentially responsible party (PRP) for an environmental contamination issue. Then we can walk through a few ways that environmental forensics will help answer the key questions of the case.

Let’s say that Dry Cleaning Business New (DCBNew) currently owns a property, which they purchased from Dry Cleaning Business Old (DCBOld) in 1990. DCBOld had acquired the property from Dry Cleaning Business Original (DCBOriginal) back in 1980, who had been operating at that same location since 1950.

Let’s also say that DCBNew and DCBOld used Perc as a primary solvent during their entire operation. DCBOriginal used Stoddard hydrocarbon as a primary solvent for ten years, then switched to a Perc machine for the duration of the time they owned the property. Here’s the operational timeline for the example scenario outlined above:

An example timeline of dry cleaning operations and how environmental forensics can uncover who may have contributed to the contamination. — An example timeline of dry cleaning operations illustrates those who may have contributed to the contamination. Even if a dry cleaning business no longer uses perc and has changed out the machines, they can still have liability from historical operations.

THE DRY CLEANER INVESTIGATION BEGINS

Now let’s add some legal liability to this scenario. We’ll say that the owner of a commercial property next door to the dry cleaning business was trying to sell their land, and through their real estate due diligence Phase I and II Environmental Site Assessment, it was discovered that the groundwater beneath their property is impacted with Perc. Immediately, the owner of the adjacent property filed a lawsuit against DCBNew and demanded financial compensation for decreased property value. On top of all this, the state regulatory agency was notified, who has now sent a letter to DCBNew stating that they must investigate and clean up whatever is found, as well as the neighboring property. This is the point where stress starts to run high for DCBNew, and rightfully so because they are now charting into unfamiliar territory with previously unknown legal liability and are under a timeline to meet the investigation and cleanup demands set forth by the state regulatory agency.

If DCBNew had been the only operator at the property ever, it would be pretty clear that they may be the sole responsible party. However, we know that there were two previous dry cleaners, DCBOld and DCBOriginal, who used Perc at the property, and they may bear some responsibility as well.

The first forensic analysis of this situation can be performed without much science at all. An understanding of the history of the dry cleaning industry gives a lot of valuable insight about who is most likely to have contributed the most to the subsurface contamination at the property. Generally speaking, it is more likely that significant releases of Perc would have happened during earlier dry cleaning operations. This is due to three main factors:

The dry cleaning process and equipment improved over the years and less Perc was lost;
The environmental regulations increased over the years that required operators to manage their process more stringently; and
There has been an increasing level of understanding of the environmental hazards associated with Perc usage.

All of these resulted in an overall decreasing trend in new Perc contamination.

The time period when DCBOriginal operated at the property from 1950-1980 corresponds to the First Generation transfer dry cleaning machine process. This process involved a tank of solvent that was used to fill the washing machine and afterward the clothes were physically transferred to the drying process. The First Generation process provided plenty of opportunities for Perc to be spilled or dripped onto the floor and into the ground. It is also possible, however, that DCBOriginal may not have used a transfer machine. This is the type of evidence that comes to light throughout the environmental forensics investigation.

In the example scenario, DCBOriginal also used Stoddard for 10 years (1950-1960), and then switched to Perc. They would have had to buy a new machine around 1960, which was the early days of the Second Generation dry to dry machines. Dry cleaning that used dry to dry machines was a much tighter process, but there were still lots of releases of Perc from the solvent recovery and waste handling procedures.

LEGAL LIABILITY TAKES SHAPE

The example scenario walks through the operational timeline of the dry cleaning businesses to better understand the factors that can affect the outcomes of the environmental contamination case. If DCBOriginal from 1950-1980 released more Perc at the site than DCBOld from 1980-1990, then DCBNew needs to be proactive with this issue and work with their experienced legal and environmental teams to make sure that these former businesses take on as much of the financial and legal burden as they deserve.

ENVIRONMENTAL EVIDENCE COMES TO LIGHT

Through the use of geological and chemical calculations and measurements, forensic scientists are able to read the site conditions and start to tell when and where the contamination may have originated. When the scientific information is coupled with an understanding of the history of site operations, such as the locations of all former operators’ dry cleaning machines, then the details of environmental releases at the property really start to reveal themselves. This helps create a defensible picture that includes how much contamination was contributed, by which past operator, and how the cleanup costs should be allocated to the responsible parties.

In the example scenario, DCBNew should be cautious about simply blaming all the former operators at the property because they very well may have contributed to the contamination. Even if the dry cleaning business started operating in the 1990s with a Fourth Generation machine, it’s possible that there may have been Perc releases. I’ve seen plenty of cases where a Perc release was found beneath a dry cleaning business and the operation had only been there for two years. Machine maintenance, waste Perc handling practices, contact water handling methods, filter disposal and even spotting procedures are all areas that could cause potential problems.

WHAT CAN A DRY CLEANER DO?

When a dry cleaner finds themselves staring in the face of an environmental contamination problem, stress can run high. There is a lot at stake. If there are former dry cleaning businesses that operated at the same location, there is a good chance they can be invited as a responsible party.

Ultimately, remember that this is a legal situation. Expert attorneys and scientists should be involved to help navigate the situation. The good news is that if you are able to find old commercial general liability (CGL) insurance policies, there could be assets to pay for an expert attorney and an environmental forensic scientist of your choice, also known as, an environmental consultant.

If you’re facing an environmental contamination issue, we’ll help define your next steps with a confidential consultation.

As seen in Cleaner & Launderer

Has Environmental Contamination Cracked Your Nest Egg?

Posted on April 11, 2019March 22, 2024 by Alex Miller

How the value of your dry cleaning business can be affected after contamination is found.

Written by Jeff Carnahan, LPG, President, EnviroForensics
As seen in the April 2019 issue of Cleaner & Launderer

At the threat of mixing metaphors right out of the gate, I’d like to start this article by referencing a fable we all know; that of the ant and the grasshopper. While the care-free grasshopper chirped away and enjoyed times of plenty, the industrious and hard-working ant busily labored to store food for winter. When readily available food became scarce as winter fell, the grasshopper starved but the clever ants remained well-fed from their stockpiles. I have had the pleasure of meeting and working alongside many dry cleaners throughout my career, and their work ethic and wisdom have consistently impressed me. Without fail, I’ve heard it told by them that the hard work they’ve put into their business is intended to help build-up winter stores for lean times, their retirement, or to pass on to their children. A lot of people refer to this as building a nest egg. Regardless of what you call it, the monetary value of the hard work, blood, sweat, and tears that you’ve invested in your business is held in the potential sales price of your business assets and potentially, your property.

The Good Old Days are Over

During all the years of doing business, the fact that your future nest egg could be potentially devalued by an environmental contamination problem was probably not part of the equation. Decades ago, it didn’t need to be. Back then, when businesses and properties were bought and sold, it wasn’t standard practice to even consider the environmental condition of the land. As such, the value of the sale wasn’t affected. The business owner could cash-in for a fair price and go on to enjoy their retirement.

Today, however, nearly every commercial property and business acquisition involves a real estate and environmental due diligence process intended to specifically and thoroughly find out whether environmental contamination has occurred. The days of expecting someone to buy your business without determining if they would be buying environmental liability, or your property without finding out if its value has been impacted by contamination, are gone.

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Let’s talk for a minute about the environmental assessment process during sales transactions, and then we can go over a couple of things that you can do to help yourself out and minimize the damage to your nest egg when the time to retire comes. For those who may be in the mode of buying business and properties, this may come in helpful for you as well.

What Happened?

A short discussion about the environmental due diligence process was presented in my February article, How Clean is Clean Enough? Regulatory Closure vs. Environmental Cleanup, but I’ll breakdown the process step-by-step. Back in the late 70s and 80s, a series of laws were passed by Congress that put into place two major facts:

Certain chemicals were determined to be hazardous and had to be managed in specific ways; and
As a generator of wastes containing these certain hazardous chemicals, businesses or individuals would forever carry any associated liabilities resulting from these chemicals.

The laws were comprised primarily of the Resource Conservation and Recovery Act (RCRA) and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Some of you may remember these days because suddenly you had to manage your solvent waste differently and you had to ramp-up your record keeping.

It may have even seemed unfair that the federal and state governments were going to be holding you responsible for what contamination may have happened as a result of your business, or on your property, regardless of if you had anything to do with it. The fact was, and is, that RCRA and CERCLA ended up causing a standard of practice in the property and business transaction world that was intended to avoid those environmental liabilities from being transferred along with what was being sold.

How it Works These Days

When a business entity buys a property, if a series of environmental inquiries aren’t performed properly, they could accidentally be held responsible for contamination in accordance with CERCLA. If the inquiries are performed correctly, the buyer may qualify for an exemption from those CERCLA liabilities. The first inquiry that is needed is called a Phase I Environmental Site Assessment (ESA). The Phase I ESA needs to be performed by a qualified Environmental Professional (EP), like an environmental consultant. Your consultant will follow a specific set of due diligence standards to look at environmental records and databases to determine what the sale property has been used for in the past, and what has gone on at surrounding properties to see if those activities could potentially have impacted the sale property. They will also come to do a site visit to walk around the property and buildings to see if any present operations may be potentially causing a problem. They’ll also need to do an interview to ask some standard questions about knowledge of environmental issues, etc. If they do find something during this process, they may have to put in their report that a Recognized Environmental Condition (REC) has been identified. If a REC is identified during the Phase I ESA process, then there need to be samples of soil, groundwater and/or vapor collected from the sale property to determine if an actual environmental release has occurred.

The subsurface investigation process is called the Phase II ESA. If an environmental release is identified at the property, there will be additional investigations to gather more data. There needs to be more data to gain insight into the potential cost of cleanup so that the buyer and seller of the property can start talking about how the price is impacted, or even if the buyer wants to still buy the property. The cost estimating process will also need to take into consideration that the cleanup would be performed in a state agency program so that a regulatory closure can be received afterward.

The Challenge for Dry Cleaners

Here is the tricky part; due to the prevalence of environmental issues related to use of perchloroethene (PCE, Perc) in the dry cleaning industry, just the fact that a dry cleaner exists, or used to exist, at or adjacent to the sale property, is enough to trigger a Phase II ESA per the due diligence standards. At this point in the property transfer process, if you want to continue with the sale, there will definitely need to be sampling. The process can be stopped right after the Phase I ESA without any liability to the property owner, but that won’t get the property sold. This is a very uncomfortable spot to be in, I’m sure. Many of you know this for a fact.

Putting the property sale process aside for a minute, when a business is being sold, a similar due diligence process is undertaken by the potential buyer. They will want to make sure that the business they are acquiring doesn’t have a current or hidden environmental liability that could hit the new owners at some point in the future and affect the value of their investment. Businesses are usually sold either as asset-only acquisitions, or stock plus assets acquisitions. The CERCLA liability that we are talking about is tied to the stock of the company and its owners. Because of this, many times business buyers will want to purchase just the assets (equipment, customers, brand, goodwill, etc.) of the company, and not acquire the property or stock. That allows the buyer to skim the cream off the top of the business, and leave the junk at the bottom, like the environmental liability, for you. This is a way, however, of getting the job done and keeping a good bit of value for your nest egg.

Preserving Your Nest Egg

Let’s talk about a couple of ways that you can preserve the integrity of that nest egg in preparation for the time when you are ready to cash-in and move on.

Read how a prominent second generation dry cleaner proactively prepared their exit strategy

First, there are a variety of insurance products available that you can purchase as protection against environmental liability. The insurance industry started specifically excluding coverage for environmental pollution from their general liability policies back in the mid-80’s, right around the time that the CERCLA responsibilities were being formed. However, environmental pollution liability can still be insured today as specific policies or riders if it needs to be a part of your calculation. If you think that these may be of interest to you, I encourage you to reach out to your agent or a representative for a carrier that is involved in the dry cleaning industry. An insurance company with a long history and knowledge of dry cleaners would probably be best.

Another way to help preserve your nest egg against devaluation from contamination issues is, of course, those old general liability policies from before the mid-80s, when there weren’t specific exclusions. From my experience, this is usually the time period when environmental releases actually occurred anyway. Find them and assess their value. Even if there are no known environmental releases associated with your dry cleaning business, having these old policies in hand may be what is needed to convince a potential business or property buyer that they won’t be stepping into a problem that can’t be paid for if they close the deal with you. Those old policies are an asset to your business, so they should be part of your nest egg calculation.

Once triggered historical commercial general liability (CGL) policies may be used to for legal fees, defense against claims, site investigation, remediation/cleanup, interim remedial measures, building legal case, potentially responsible parties (PRP) search, interfacing with agencies and prior costs be may be retroactively recovered.

Contact us so we can help you protect your nest egg.

As seen in Cleaner & Launderer