Citizen suits against polluters increase -- but can guilty pay?

In Legler, N.J., residents angry over the chemical contamination of their water supply have sued for $750 million a company they charge with partial responsibility for the mess. In Idaho, parents worried about their children's health are using a local lead smelter for $20 million in damages. And in New York, lawsuits filed against Hooker Chemical Company by residents of the Love Canal area are estimated to total $3 billion.

With increasing regularity, reports such as these make headline news while swelling the number of multimillion-dollar lawsuits being filed against chemical and plastics manufacturers, metal fabricators, oil and coal companies, and other producers, transporters, and disposers of hazardous wastes.

What almost never makes the news, however, is the fact that nearly all of the companies caught in this whirlwind of legal action have virtually no insurance coverage for the hefty claims they now face.

But even as tough government regulations and civil court actions are holding businesses responsible for damages caused by the waste they create -- just as they have been held liable for damages caused by the goods they make -- a new field of insurance is being developed to deal with this new liability.

Spurred in part by the publicity over the effects of hazardous waste dumping at Love Canal and in part by strict Environmental Protection Agency (EPA) regulations that took effect last month, a handful of insurance companies are pioneering policies for what is termed gradual, or nonaccidental, pollution.

Already, industry observers say they expect that waste liability will be one of the leading issues confronting American businesses in the 1980s, just as job safety and product liability were among the most pressing workplace concerns of the 1970s.

"Consider the strength of the environmental movement," says one analyst, "and look at the tremendous public concern over hazardous waste. You can't turn that back. . . . Issues regulating the environment are going to be the issues of the '80s."

The EPA estimates that 57 million metric tons of hazardous wastes are generated each year by some 700,000 businesses, municipalities, and utilities. And it is estimated that all but a handful of those companies now rely on standard liability insurance policies that cover only accidental or sudden pollution, such as the damage which could be caused, for example, by poisonous fumes released into the atmosphere by an accidental explosion at a chemical processing plant.

Although hazardous waste liability insurance began emerging in 1978, in the wake of the Love Canal disclosures, the concept has gathered momentum recently as EPA regulations outlining strict responsibility for hazardous waste handling have become law.

In addition, as part of the final phase of Resource Conservation and Recovery Act regulations scheduled to take effect Dec. 31, industry observers say they expect the EPA will require manufacturers and their waste handlers to pruchase for the first time nonsudden pollution insurance.

Under the newly developed policies, limits are set at $15 million to $20 million, although one firm, Alexander and Alexander (A&A) has initiated a program that is expected to offer limits as high as $100 million.

The damages covered by the policies include bodily injury, property damage, and "diminished amenities," or reimbursement for property that is rendered unusable or unpleasant to live in by such pollutants as noise and stench. But most significantly, say policy writers, the coverage allows companies to insure themselves against unforeseen polution hazards that may take years to surface.

"The problem, of course, is that substances used today may be hazardous 10 years from now," says Hugo J. Standing, as senior vice-president at A&A, which has hosted a series of seminars around the country to explain the hazardous waste liability issue to businesses and insurers.

"This insurance is important because of the future," he says. "A lot of things now classified as hazardous were considered to be state of the art when they were first used years ago. People just don't know what may be considered hazardous in the future."

To quality for such policies, however, firms must undergo a rigorous engineering survey and scientific evalution of the wastes they deal with, their plant facilities, and their management techniques. Because many of the insurance programs are also designed to help correct hazardous waste problems, companies can expect detailed pointers on how to improve their waste operations.

Although indurers estimate that only a relatively small number of companies are now insured for hazardous waste liability, they say they expect demand for such policies to grow as awareness of the issue increases.

"Up until Love Canal, many business people didn't feel they were responsible for that type of [damage]," says Matt Gerrity, an A&A vice-president involved with the company's hazardous waste program.

"There is no doubt in my mind," he continues, "that within four to five years , environmental impairment liability insurance will be as standard a form as a fire policy."

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