National Clothesline, October 2003
Steve Henshaw, President and CEO of EnviroForensics and Policy Find
The bad news knocked Denver Cain for the proverbial loop. He only wanted to sell his drycleaning business in Indianapolis — The Washboard Laundry and Drycleaning — and retire in peace. Instead, he was surprised to discover that his property was contaminated with perc. Cain’s financial future looked dismal at best. The property’s value was estimated to be worth $300,000, but cleanup costs were projected to be between $500,000 and $750,000. “I spent quite a bit of money with a law firm,” Cain recalled. “I was getting nowhere.”
Running out of options, he turned to EnviroForensics for help. The company, founded in 1996, conducts soil and groundwater investigations and designs and implements viable remediations. Their speciality is working with chlorinated solvents. The environmental engineering firm also has an ace up its sleeve. Its niche is insurance archeology, which essentially means it has the resources to search for, and often find, historical insurance policies that can be used to fund the prohibitive costs of site cleanups. In fact, EnviroForensics has private investigators on tap to uncover policies dating as far back as the 1960s.
Company CEO Steve Henshaw explained the process. “We’re using old Comprehensive General Liability policies,” he said. “We’re not using extra policies that people buy to address contamination. We’re using the historical policies that they used for unforeseen risks. Now, the insurance carriers have typically written in pollution exclusive language, but a lot of the contamination is not from today’s operations. A lot of the contamination happens historically.”
Of course, even old spills can affect a property owner from “cradle to grave” and Cain feared that the problem would be passed down to other generations of his family. “Denver was in the process of negotiating a sell by the time we got involved with him,” Henshaw noted. “His money was tied up in an escrow situation, but we got coverage. We’ve done the investigation. We are in the process of designing the remediation and the carriers are participating and paying for this. Denver has not had any out-of-pocket expenses.”
It almost sounds too good to be true, which might explain why Dorothy Minder-Forbes was reluctant to hire the company when she found out that her three drycleaning properties in Indiana — Glen Park Cleaners, Brunswick Cleaners and Hobart Cleaners — were all significantly contaminated with perc.
After being in business since 1957, she was worried that her lifelong investment would turn into a staggering debt. About eleven months ago, she took the plunge and hired EnviroForensics. “It was quite scary,” she recalled. “It took a lot of reassuring by Steve. I knew it had to be done. They worked really hard with me where I could get it done in a timely fashion because I had a buyer I was worried about losing.”
Fortunately, Minder-Forbes had kept detailed records back to the 1980s and before, which sped up the process. In a little over nine months, EnviroForensics had secured liability coverage from five different companies.
“This is a significant success story,” Henshaw emphasized. “Essentially, Ms. Minder-Forbes has a guarantee and that guarantee is backed by over $20 million, and the cleanup is not going to cost that much. The carriers are standing behind her at this point and putting their money there. She’s in very good hands and that’s a great position for her to be in.”
In all, Minder-Forbes has paid $5,000 per site, a figure she was more than happy to spend. “They worked very hard for me because I needed to sell,” she said. “Now, they’re starting on a corrective action plan and they should be cleaning up by the end of September.”
Though he is quite proud of his company’s success stories, Henshaw is the first to admit that not every case is settled so quickly. He also pointed out that $20 million in liability coverage ranks in the higher echelon of potential insurance funding. After all, not everybody is going to have the appropriate coverage.
“We understand the insurance before we start the process,” Henshaw said. “There are going to be situations where the insurance is not going to cover these problems. We have to understand their coverage before we’d recommend to them to step forward because it is a big risk. Ultimately, these clients are the ones responsible for cleanup.
“We take on the responsibility for investigating the site with the understanding that the insurance carriers have that responsibility to pay for their policyholder’s defense,” he added. “So, we are able to get the site investigated and the legal fees covered on behalf of these policyholders.”
The best advice Henshaw has to offer for cleaners considering selling their business is to give them selves a time cushion that will enable them to deal with contamination problems should they arise.
If bad news strikes, it is imperative to hire trained professionals who are familiar with the lengthy, complicated legal process for environmental cleanup cases. A cleaner may feel more comfortable with a family lawyer, but if that attorney is not well versed in the proper procedures for remediation claims, liability coverage can be denied just as easily as it can be granted.
“It’s a nerve-wracking situation,” Henshaw said. “The reluctance is that it’s still scary for people. You’re still putting yourself out there. It is easier for people, in essence, to bury their head in the sand and not deal with it until they absolutely have to, than to plan for this.”
On the other hand, the earlier the problem is addressed, the easier it is to deal with in the long run. “What we’re trying to get the industry to understand is that if you’re trying to sell your business in three years, you should start this process now because it’s going to take a little time,” he noted. “The time scale is typically an 18-month period of time to sort of get the carriers committed to what needs to be done.”
