1. Using Insurance to Fund Brownfield Development Technical Issues Geoff Glanders, President August Mack Environmental, Inc.

2. Technical Issues Regarding Insurance Claims for Environmental Coverage Must Determine If a Release of a Pollutant Has Occurred (An Accident or an Occurrence) –Environmental Records Review Internal Records Agency Records –EPA –State Agency –Local Health Department –Local Fire Marshal –Local Sewer System

3. Technical Issues Regarding Insurance Claims for Environmental Coverage Other Sources –Newspaper Articles –Sanborn Maps –Intrusive Sampling Soil Samples Groundwater Samples Surface Water Samples Sediment Samples Soil Vapor Samples

4. Technical Issues Regarding Insurance Claims for Environmental Coverage Must Determine the Nature of the Release –Sudden and Accidental Spills Overfills –Expected or Unexpected Process Areas Waste/Raw Material Handling Areas Septic/Sewer Systems

5. Technical Issues Regarding Insurance Claims for Environmental Coverage Determine Media of Concern (Owned Property Exclusion) –Building Materials –Soil –Groundwater –Sediment –Surface Water

6. Technical Issues Regarding Insurance Claims for Environmental Coverage Must Determine the Timing of the Release –During the Policy Coverage Period –When Groundwater or Soil Vapor Leaves Property Boundaries

7. Technical Issues Regarding Insurance Claims for Environmental Coverage Determining Trigger for Cleanup –Voluntary Programs –Agreed Orders/Consent Decrees –Letters of Warning –Superfund PRP Notice Letter –Notices of Violation –Permit Conditions –Unilateral Orders –NPL Listing

8. Technical Issues Regarding Insurance Claims for Environmental Coverage Determine Damages –Past Costs Investigation Remediation/Cleanup –Projected Future Costs Investigation Remediation –Allocation By Policy Period Pro-rata by Volume of Pollutant Released Over Time

9. INSURANCE ISSUES CASE STUDY Heat Exchanger Manufacturing Property Previous Settlement Settled On-site Impacts Offsite Contamination Issue Came to Light Requiring New Assessment of Coverages

10. INSURANCE ISSUES CASE STUDY SETTING 20-acre property surrounded by industrial and residential property Manufacturing operations from 1930’s to late 1980’s On-site soil impacts; on-site/off-site groundwater and vapor impacts associated with degreasing solvents. Adjacent large-capacity dewatering wells have operated since the mid-1940s Solvents detected in neighboring off-site large-capacity pumping wells

12. INSURANCE ISSUES CASE STUDY Investigate Causation, Timing and Damages 1.Research solvent usage, locations, and time frames 2.Identify release mechanisms for solvents 3.Conduct a fate & transport analysis to evaluate timeframes for solvent migration 4.Compute past investigation costs and develop remedial cost estimates

13. INSURANCE ISSUES CASE STUDY 1) Solvent Usage and Timeframes Historical Research –Researched available solvent use/purchase records from facility –Compiled all available public records –Reviewed depositions from former employees Developed solvent usage history Estimated approximate quantities of solvents used Developed detailed facility map showing building departments and solvent usage locations

15. INSURANCE ISSUES CASE STUDY 2) Determine Causation - Solvent Release Mechanisms Used information in #1 above to assess practices that resulted in solvent releases to media, including: –Incidental spills during degreaser operation - concrete conditions, cracks, etc.; –Spills during transfers of solvents (spillage and drum puncture); –Releases to sewers/drains; –Releases during product/waste storage; and –Releases from empty solvent drum storage. Depositions stated that small releases of solvents were common. Records document that solvent usage began in 1940s and continued heavily until the 1980s Compared solvent usage locations with soil and groundwater data

18. INSURANCE ISSUES CASE STUDY 3) Fate & Transport Analysis Purpose of analysis - to develop an estimated timeframe for how long it takes solvents contamination to travel through the soils and groundwater and reach the property line. Analysis required knowledge of geology and hydrogeology –Physiographic setting (valley train outwash deposit in till plan) –Site-specific and regional geologic/hydrogeologic information –Groundwater flow information and well withdrawal rates (adjacent property) Used extremely conservative solvent release rates (one ounce per each 55-gallon drum, or 1/7,000 the volume of drum.

19. INSURANCE ISSUES CASE STUDY 3) Fate & Transport Analysis (Continued) Developed an unsaturated vertical flow model based on the geologic materials in specific “source areas” –Analysis concluded that even at the low release rate identified above, solvents would saturate and eventually reach groundwater in as little as 5.5 years years in clay (quicker in sand and gravel materials). Developed horizontal/vertical saturated flow model and conservative retardation factor for sand and gravel aquifer materials. –Groundwater flow rate of over 1 ft per day based on data collected in field and published data for aquifer. –Analysis concluded that based on the groundwater flow rates and conservative retardation factors, that impacted groundwater would migrate from the source areas to the property line in as little as 6 months in several of the source areas, and a maximum of 10-years in other source areas. –Prepare map showing travel times of solvents in groundwater for different source areas.

21. INSURANCE ISSUES CASE STUDY 4) Cost Analysis –Investigation Costs to Date - $560,000 –Estimated costs for regulatory coordination (U.S. EPA), additional investigation, pilot testing, and interim measures – $840,000 –Soil and groundwater cleanup using Air Sparge and Soil Vapor Extraction - $3,000,000 –Total estimated minimum damages from the contamination: $4.4 Million.

22. INSURANCE ISSUES CASE STUDY Conclusions: –A large volume of solvents were used and released in specific locations from 1940s-1980s. –Heaviest soil and groundwater impacts identified in these locations. –Spilled solvents would saturate the soils and migrate to the property line in groundwater in as little as six years. –Based on this analysis, solvents actively escaped from the property during the period of insurance coverage (1965- 1988) –Damages are estimated at $4.4M

23. Questions? If You Have Questions, Please Contact: Geoff Glanders President August Mack Environmental, Inc. (317) 579-7400 gglanders@augustmack.com