Superfund

Contractors Are Being Too Liberally Indemnified by the Government Gao ID: RCED-89-160 September 26, 1989

Pursuant to a legislative requirement, GAO reviewed the Environmental Protection Agency's (EPA) Superfund Amendments and Reauthorization Act of 1986 (SARA) Section 119 program for indemnifying Superfund program contractors and subcontractors against liabilities caused by negligence, focusing on: (1) the use of and need for indemnification agreements; (2) claims against those agreements; (3) the program's compliance with applicable laws and regulations; and (4) program management.

GAO found that: (1) as of June 1989, EPA had provided over 1,000 indemnification agreements to Superfund prime contractors and subcontractors, most of which worked directly for EPA; (2) EPA did not grant indemnification to any contractor working directly for parties responsible for the contaminated sites; (3) while no claims had been filed against any of the indemnification agreements, many years could pass before pollution was detected and a claim brought against the alleged polluter; (4) most private insurers generally regarded pollution risks as uninsurable, although three insurers provided some limited-coverage pollution insurance for cleanup contractors; (5) although several contractors cited their reluctance to perform Superfund work without indemnification, some of them had performed Superfund work for states and responsible parties without indemnification; (6) EPA provided indemnification free of charge; (7) EPA did not fully comply with requirements to provide indemnification on a discretionary, case-by-case basis, and did not enforce guidance procedures for granting indemnification; (8) EPA did not set limits on the amount of contractor indemnification; and (9) the EPA contractor for providing section 119 policy support was a direct beneficiary through two major indemnified Superfund contracts.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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