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Project # 62726

Environmental – Evaluation of Pollution Remediation vs. Regulatory Compliance and Plant Upgrades

VERTEX was retained by an international property and casualty insurance carrier to assist them in their review and investigation of a claim made by an oilseed and vegetable oil production company on their environmental pollution insurance policy.

The claim pertained to the insured’s production facility in China and approximately $830,000 in costs incurred by the insured pursuant to directives issued by the Tianjin Environmental Protection Bureau (TEPB), the local environmental regulatory authority. These directives were issued following the TEPB’s monitoring of volatile organic compound levels in air at the downwind facility property boundary, which were found to be significantly above the applicable standard.

VERTEX performed a detailed review of the damages/incurred costs information submitted and concluded that with the exception of approximately $11,000, all of the incurred costs were related to production process modifications, preventative measures, and plant upgrades, including the purchase of new and more effective equipment for reducing odor-causing volatile organic chemicals in the plant’s gas emissions so as to achieve compliance with the applicable regulatory standard.

None of the submitted costs incurred were found by VERTEX to relate to the direct remediation of contaminants released into the atmosphere or a pollution condition in the air. The aforementioned $11,000 related to the collection and analysis of air samples to confirm the reported results of the TEPB’s monitoring and assess the impact of the new plant production processes and upgraded equipment in bringing the volatile organic compound concentration in the plant’s gaseous emissions into compliance with the applicable TEPB regulatory standard.

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