Twelve years ago, the Baltimore Colts left town in the darkness of night bound for the newly-constructed Hoosier Dome (now the RCA Dome) in Indianapolis. The city of Denver was awarded a major league baseball franchise and constructed a 1940s-style ballpark "Coors Field" in the lower downtown (lodo). Due to costs to renovate the Kingdome into a modern, first-class facility, the Seattle Seahawks are looking to migrate south to California. The Raiders returned home to Oakland after concessions were granted to upgrade the Alameda County Coliseum. The city on the lake watches helplessly as one of the most fanatical football towns loses their team, but not its name. The Rams pack up and move from Anaheim to a newly-constructed, domed stadium in St. Louis. The state of Maryland and the city of Baltimore approve tax increases to partially finance construction of a new football stadium...

Sports construction is one of the hottest and fastest growing specialty contracting markets, representing a billion dollar industry. In fact, 1994 was the most lucrative year to date, with over $1.4 billion in new and renovative construction of sports complexes, stadiums, arenas and racetracks. As this industry expands and the trend to revitalize urban areas with new sports complexes continues, so too do the potential liabilities facing contractors and franchise owners. Fortunately, owners and contractors can protect against the potential losses they face with specialized insurance products designed to address the unique liabilities of sports arena construction.

Gaining A Competitive Edge

Several factors have contributed to the increase in arena construction. Major League Baseball (MLB) and the National Football League (NFL) instituted this initial movement toward new facilities to increase or uphold franchise revenues. The National Hockey League (NHL), National Basketball Association (NBA) and other professional sports organizations have followed suit. The list of recently constructed and planned sports venues continues to grow. Two of the most historic indoor arenas, the Boston Garden and Chicago Stadium, have been replaced with the Fleet Center and United Center. The Philadelphia Flyers and 76ers will move to a new Corestates Center for the 1996-1997 season. The Washington, DC sports franchises are moving to a downtown site of the MCI Arena, which is under construction and the Redskins will break ground in suburban Prince Charles County. With the United States hosting both Summer and Winter Olympic Games over the next few years, infrastructure and sports venue construction in Atlanta and Salt Lake City are moving forward rapidly.

Economic Benefits

Cities invest public funds to either retain or lure sports franchises for their revenue-generating capabilities. In today's uncertain economy, many franchises look to the public to support their bottom line by offsetting high salaries and operating costs. Also at issue is revenue production to limit franchise movement away from fans. The 1990s saw revenue generation from sources never before available, such as corporate sponsorships, premium/luxury seating, upscale restaurants, concessions and advertising sales. These sources generate the type of revenues that sports franchises are pursuing. The majority of sports complexes that are 10 or more years old are considered obsolete in their present state to produce the necessary revenue. Therefore, teams with older facilities, as well as small market teams facing other economic issues, need their arenas renovated or replaced to stay competitive. When owners campaign for these new facilities they promote to their stakeholders the economic benefits creation of jobs and spending.

Urban Revitalization And Potential Liabilities

Many downtown areas of the cities these sports franchises occupy are in need of revitalization, which the new construction often provides. For example, The Camden Yards project, specifically constructed as a baseball stadium, rose from dilapidated ruins as part of the renaissance of Baltimore's inner city. The construction of Camden Yards has been instrumental in making Baltimore's Inner Harbor a thriving tourist attraction.

Sports arena construction and urban revitalization go hand-in-hand. They provide significant economic enhancements to the local economy, such as jobs and spending, and bring architectural beauty to once-ailing urban areas. However, these downtown areas also provide a potentially volatile environmental liability to the owners and contractors performing work on such sites. Fortunately, there are products available in todayís insurance marketplace that can limit the potential liability associated with sports construction.

Key Insurance Products For Sports Construction

OCIPs. One of the key insurance products utilized to address the risk associated with multi-million dollar construction includes Owner Controlled Insurance Programs (OCIPs), also referred to as owner controlled wrap-ups. These OCIPs reduce insurance costs by utilizing a basic risk management concept of placing all active contractors and the owners/clients under the same program. The list of active contractors typically includes the construction manager, general contractor and various specialty trade subcontractors. The concept of an OCIP provides risk transfer options for liabilities that are otherwise unavailable and gives the added control a sports franchise and/or its owners favor, in addition to reducing overall insurance costs associated with such projects. Other advantages of an OCIP include claims handling and loss prevention programs which the owner can control.

Environmental Insurance. Most of the OCIPs incorporate the standard casualty insurance programs. However, since many of these sports construction projects are pursued as urban revitalization projects, another key insurance product is a prudent and diligent choice for incorporation into the OCIP: environmental/pollution liability insurance. These urban sites are potential hosts to an array of environmental risk including contaminated urban fills and other chemicals/hazardous substances. Additionally, these sites can include Brownfields, former industrial and commercial facilities whose prior site activities would violate current state and federal environmental regulations. These practices could have included on-site disposal of wastes from the manufacturing and industrial production processes and poor housekeeping with regard to chemical storage and containment. Improper storage/containment of chemicals may have resulted in chemicals and/or hazardous materials leaching or migrating into underlying soils and groundwater. This contamination would impact human health and the environment with regard to water supplies, limiting site usage and causing diminutive property values.

With the franchises purchase of such a property, remediation and environmental cleanup expenses, prior to construction, could add up to millions of dollars. In addition, those contractors performing the work could potentially exacerbate a preexisting condition, thus causing an environmental loss or a pollution condition to occur during performance of standard construction activities. Subsurface environmental investigation and assessment performed on many of these sites definitively identifies preexisting contamination from previous site usage. For example, the Coors Field in Denver was built on the site of a former railyard, and the Alamodome in San Antonio on a former landfill. Both of these complexes imposed pollution liability upon the contractors performing work. Recently, the impending move of the Chicago Bears created a stir. The Bears potentially would move to a new complex in Gary, Indiana. The former industrial site in Gary was identified as having substantial subsurface contamination, thereby causing further costs for site remediation.

GCPL. Given the risks involved with contaminated sites as well as the liability of potential unknown subsurface conditions, another viable insurance option is a General Contractors Pollution Legal Liability (GCPL) policy. The GCPL is available to those general and specialty trade contractors whose environmental liability is clearly incidental to the services they perform and vicariously imposed by subcontractors. The purchase of blanket GCPL by these nonenvironmental contractors has increased significantly. The blanket approach provides coverage for all of a contractors operations as opposed to coverage on a project-specific basis. These contractors are seeing the benefits of a GCPL policy as part of their risk management program. In addition to providing liability protection to their bottom line, a GCPL policy provides a competitive edge in bidding especially when the bid specification requires a pollution liability insurance component.

A Winning Strategy For Limiting Liability

Placement of environmental insurance coverage as part of an OCIP in sports arena and infrastructure construction as well as contractors purchasing GCPL have been successful tools in limiting insurance liability and risk management costs to the entities involved. The environmental/pollution coverages available in today's marketplace can extend to the owners, contractors and consultants. These coverages afford protection against catastrophic environmental loss from third-party liability and can be extended to insure professional liabilities associated with such a project. In addition, the environmental insurance products available in today's marketplace for projects such as sports construction can be tailored upon completion of the construction phase to extend to both third-party and first-party environmental liability for the owned premises and/or property in the interests of the owner for future years.