Financial Institutions Financial Institutions


Secured Creditor Environmental Insurance

The Environmental Division at Body-Borneman specializes in solving complex environmental liability challenges for our clients.

Are you truly protected by your current environmental due diligence program?

The transaction of lending money must now factor in the exposure of direct liability for environmental contamination of properties held after foreclosure, as well as the non-existence of collateral value in contaminated properties.   In today’s market, if your lending institution relies exclusively on environmental site assessment (ESA) surveys, your assets are not truly protected.  Consider these simple facts:

  • Even the most thorough Phase 1 ESA’s provide only limited protection to a lender faced with foreclosing on a loan (specifically, protection from EPA Superfund Actions).
  • However, the overwhelming majority of environmental remediation projects are performed on sites that are not listed on the Federal Superfund list.
  • Who will pay for the cost of remediation if the lender is forced to foreclose on a contaminated property; The environmental consultant?  This is highly unlikely!   In most cases, the lender ends up paying for the remediation costs if it elects to foreclose, or it is forced to absorb a loss by writing off the bad loan altogether.
  • ESA’s are performed as a snapshot in time, and often do not consider future impacts to the site which could lead to additional environmental liabilities.  In addition, even the best ESA’s are only as good as the information provided to the consultant, and thus, the potential for key information to be missed is significant.
  • No protection is afforded to the lender from potential third party property damage or liability claims.
  • Changes in State and Federal regulations can result in future agency re-openers on a site even if a No Further Action Letter was previously issued.

Consider the Benefits

Secured Creditor Environmental Insurance provides coverage for loss arising from a default on a commercial real estate loan accompanied by an environmental condition, and pays the lesser of the cleanup costs or outstanding loan balance to the lender at the time of default. The second coverage part provides third-party lender liability coverage for bodily injury and property damage.

The Secured Creditor Environmental Insurance policy provides the following benefits to the lender:


  • A competitive advantage to secured creditors versus standard environmental due diligence techniques. The due diligence ESA provides no protection to the lender when an environmental claim is made.
  • Transfers the risk for both existing and unknown environmental conditions and future contamination during the policy period to a highly rated insurance carrier.
  • Allows lenders to provide a faster turnaround time on their loans, since the insurer will perform all required environmental due diligence in house to add the loan to the policy. The average turnaround time for processing is just 3-4 days.
  • Eliminates the risk that the environmental site assessment performed in conjunction with the loan origination may have missed one or more material conditions, or underestimated the cost of remedial action necessary to fully address the site conditions.
  • Provides protection against environmental conditions that occur after the ESA has been performed.
  • Protects the collateral value of each and every property the lender chooses to insure against unforeseen environmental contamination. When a loan covered by environmental insurance goes into default, the lender notifies the insurer of the default and the environmental condition in accordance with the policy. The policy then pays the cleanup costs, or the remaining loan balance, whichever is less. If the insurer pays the cleanup costs, the lender gets collateral in the form of a clean, marketable property. If the loan balance is paid off, the lender receives collateral back in the form of money. Either way, the lender is made whole again.

Most Insurance Professionals Simply Don’t Understand Environmental Issues!

Unfortunately, this is a documented fact about the insurance industry. Most insurance professionals have little or no understanding of the complex regulatory and legal environment that applies to environmental risks and exposures. As a result, most insurance representatives would prefer to avoid clients with environmental, and related risks. At Body-Borneman Insurance, our risk management staff maintains a level of environmental, health and safety experience that is unmatched by our competitors. Our unique blend of technical and insurance knowledge allows us to quickly and thoroughly understand your business needs, and formulate the best options for a comprehensive, yet affordable, insurance program.

Established in 1962, Body-Borneman Insurance has been a recognized leader providing comprehensive insurance programs for businesses and families. Today, our 40-plus-member staff services over 20,000 policies from our offices in Boyertown and Pottstown, PA. The Environmental Division at Body-Borneman was created to serve the unique insurance challenges of clients who are presented with environmental liabilities. We pride ourselves on providing superior service, combined with the technical expertise to best understand the unique business needs of this industry. No risk is too big or too small.

The Environmental Risk Management Division at Body-Borneman is managed by David Guzik, REM, CHMM. Dave is a licensed insurance agent who has nearly 20 years of direct experience in environmental consulting, site remediation, emergency response and consulting. Dave has personally managed numerous Superfund remediation projects, hazmat emergency response efforts, and has also spent time as an underwriter and loss control consultant for two of the largest underwriters of environmental insurance. Dave’s unique blend of technical and insurance knowledge ensures that our risk transfer programs meet the complex needs of our customers.

Many insurance agencies represent a single carrier. This significantly limits the available options to their clients. The Environmental Risk Management Department at Body-Borneman is authorized to represent all of the major environmental insurance carriers, including AIG, Kemper, Seneca, Gulf, Evanston, Zurich, American Safety, Chubb, Hartford and XL Environmental. Our day-to-day working relationship with these well-established underwriters ensures that we have the ability to create the best insurance program for each individual client.

For more information, contact David A. Guzik, REM, CHMM at (610) 367-1162, or by email at daguzik@bodyborneman.com.