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Responding to hazardous waste sites: Sharing the response risks

Journal of Hazardous Materials
Publication Date
DOI: 10.1016/0304-3894(87)87011-5
  • Design
  • Economics


Abstract The EPA faces a challenge in indemnifying the Superfund response action contractors (RACs) so that cleanup of the nation's hazardous waste sites will not be interrupted. Although such a program is currently justified by the absence of Property and Casualty (P&C) insurance coverage for RACS, the Government seems to be avoiding a long-term presence as a surrogate P&C insurer. Given the cyclical nature of the P&C commercial insurance market, care should be taken so that the indemnification program does not obstruct reentry of commercial insurers. To walk this fine line between assuring the availability of qualified RACs and encouraging the availability of commercial P&C liability insurance to RACs, the EPA indemnification program first should recognize the basic economic forces of the pullution liability insurance marketplace. The analytical framework in this paper has provided a starting point toward understanding these forces and developing a least-intrusive indemnification scheme. The conceptual design of the scheme should be based on three criteria: (1) continuing the Superfund cleanup program, (2) providing technical assistance to the P&C insurers, and (3) maintaining the RAC demand for commercial pollution liability coverage. Implementation of such indemnification poses difficulties in the areas of constructing coverage limitations, deductible levels, and other terms and conditions. Policy decisions in these areas will not be easy because of a lack of actuarial loss data and the change in the risk distribution pattern effected by these decisions.

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