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Environmental liability.

At the 36th Annual RIMS Western Regional Conference held from September 29 through October 2 in Coeur D'Alene, Idaho, conference participants had the opportunity to meet with other risk managers and discuss some of the pressing issues of the day. The conference, which was sponsored by the Washington Chapter of RIMS, opened with a speech by Suzanne Crager, president of RIMS. "Currently, one of the more compelling concerns at RIMS is the NAIC's decision to rescind RIMS' status as a consumer advocacy group. However, this is by no means a dead issue; the battle has just begun."

One general session was held on the key issues surrounding environmental liability. "This is a prominent subject when you think of its costs," says William Hedrick, manager of liability risks and insurance litigation at the Boeing Company. "For example, Salomon Brothers estimates that the total costs of dean-up for Superfund sites will be $750 billion."

Mr. Hedrick says that risk managers must examine their companies to see if they are vulnerable to CERCLA liability exposures. "If you produce or dispose of hazardous or industrial waste, you should be concerned about the potential for liability," he says. In some cases, a company can even be held liable for pollution problems that occurred years ago and for which the company may not actually have been responsible. "In 1964 Boeing was given the go-ahead by state agencies to use a site owned by a recycling firm called Western Processing Company, which it used until 1977," says Mr. Hedrick. "After the plant was shut down by the EPA in 1983, Boeing was held liable for pollution that occurred both before and after Boeing used the plant, even though the state had given approval."

Although insurance can be a viable source of funds for covering clean-up costs, risk managers must develop a strategy for gaining this coverage. "You need to reconstruct all relevant insurance programs as far back as possible so you can see if they'll respond." And when a company realizes that it has a pollution problem, Mr. Hedrick said that creating a team is the crucial first step, "The aim of the team is to respond to the requirements of regulatory agencies and your insurers." Generally, the team will consist of the risk management department, inhouse counsel, outside counsel, brokers and technical consultants. "You should inform your insurers once you realize you have a pollution problem."

The next step is to cooperate with insurers. "Tell your insurers what you're doing to cooperate with the requirements of regulatory agencies." For example, companies can provide their insurers with regular reports that detail the company's clean-up efforts. "Insurers and insureds should work together to reach business solutions to environmental liability problems instead of leaving it to the courts," adds Mr. Hedrick. "At present, 50 to 80 cents of every dollar spent on environmental clean-up costs are spent on transaction costs."
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Title Annotation:36th Annual Risk and Insurance Management Society Western Regional Conference
Author:Christine, Brian
Publication:Risk Management
Date:Nov 1, 1992
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