Estimation of Liabilities Due to Inactive Hazardous Waste Sites

The potential liability associated with inactive hazardous waste sites can be large for both policyholders and insurance companies. Our paper outlines several methods that can be used to estimate and monitor insurance company and/or policyholder liabilities associated with inactive hazardous waste sites. We have outlined several publicly available data elements which can be helpful in evaluating environmental liabilities. None of the procedures described in this paper provide "the method" to analyze environmental liability exposures. For financial reporting purposes, company management needs to evaluate the details of its own exposures and judge the ultimate cost based on current facts and financial reporting principles. Additionally, this paper summarizes the legal issues involved in environmental coverage disputes between insureds and insurance companies. For the past ten years issuers of CGL policies and their policyholders have engaged in a protracted struggle to determine whether or not environmental liabilities are entitled to defense and indemnity under CGL policies. This paper discusses major coverage issues such as what constitutes a "suit", whether it results in "damages", whether it was "sudden and accidental", etc., upon which the primary battle lines between insurers and insureds are drawn. Although the legal landscape of environmental insurance coverage is becoming clearer, many of these and other issues have not been decided in a number of jurisdictions. Keywords: Superfund, Pollution, CERCLA