Coverage Spotlight: Apartment Owners & Managers

The ever-changing landscape of the real estate market has created new environmental liability challenges for apartment managers and owners. Faced with competition for investment opportunities, often involving the pursuit of properties in congested areas or environmentally challenging areas (ex. waterfront, warehouse, industrial, etc.), environmental exposures may only become evident during the last hours of a transaction or, in the worst case scenario, when a claim is made against the real estate entity. Operational exposures are on the rise as well, as tenants and client entities become more aware of mold and other indoor air quality concerns. Managers and owners are facing a significant increase in activity related to their operations.

Apartment complex environmental risks may initially appear to be innocuous, but a closer look at their exposures reveals that they can be very serious. The operations and locations where these complexes are situated can lead to environmental exposures that may not be uncovered until they are undergoing redevelopment or renovation activities, or a claim is made against a manager or owner.

Environmental Concerns:

  • Maintenance chemical spills, releases of fumes from chemicals used for maintaining the grounds (example: deck or cement sealants) and the lack of emergency control plans may be a source of environmental concern.  Chlorine mixtures used for treating cooling water or oils, fuels, lubricants, paints, and cleaning chemicals could be released into drains.  Apartment managers may not always know where all the floor drains discharge.  Over time, spilled chemicals may impact soil, sewers, or groundwater in the vicinity of the apartment complex.
  • Potable drinking water may be delivered through pipes that contain lead, which may adversely impact tenants and employees.  In some cases, potable drinking water may be obtained from on- site wells which may be impacted from toxic sources on or off the property, including underground storage tanks or landscaping chemicals.
  • The quality of indoor air at apartment complexes may be compromised by, for example, the use of formaldehyde in building materials, fumes from new carpet adhesives, improperly removed asbestos or lead-containing materials by contractors, the use of crystal methamphetamine to make illegal drugs by tenants, insecticides/fumigants used to control infestations, or terrorist threats such as biological, chemical, or radiological agents.
  • Carbon monoxide may be released from fuel fired devices such as boilers or from parking garages without adequate ventilation.
  • Pesticides or fertilizers used for outdoor terraces or gardens may eventually find their way onto neighboring properties and/or local water bodies.
  • Underground or aboveground storage tanks used for heating oils may leak and adversely impact the apartment complex grounds or surrounding properties.
  • The apartment complex location may have been used as a commercial or industrial facility in the past and the apartments may be situated on property that has been adversely impacted by previous owners or occupants.
  • Apartment complex owners/managers may be at risk (from a compliance as well as reputational standpoint) if they are publicly exposed for being included in a group that gave their waste materials to disposal sites that did not dispose of them properly.

Coverages that should be considered for this class of business include Site Pollution Liability (EIL) including Business Interruption, Storage Tank Coverage; and during the construction or redevelopment of property, CPL, TPL, and NODS should be considered. For more information or to discuss a specific account opportunity, contact us.