Hazardous Waste:

Issues Surrounding Insurance Availability

RCED-88-2: Published: Oct 16, 1987. Publicly Released: Oct 16, 1987.

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Pursuant to a legislative requirement, GAO provided information on the availability of insurance for individuals liable for the release of hazardous substances into the environment, particularly the: (1) judicial interpretation of pollution insurance policies; (2) frequency and severity of insurance claims; and (3) economic impact of pollution liability on the insurance market.

GAO found that: (1) although more than 100,000 companies generate, handle, and dispose of hazardous substances, few carry pollution liability coverage; (2) only one insurance company actively markets pollution insurance and it provides maximum annual coverage of about $12.5 million; and (3) although 1985 insurance claims payments were generally low, these claims were not necessarily indicative of the eventual magnitude of the insurance industry's payments. GAO also found that: (1) the Environmental Protection Agency (EPA) has not met the requirements of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to establish the financial responsibility of all companies subject to pollution liability; (2) although the courts consistently hold companies liable for cleanup costs, pollution victims generally find it difficult to receive compensation; and (3) although judicial interpretation of pollution insurance contract coverage varies, it does provide a basis on which to draft provisions that could help reduce variability in the future.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The Superfund law will come up for reauthorization in 1991, but there are no indications that Congress will implement the recommendation.

    Matter: Determining the amounts that insurers are paying is difficult because the industry does not have centralized, comprehensive data on these indemnity payments. Congress should consider requiring insurers or responsible parties, as appropriate, to report to EPA the amounts of indemnity payments made to cover pollution cleanups and related third-party bodily and property damage.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Because of limited market for environmental insurance, EPA does not plan to act on this recommendation at this time.

    Recommendation: The Administrator, EPA, should establish specific milestones leading to the timely implementation of financial responsibility regulations for the risks associated with classes of facilities covered by CERCLA section 108(b).

    Agency Affected: Environmental Protection Agency


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