Environmental Risks for Vacant Properties

On November 27, Property Casualty 360 published an article titled Vacant Property’s Environmental Risks.
 
Vacant Property’s Environmental Risks

Vacancy isn’t the only headache property owners can face: Empty buildings and land can cause pollution-related liability. Learn about possible options to mitigate environmental liabilities through insurance and risk management.
 
As America’s real estate crisis recovers along with our economy, more than 14 million properties remain vacant or abandoned across the country. Real estate is considered a vacant property when it is not currently occupied or in use. This includes empty lots as well as structures.

Cities like Detroit, Cleveland and Las Vegas are dealing with thousands of undeveloped lots, empty houses and even entire neighborhoods, as well as commercial, retail and industrial properties. This has resulted in an increase in crime and lower property values for surrounding areas. Local communities left to care for these properties by default do not have the time or resources to keep the properties in good condition, thus causing an increase in exposure to risks like vandalism, fire, theft and water damage. In turn, these risks hinder the possibility of resale and revitalization in the future as economic conditions continue to improve, leading to possible setbacks throughout our communities.

Several environmental risks are associated with all types of vacant properties. Older buildings may have existing asbestos insulation and tiles, as well as lead paint and lead piping. All buildings constructed before 1980 have the potential to contain both asbestos-containing materials and lead-based paint. Leaking heating oil tanks, pipes and appliances are prevalent, as well as any chemicals or lubricants stored on premises in garages or sheds.

Unknown underground storage tanks may exist onsite as well. Underground storage tanks that are not maintained regularly cause soil and groundwater contamination at the subject property itself as well as surrounding real estate. Retail shopping centers or commercial office buildings that have housed dry cleaners, printers, or restaurants have serious concerns pertaining to the improper storage and disposal of chemicals, inks, dyes and grease/oils.

Poor maintenance, concrete cracks, dilapidated roofing, clogged sewer pipes and broken sprinkler systems can result in water intrusion and mold growth. Mold grows rapidly in warm and moist environments—bathrooms, basements, under carpeting, inside walls and HVAC ducts—and easily can spread throughout a commercial, retail or residential structure, impacting others.

Weather-related events such as flash flooding exacerbate indoor water and mold issues, and cause excessive surface water and silt runoff affecting neighboring properties or waterways such as ponds, streams or rivers. Should a waterway become impacted, not only is the quality of water at risk, it threatens plant and animal life as well.

Vacant buildings and land are attractive locations to illegally dispose of hazardous waste, drums and containers—a practice commonly called “midnight dumping.” The drums and containers are almost never appropriate to properly contain the waste and the contents are easily released onto the property.

Criminal activity at abandoned sites is a major concern. Criminals establish illegal methamphetamine labs in abandoned properties, with the remnants left behind after they move on.
These residual materials cause widespread contamination to a facility and can cost thousands of dollars to restore the property back to its previous condition.

Often city officials are unsure who is legally responsible for dealing with these environmental hazards. If the property owners can be tracked down, they may be held liable. Banks taking over properties via foreclosure and local municipalities are left with figuring out how to deal with these issues. Some local organizations even attempt adverse possession in hopes of improving their declining neighborhoods.

Adjacent property owners or additional on-site tenants also are affected by contamination stemming from a vacant property. Mold growth easily spreads between units. Leaks, toxic fumes and mold can devastate innocent landowners.

Mitigate Losses

Generally, environmental issues are excluded from most general liability or property insurance policies, including defense costs. So property owners, cities and financial institutions that did not cause a problem may still have to defend themselves from suits that could arise from the threat of contamination.

Owners also must spend the time and money to figure out the source of the contamination, then implement a solution that can sometimes take many years to complete. Environmental insurance policies can be an effective tool for concerned parties to manage the risks while protecting their assets as the real estate market recovers.

Many city officials are moving forward with redevelopment plans, which include the demolition and removal of abandoned structures. The contractors hired to perform the work will come into contact with many of these environmental exposures during the course of debris removal, site preparation, demolition, grading, landscaping, and other activities.

A contractors’ pollution liability (CPL) insurance policy protects contractors if a pollution condition occurs as a result of their work or work performed on their behalf (i.e., subcontractors). Defense costs are also covered under this type of policy. For example, if a demolition contractor causes a release of asbestos fibers, causing unsafe air quality conditions, an injured third party could sue. An excavation contractor could unknowingly unearth an abandoned storage tank and puncture it, causing a leak and subsequent damage to a neighboring property.

Contractors do have options available to them to adequately protect themselves from any resulting claims or lawsuits, as a CPL policy provides protection for both ongoing and completed operations after the contractor has finished work on the project. Coverage can be purchased on a claims-made or occurrence basis and be tailored for specific projects/contracts. A CPL policy addresses potential contaminants such as asbestos, lead, silica and mold. Additional features of a CPL program may include coverage for over-the-road spills during transit and disposal of waste at a non-owned location, such as a landfill. Limits of liability generally start at $500,000 and can go upward to $50 million.

Environmental insurance also exists for the property owner or manager, including banks or other financial institutions that have taken over vacant properties via foreclosure. Occupied buildings have various environmental exposures, but empty structures with no supervision or maintenance can turn a small issue into a multi-million-dollar remediation project.

Site pollution, or pollution legal liability, is a policy crafted to cover both third- and first-party claims, including defense costs, resulting from pollution conditions at, on, under, or emanating from scheduled locations (in this instance, vacant properties). Variations of this policy include secured creditor environmental insurance and lender liability, which protect financial institutions and borrowers throughout the buying and selling process. Many policies are crafted especially for commercial property portfolios, and there is no exclusion for vacant properties.

These policies can be tailored to cover environmental hazards including mold, storage tanks, transportation pollution, illicit abandonment, in-place asbestos and lead, soil/groundwater contamination, air and noise pollution, and waste disposal to non-owned locations. Business interruption image restoration may also be purchased and some policies today even assist with green standards compliance.

Most policies include coverage for natural resources damages within the policy form itself. Coverage is written on a claims-made basis and policy terms generally vary from 1 to 10 years in length. Policy terms can be built to fit the needs of the specific property owner, lender requirements and the risks associated with that particular location. Much like the CPL policy, liability limits can range from $500,000 to beyond $50 million, depending on the complexity of the property schedule and any transactional requirements.

Vacant properties will remain a large part of real estate landscape for the next several years. Focusing on the potential issue now will lend to a more successful outcome as our economy continues to recover. When at all possible, property owners, municipalities, and financial institutions will need to best provide protection for these properties as well as adjacent property owners or tenants. Supervision, security, maintenance, and environmental awareness—including the purchase of adequate insurance—will manage challenges as well as create proactive solutions for redevelopment in the future.

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About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

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CHIEF EXECUTIVE OFFICER

Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.

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Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.

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CHIEF INFORMATION OFFICER

George Mehok

George Mehok is the chief information officer for Safeguard. He is responsible for all strategic technology decisions, new systems deployments and data center operations supporting a national network of more than 10,000 mobile workers.

George has more than 20 years of leadership experience dedicated to high-growth companies in the mobile telecommunications and financial services industries, spanning startups to global industry leaders.

George played a senior role in the formation of Verizon Wireless, leading the IT product development and strategic planning team. He led the integration planning for the Verizon merger including: GTE, Vodafone-AirTouch, Bell Atlantic Mobile and PrimeCo.

As chief information officer at Revol Wireless, a VC-backed CDMA wireless communications network operator, George’s team implemented an integrated technology infrastructure and award-winning business intelligence platform.

George holds a bachelor’s degree in political science and economics from Eastern Michigan University and an M.B.A. from The Ohio State University. He is a board member of Akron University’s School of Business Center for Information Technology, in addition to an advisory board member for OHTec.

In 2013, George won the Crain’s Cleveland Business CIO of the Year award for his team’s work in completing a major acquisition and technology transformation at Safeguard. In 2015, George’s team was recognized by InformationWeek’s annual Elite 100 ranking of the most innovative U.S.-based users of business technology. The mobile inspection technology developed at Safeguard was selected as InformationWeek’s “One of the top 20 ideas to steal in 2015”.

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General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard and oversees the legal, human resources, training, and compliance departments. Linda’s responsibilities cover regulatory issues that impact Safeguard’s operations, risk mitigation, enterprise strategic planning, human resources and training initiatives, compliance, litigation and claims management, and mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans over 20 years, and Linda’s experience covers regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for the Control, Quality Assurance, Business Development, Accounting & Information Security departments, and is a Managing Director of SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Joe has been in a wide variety of roles in finance, supply chain management, information systems development, and sales and marketing. His career includes senior positions with McMaster-Carr Supply Company, Newell/Rubbermaid, and Procter and Gamble.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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AVP, High Risk and Investor Compliance

Steve Meyer

Steve Meyer is the assistant vice president of high risk and investor compliance for Safeguard. In this role, Steve is responsible for managing our clients’ conveyance processes, Safeguard’s investor compliance team and developing our working relationships with cities and municipalities around the country. He also works directly with our clients in our many outreach efforts and he represents Safeguard at a number of industry conferences each year.

Steve joined Safeguard in 1998 as manager over the hazard claims team. He was instrumental in the development and creation of policies, procedures and operating protocol. Under Steve’s leadership, the department became one of the largest within Safeguard. In 2002, he assumed responsibility for the newly-formed high risk department, once again building its success. Steve was promoted to director over these two areas in 2007, and he was promoted to assistant vice president in 2012.

Prior to joining Safeguard, Steve spent 10 years within the insurance industry, holding a number of positions including multi-line property adjuster, branch claims supervisor, and multi-line and subrogation/litigation supervisor. Steve is a graduate of Grove City College.

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AVP, Operations

Jennifer Jozity

Jennifer Jozity is the assistant vice president of operations, overseeing inspections, REO and property preservation for Safeguard. Jen ensures quality work is performed in the field and internally, to meet and exceed our clients’ expectations. Jen has demonstrated the ability to deliver consistent results in order audit and order management.  She will build upon these strengths in order to deliver this level of excellence in both REO and property preservation operations.

Jen joined Safeguard in 1997 and was promoted to director of inspections operations in 2009 and assistant vice president of inspections operations in 2012.

She graduated from Cleveland State University with a degree in business.

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AVP, Finance

Jennifer Anspach

Jennifer Anspach is the assistant vice president of finance for Safeguard. She is responsible for the company’s national workforce of approximately 1,000 employees. She manages recruitment strategies, employee relations, training, personnel policies, retention, payroll and benefits programs. Additionally, Jennifer has oversight of the accounts receivable and loss functions formerly within the accounting department.

Jennifer joined the company in April 2009 as a manager of accounting and finance and a year later was promoted to director. She was named AVP of human capital in 2014. Prior to joining Safeguard, she held several management positions at OfficeMax and InkStop in both operations and finance.

Jennifer is a graduate of Youngstown State University. She was named a Crain’s Cleveland Business Archer Award finalist for HR Executive of the Year in 2017.

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AVP, Application Architecture

Rick Moran

Rick Moran is the assistant vice president of application architecture for Safeguard. Rick is responsible for evolving the Safeguard IT systems. He leads the design of Safeguard’s enterprise application architecture. This includes Safeguard’s real-time integration with other systems, vendors and clients; the future upgrade roadmap for systems; and standards designed to meet availability, security, performance and goals.

Rick has been with Safeguard since 2011. During that time, he has led the system upgrades necessary to support Safeguard’s growth. In addition, Rick’s team has designed and implemented several innovative systems.

Prior to joining Safeguard, Rick was director of enterprise architecture at Revol Wireless, a privately held CDMA Wireless provider in Ohio and Indiana, and operated his own consulting firm providing services to the manufacturing, telecommunications, and energy sectors.

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AVP, Technology Infrastructure and Cloud Services

Steve Machovina

Steve Machovina is the assistant vice president of technology infrastructure and cloud services for Safeguard. He is responsible for the overall management and design of Safeguard’s hybrid cloud infrastructure. He manages all technology engineering staff who support data centers, telecommunications, network, servers, storage, service monitoring, and disaster recovery.

Steve joined Safeguard in November 2013 as director of information technology operations.

Prior to joining Safeguard, Steve was vice president of information technology at Revol Wireless, a privately held wireless provider in Ohio and Indiana. He also held management positions with Northcoast PCS and Corecomm Communications, and spent nine years as a Coast Guard officer and pilot.

Steve holds a BBA in management information systems from Kent State University in Ohio and an MBA from Wayne State University in Michigan.

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Assistant Vice president of Application Development

Steve Goberish

Steve Goberish, is the assistant vice president of application development for Safeguard. He is responsible for the maintenance and evolution of Safeguard’s vendor systems ensuring high-availability, security and scalability while advancing the vendor products’ capabilities and enhancing the vendor experience.

Prior to joining Safeguard, Steve was a senior technical architect and development manager at First American Title Insurance, a publicly held title insurance provider based in southern California, in addition to managing and developing applications in multiple sectors from insurance to VOIP.

Steve has a bachelor’s degree from Kent State University in Ohio.