Evaluation of Property Damage Claims for Insurance Recovery.
Background. DCA was retained by The London Market to evaluate environmental property damage claims brought by a major U.S. power utility to this insurer. The utility claimed nearly $450 million for past and future costs at thirty-two former manufactured gas plant (MGP) sites and one site contaminated with polychlorinated biphenyls (PCBs). DCA evaluated past and future costs totaling $295 million (66%) for eleven of these sites.
Risk Exposure. Both parties faced significant litigation risks (and costs) had they moved forward to a trial and an appeal. In addition, Lloyd's was at risk for having a final resolution to this claim exceed their reserves that had been set aside.
Resolution. DCA reviewed and evaluated technical, financial and legal/regulatory documentation compiled by the utility and their consultant in support of their claim; interviewed the utility’s representatives, their consultant, and state regulatory agency personnel; conducted visits to the major sites; reviewed documentation to assess the reasonableness and appropriateness of past costs; evaluated the probabilistic future cost models developed by the utility’s consultant and developed independent future cost projections using deterministic and probabilistic modeling techniques; and prepared a report and made a formal presentation to the client and to the insured and their consultants summarizing DCA's work.
Results. DCA's evaluation indicated past and future costs of approximately $90 million were potentially recoverable from this utility’s insurer prior to legal analysis. The client and the insured settled this claim and avoided litigation.
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