An essential step in a real estate transaction is to evaluate the property for environmental contamination and to assess the potential related liability for the new owner. Environmental liabilities associated with the purchase, sale or development of properties can be extremely complex, typically generating volumes of sampling data, assessment reports, regulatory correspondence and other legal correspondence. The environmental risks detailed in these documents are often the linchpin in completing the transaction.

They also form the basis for risk allocation between the buyer and seller and, in many instances, the underwriting of environmental insurance to transfer or mitigate the exposures. This due diligence seeks to identify liabilities that arise out of property acquisition and divestiture; day-to-day environmental risk; lost market value resulting from known, pre-existing and new pollution conditions; and newly emerging concerns, such as mold and indoor air quality.

In today's litigious environment, managing this mountain of material is critical to documenting current environmental conditions. It's also essential to preserving information for future use in the event of conflicts over indemnities or regulatory actions. And it's necessary when underwriting environmental insurance coverage, tracking and documenting changes to policy terms and conditions, and managing any claims that may manifest from the property.

REAL ESTATE INVESTMENT TRUST: AON'S SEVEN STEPS TO EASING THE PAIN

Aon's involvement with most real estate transactions usually entails structuring, placement and service of environmental liability insurance policies, which incorporate the extensive data management described. This is especially true when the transaction involves a real estate investment trust (REIT) portfolio, which can sometimes include hundreds of assets that are often in a constant state of flux.

One such example is a large REIT with a portfolio of more than 250 locations throughout the United States. The REIT's properties encompass both residential and commercial assets, including an increasing number of buildings that had been previously contaminated. It was struggling with the volume of data associated with its development activities, which included:

• Due diligence assessments.
• Demolition and reconstruction.
• Cleanup of existing contamination.
• Management of contamination to be left on-site.
• Lenders' requirements.
• Purchase and sale documents.
• Endorsements and claim submissions.

Understandably, the documentation to be reviewed and retained was staggering. Initially, an Excel spreadsheet was used to keep up with the coverage determinations for each asset, specific endorsements and other documents. However, that quickly became unwieldy and time consuming to manage.

The client was already using Aon RiskConsole, so Aon's Environmental Service Group partnered with eSolutions to design a new module that would track the pollution policy and all endorsements, environmental documents and coverage determinations. The REIT insisted that the module had to be easy to use and security-enabled to allow access to the broker, the risk manager, the underwriter, the underwriting engineer and selected client asset managers.

Aon's RiskConsole was configured to display all asset details (i.e., name, address, coverage effective date, coverage type, coverage restrictions) and associated environmental data in a searchable format. It also had to link assets to the uploaded policy and all related endorsements, and allow all parties with access to the database to upload and download the environmental documents.