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. Biography: Raja Bhagavatula is a Fellow of the Casualty Actuarial Society, a Member of the American Academy of Actuaries and a Consulting Actuary in the New York office of Milliman & Robertson, Inc. Raja serves on the CAS Reserve Committee and has a Masters degree in Pure Mathematics from Osmania University, India. She has worked on consulting assigmnents involving mergers and acquisitions, reserving, pricing and financial analysis for insurers and self I insurers. Many of her assignments involve estimation of environmental liabilities for insurance companies and insureds. I Brian Brown is a Fellow of the Casualty Actuarial Society, a Member of the American Academy of Actuaries and a Consulting Actuary in the Milwaukee office of Milliman & Robertson, Inc. Brian serves on the CLRS committee and has a Bachelors degree in Economics from Illinois State University. Brian’s area of expertise is property and casualty insurance, especially in ratemaking, loss reserve analysis, and actuarial appraisals for mergers and acquisitions. Brian is an active member of the Milliman & Robertson research group on environmental liabilities and has previously authored three papers.