Chubb: Legal, Govt. Fears Nix Brownfield Buys

Among heavy manufacturers, 60 percent reported that they have had a deal fail because of environmental concerns.

The top causes for failure include a refusal, by either buyer or seller, to clean up the contaminated property (59 percent) and a failure to disclose the contamination (29 percent). In about 10 percent of cases, neither the buyer nor seller was able to secure environmental insurance, according to Chubb.

"CFOs, other senior executives and even boards of directors are genuinely concerned about the high cost of environmental cleanups?which can run into the hundreds of millions of dollars," said Michael J. Murphy, president of Chubb Environmental Solutions.

He continued that many companies are seeking to avoid the risks altogether when they have a choice "rather than to take on the costs of dealing with contaminated properties."

In addition to the cost of failed and avoided transactions, 35 percent of the companies surveyed have been investigated by a state or federal agency over environmental concerns, the study found.

Seventy-six percent of companies investigated were fined, while 38 percent faced other consequences, including mandatory cleanups or shutting down a facility.

Over the past decade government agencies have enacted a thicket of new environmental rules?more than 50 at the federal level alone, Chubb reported.

"Although there is clearly increased attention on environmental risk management, there is still room for improvement," said Mr. Murphy. "Manufacturers have been dealing with these issues for years, but financial and professional services firms have only recently begun to recognize their exposure to environmental issues."

While air and groundwater contamination are routine concerns for manufacturers, airborne microorganisms, black mold and other indoor air quality issues also affect firms that operate in office buildings. These later concerns have only achieved prominence in the last several years, according to Chubb.

Overall, 83 percent of the companies rated their approach to environmental risk management "good" or better, and 57 percent of the companies reported an increase in their environmental compliance budgets.

The study found that nearly half of the companies reported that their boards receive regular updates on environmental risks. And 55 percent of all CFOs who responded said they participate in meetings dealing with environmental risks "frequently." About 38 percent said they participate in most or nearly all such meetings.

More than 140 senior financial executives participated in the survey, Chubb said, which was conducted by mail.

Forty-nine percent of the respondents were CFOs or senior vice presidents of finance, 25 percent were treasurers, and the remainder included vice presidents of finance and chief risk officers. The respondents work for service firms, heavy and light manufacturers, chemical firms and retailers/wholesale distribution. Annual company revenues ranged from less than $100 million to more than $1 billion.

Chubb Environmental Solutions, a unit within Federal Insurance Company, said it helps businesses tackle large-scale environmental exposures and offers insurance underwritten by member insurers of the Chubb Group of Insurance Companies. More information on Chubb Environmental Solutions can be found at http://www.chubbfsi.com.