The world is full of hazardous and noxious substances. They're used for good purposes, but eventually whatever hasn't been consumed in their use needs to be disposed of. There are approved ways to dispose of toxic substances, but there are inherent risks. The materials may leak out of their containers overtime, contaminating the soil and potentially the groundwater, affecting local residents and the environment itself. Sometimes the materials are spilled in an accident of some sort, or simply abandoned inappropriately by the party in control of the materials. The hazards became apparent in the 1970s when a power company dumped 21,000 tons of hazardous chemicals into the abandoned Love Canal project, then covered it over with dirt and leased out the land. The chemicals had contaminated the groundwater and over time the residents were affected. This and the existence of other contaminated sites led Congress in 1980 to establish the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) which is commonly known as Superfund. The Act allows the EPA to step in and either force the company that caused the spill or accumulation of toxic waste to clean up the site, or for the EPA to clean it up and pay for those costs. The law created a tax on chemical and petroleum industries to create a trust fund that is used for cleaning up toxic sites. It established prohibitions and requirements surrounding closed and abandoned hazardous waste sites, provided for liability for those responsible for the release of waste at those sites and established a trust fund to provide for cleanup when no responsible party could be identified.
Superfund applies not to just immediate spills, but sites where toxic waste may have been dumped in the past and where the containment for such waste is now leaking or otherwise contaminating the ground, risking harm to people and the environment as a whole. Companies go out of business and it's possible that a site may not be identified as a toxic site for many years; in such cases, if no responsible party can be found, liability could be assigned to the existing owner of the site or the trust fund would be used to fund cleanup of the site.
There are four classes of liable parties under Superfund:
Current owners/operators of a facility Past owners/operators at the time when the hazardous materials were disposed Generators and parties that arranged for the disposal or transportation of the hazardous materials Transporters of hazardous materials that selected the site that the materials were taken to
Liability for a site can be triggered if there are hazardous wastes at a facility, there's a release of those materials, response costs have or will be incurred and the defendant is considered a liable party. Liability is considered to be retroactive, joint and several, and strict.
Retroactive liability is for incidents that occurred before CERCLA existed. Joint and several is when any one potentially responsible party (PRP) can be held responsible for cleanup at the site when the harm caused can't be separated amongst multiple parties. For example, a chemical company may dispose of waste at a given property and then successively sell it to other companies who also dispose of waste at the site; it may be impossible to determine which company's waste is causing the problems. Strict liability provides that a PRP cannot claim that it was acting under current best practices or that it was not negligent. If some of that company's waste is found at a waste site, that company is liable. Defenses to liability are few; acts of God, war, or omissions of a third party that the PRP has no contractual relationship are the only defenses. There are some exemptions for municipal solid waste, recyclers, cleanup contractors, innocent landowners, prospective purchasers, lenders, good samaritans, and state and local governments. Special provisions apply to the exemptions which can be found here.
Once liability has been established, then the PRPs are potentially responsible for the government cleanup costs, damage to natural resources, costs of health assessments and injunctive relief if a site presents an imminent and substantial endangerment to the environment or population.
The pollution exclusion in the standard property policies is an absolute exclusion, releasing insurers from providing coverage from cleanup of such sites. An overview of the pollution exclusion can be found here.
Christine G. Barlow, CPCU
Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.