Many kinds of businesses, from local gasoline service stations, dry cleaners, and instant print shops, to major international manufacturing enterprises, need to comply with a myriad of environmental laws and regulations. In the last 20 years, businesses have learned that one mis-step can result in bankruptcy.

Anyone driving around this country has seen evidence of what can happen when a business develops environmental problems. How many gasoline stations have had their businesses disrupted for months because their tanks have leaked? How many have been forced to close their doors forever because they could not withstand this much down time?

The easiest solution for these property and business owners would be to purchase adequate insurance to cover these kinds of claims. However, since 1986, national insurance carriers stopped offering insurance policies that covered pollution claims, leaving business people at risk. The good news is that this insurance gap no longer exists.

Recently introduced insurance policies, from leading national insurers, now protect commercial property owners and business owners from potentially crippling environmental claims. These policies may respond to claims relating to spilled contamination, changes in environmental laws, as well as personal injury lawsuits and professional malpractice claims relating to pollution spills and releases. Many commercial real estate transactions, from local bakeries and gas stations, to large factories, now require one or more parties to purchase this special kind of insurance.

Local Business People Will Benefit Most
While these new policies are available to anyone who qualifies, smaller business people have the most to gain. This is so because large, national companies can very often survive a large environmental expenditure, even when insurance money is not available to pay claims. And depending on the nature of the contamination and resulting harm, claims can be very costly. For example, a toxic spill that closes a municipal drinking water well can cost millions of dollars to cure. And everyone is familiar with large residential claims, such as "Love Canal," which also resulted in a multi-million dollar cleanup tab.

For large businesses, a multi-million dollar cleanup tab is unwelcome news, but it will usually not cripple the company. However, most smaller business people and property owners cannot survive this kind of monetary strain. For this reason, the new pollution insurance policies are in a sense more valuable to local business people than to large national or international companies.

There are three national insurance carriers that sell this new breed of insurance. Perhaps the most aggressive company is Kemper Environmental . Steve Noble oversees underwriting for commercial property pollution insurance policies at Kemper. I recently spoke with Steve about these new insurance products.

What These New Policies Cover
According to Noble, environmental insurance policies respond to pollution discharge claims. This can include toxic substance spills, chemical spills, hazardous waste spills, etc. Environmental insurance can also address pollution claims caused by professional malpractice, and it can meet many other special needs.

By encouraging commercial property transactions, these policies can help local business and commercial property owners. Purchasers require enough income to sustain themselves, their businesses, and to repay their purchase money loans. An unexpected environmental claim can divert income so that the property owner cannot meet payroll or pay back his/her mortgage. Pollution insurance helps guard against this potential problem. In short, Noble explained that this insurance allows a local commercial property purchaser to get "a good nights sleep."

Sellers also benefit because when they sell, they never want to hear about the property again. An environmental claim, filed years after the sale, can therefore be a most unwelcome event. Pollution insurance provides sellers with a way to cope with these kinds of pollution related claims, which may be asserted years after they sell the property.

And lenders require "sustainable" collateral value. A pollution claim can greatly reduce the value of a bank's collateral. Pollution insurance provides the bank with comfort in knowing that property held as collateral will not lose its value due to an environmental claim.

While some form of this insurance has been available for 10 years, according to Noble it has only been widely available for the past three years. Underwriters are becoming increasingly comfortable with the risks based on evolving claims experience. Because underwriters are now better able to evaluate risks, and because newcomers are entering this specialized field creating new competition, pollution policy premiums continue to drop.

The national carriers with enough resources to respond to and handle claims are Kemper Environmental, the AIG Group, ESC/Reliance Insurance, and Zurich America. Several other companies have explored this new line of business, but have not entered the marketplace.

Noble said that his largest policy was sold to a Massachusetts's developer for a $400 million hotel project. But policies are sold every day for smaller, community projects at affordable premiums. When asked what he will not insure, he laughingly recalled that a developer came to him with a proposal to redevelop Love Canal -- the site of one of the nation's most notorious residential pollution releases. He quipped that he will not insure Love Canal for any premium, under any circumstance .

The information provided in this column is written by Stuart Lieberman,a practicing environmental attorney, and is for general information purposes only. It is not legal advice and should not be used in place of legal advice.

Stuart Lieberman, Esq., and IRED.Com, Inc., will not accept any responsibilty for any reliance on the information in this column or any damages whatsoever resulting from reading this column.