Allocating Risk for Hazardous Waste Cleanups

Article excerpt

Despite the strong demand for pollution liability policies, the insurance industry has not been willing to grant significant coverage, imposing instead extremely high premiums and protective terms and conditions " on prospective contractors.

THE YEAR IS 2010. After 10 days of tense deliberation, the jury's verdict is about to be announced. A well-known, highly respected hazardous waste contractor that had used the best technology available 20 years earlier to clean up a highly contaminated waste site is on trial. Now, there are more advanced technologies to clean up such sites, but these did not exist at the time.

The verdict is in. The defendant is found negligent, and the relatives of a woman who died from a rare form of cancer are awarded millions in damages. Like most other contractors, this one was unable to arrange for adequate liability coverage at the time of the cleanup, and the judgment signifies the demise of the company. More importantly, it means that many severely contaminated waste sites probably will not continue to be cleaned up, posing a far greater menace to health and the environment.

This scenario is not so farfetched. Contractors working in today's complex regulatory environment often are faced with astronomically high liability risk for various types of much-needed work. At the forefront is the remediation of hazardous waste sites. They include municipal landfills, industrial lagoons, and recycling facilities, which are characterized by the actual or threatened release of pollutants or contaminants to surface water, the air, or groundwater, as well as by potential direct human contact with the wastes.

A Response Action Contractor (RAC) is the scientist, engineer, or constructor charged with remediating or cleaning up hazardous waste sites. The RAC's role includes determining the nature and extent of the contaminants, risk to people and the environment posed by these substances, and alternatives for remediation. Based on this information, a remedy for the site is selected and the RAC completes the design and remediates the site. The definition of an RAC does not include anyone responsible for placing the waste at the site or anyone who profited from the disposal.

Initial data collected from site investigations are used to perform a risk assessment and then determine alternative solutions. The uncertainties that are likely to exist at the end of this process will be reduced somewhat during the design phase, when more samples are taken and additional treatability studies are conducted to determine cleanup parameters.

Remediation begins once the design is complete. It is complex and involves many factors because most waste is transmitted underground, and the tools currently available to detect contaminants and track their migration are imperfect and costly. In addition, many of the technologies used to treat wastes are unproven and their long-term usefulness is unknown. Uncertainties may include the nature and extent of the contaminants, the underground flow paths, how the contaminants are transmitted through the unsaturated zone or in the groundwater, and the efficacy of treatment technologies.

Site remediation will proceed with or without these answers. At many of the sites, it is possible that the RAC will not locate all the contaminants or specify the correct treatment or contaminant remedy. Given that this uncertainty exists, what then is the RAC's liability?

Hazardous waste laws

Hazardous wastes are covered primarily in two pieces of Federal legislation--the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Many states also have passed laws similar to the Federal rules. These dictate strict, joint, and several liability for those persons responsible for generating or placing wastes at a site. Any one party can be held responsible for the entire cleanup cost at a site, regardless of the extent to which he contributed to the problem or whether or not he was at fault. …