Negotiations Regarding Insurance Coverage of Environmental Liabilities
Analysis Group was retained by an insurer to provide support in settlement negotiations with an insured. These negotiations focused on the coverage of future environmental remediation costs at former manufactured-gas plant sites. As a significant portion of the remediation was expected to occur several years in the future, the discount rate applied to future remediation costs would be an important determinant of their present value, and hence of appropriate settlement amounts. Analysis Group showed that the discount rate proposed by the insured was significantly lower than could be supported by available data and sound empirical practices, and thereby overstated appropriate settlement values. In addition, we worked with our client’s counsel to develop a model for allocating remediation costs among the insurer and various other insurers providing coverage for the affected sites.