$28+ Million Customized Secured Lender Environmental Insurance Policy Permits National Bank to Close Construction Loan
June 11, 2019
Successfully guided a national bank client to procure and bind a customized environmental insurance program in connection with the bank’s $28+ million construction loan for its borrower in California. The loan’s collateral property involved a former industrial site near Los Angeles International Airport (LAX), slated for redevelopment into a world-class office headquarters for a major (Fortune 10) technology tenant. The environmental insurance program consisted of a bespoke “secured lender” base policy with $10 million in limits and an “excess” layer from another insurer with over $18 million in limits to protect the bank in case the borrower defaults on loan payments due to a pollution condition. Without the insurance, the lender would not have been comfortable with the environmental risks presented by the collateral property, making the insurance program one of the most critical facets of the entire transaction. Total costs (including all premiums, taxes, broker commissions and legal fees) for the environmental insurance program (borne by the borrower) amounted to just 0.3% of the loan principal.