Approaches to Reduce Conflict when Insuring the Environmental Cleanup of Closed Military Bases Intended for Redevelopment

Base Realignment and Closure (“BRAC”) of military bases has occurred in waves over the last few decades. Many of these properties were operational through World War I, World War II, the Korean War, the Vietnam conflict, and into the modern Cold War. As part of the United States military's transfer of these properties to the local municipalities, which includes significant funds to cleanup remaining chemicals of concern, contract terms of the transfer typically require insurance policies that have the intention of mitigating the risk of additional future cleanup costs. As a result, numerous BRAC sites have established contracts with environmental consultants who have provided guaranteed fixed price contracts for cleanup of the site. To mitigate additional future cleanup costs, the environmental contractor is required to purchase a stop loss or cost cap insurance policy for their guaranteed fixed price contract to share the risk that there will be cost overruns in the cleanup of the known pollution. The redeveloper is required to purchase Premises Pollution or Environmental Liability insurance to share the risk that any newly discovered contamination will not result in additional cleanup costs for the redeveloper. This paper will discuss some of the recent lessons learned regarding (1) the terms of the initial cleanup transfer agreement, (2) efforts for project scoping/set-up, and (3) subsequent implementation dynamics of the relationships between the US Military, local municipality, redeveloper, and environmental contractor.