Potential Liability of Property/Casualty Insurers for Costs of Cleaning Up Hazardous Waste Sites

GAO discussed the property and casualty insurance industry's potential liability for costs to clean up the nation's hazardous waste sites, especially Superfund sites. GAO noted that: (1) there are about 1,200 sites on the Environmental Protection Agency's National Priorities List for Superfund cleanup; (2) parties responsible for contaminating the sites were primarily liable for cleanup, and Superfund absorbed such costs only when responsible parties could not be found; (3) 20 insurance organizations accounted for about two-thirds of the $22 billion in direct liability premiums written in 1989; and (4) court interpretations of insurance contracts split in favor of the insurer and the insured party. GAO believes that: (1) there was insufficient information to accurately predict whether property and casualty insurers would be seriously harmed by liability for hazardous waste site cleanups; (2) the total cost of cleaning up currently listed sites could reach about $40 billion and seriously affect insurance industry surpluses; and (3) the full dimensions of insurer liability and how far courts will hold insurers responsible for cleanup costs may not be known for many years.