Environmental liabilities

Chemical treatments for bacteria control represent significant cost and environmental liability. Because the regulatory pressure on the use of toxic biocides is increasing, more environmentally acceptable control measures are being developed. 

The rising cost of scrap and waste disposal, the scarcity of onsite landfill space, and potential environmental liabilities make it an economic necessity to recover iron units from dust and sludge. However, recycling to the blast furnace raises the hot metal phosphorus content to undesirable levels. 

Regardless of what institutions govern human exposure to chemicals, residual exposure will exist. Risk-averse individuals will want to share that risk through insurance. Chapter 5 explains the operation of insurance markets, particularly environmental insurance markets. The federal "Superfund" program and certain court decisions have made insurers reluctant to write environmental insurance contracts. Until Congress and the courts stop confiscating wealth through arbitrary statutes and common-law decisions, the environmental liability insurance market will not work well. 

During the mid-1980s, insurance against risks posed by synthetic organic chemicals was expensive and sometimes impossible to obtain, for two reasons. First, real interest rates had exhibited extreme variance during the previous 15 years. Real interest rates affect premiums for lines of insurance, such as medical malpractice and environmental liability, that pay claims years after premiums are collected. Second, the use of retroactive strict liability in the "Superfund" law and in various tort decisions has extracted wealth from insurance companies and made them wary of writing policies that could expose them to future legislative and court actions. 

Changes in the interpretation of tort liability by courts have raised the average risk of insuring corporate environmental liability. ... 

Risks for rarely occurring events provide business for the Lloyd s Syndicate of London. Lloyd s is a consortium of wealthy investors who agree to back insurance contracts with their entire personal fortunes (unlimited hability) for such events as the loss of an opera singer s voice or an oil-tanker catastrophe. Lloyd s was a primary purchaser of corporate environmental liability reinsurance contracts, but it suffered many losses on those contracts and was forced to restructure itself in 1993, ending its 300-year history of unlimited personal liability (Raphael 1995). 

In 1993, the Clinton administration proposed an 8.1 billion tax on insurance and chemical companies to pay for the cleanup of the 1,300 worst Superfund sites. In return, the government would have ended attempts to recover the cleanup costs through tort suits, but only for those sites. A.M. Best, an insurance rating company, estimated that the 8.1 billion was only a downpayment on a total environmental liability of 255 billion. In contrast, the total capital of the property and casualty industry was only 180 billion. Republican opposition prevented passage in both the House and the Senate (Quint 1994). 

Abraham, Kenneth. 1988. Environmental Liability and the Limits of Insurance. Columbia Law Review 88 942-88. 

Velsicol Chemical LLC, formerly Velsicol Chemical Corporation, designs, manufactures, markets and distributes high performance specialty chemicals and industrial intermediates, primarily based on benzoic acid and the organic compound cyclopentadiene. Its products include chlorendic anhydride and hexachlorocyclopentadiene (HEX). Chlorendic anhydride is corrosion resistant, fire resistant and has high UV stability, and is used in the synthesis of flame retardant polymers such as polyurethanes, unsaturated polyester and epoxy resins. HEX, a reactive intermediate used in the manufacture of agricultural pesticides in the production of flame retardants for the wire and cable industry and in the preparation of chlorendic anhydride. The company s products are produced primarily at a plant in Memphis, Tennessee Velsicol also maintains the Memphis Environmental Center (MEC), which focuses on managing legacy environmental liabilities. The firm is owned by Arsenal Capital Partners, a private equity firm. 

Insurance cover, liability and regulatory fines act as incentives for companies to comply with legislation or even adopt beyond-compliance practices [230, 231]. A new approach in improving compliance with environmental legislation comes in the form of performance bonds , which is a variation of environmental liability [232], The amount of a bond is based on the potential future environmental damages that could be attributed against a chemical producer. If damages occur, the bond funds environmental remediation otherwise it is returned with interest or traded. 

R. Schwarze, Environmental Liability and Accident Prevention Preliminary Experience in Germany, European Environment, 2001, 11, 314. 

Marshall R, Sims R, and Castella J (1999) When is a mistake a crime The ever shrinking Mens Rea requirement for environmental crimes. Argent Environmental Liability, Enforcement Penalties Reporter 10 29. 

Establish procedures to evaluate and quantify potential environmental liabilities. 

Measures related to sustainable risk management would include accrued environmental liabilities, fines, warnings and penalties, as well as product take-back programs whether in compliance with or in addition to regulatory initiatives. 

This concept of having value at stake on social and environmental issues is broad and more powerful than the more traditional view that the main financial import of environmental issues is as potential liabilities. There have been significant efforts made to improve corporate disclosure of material environmental liabilities,25 and the increased emphasis on the identification and disclosure of risks under the Sarbanes-Oxley Act should drive this further. Value at stake includes these potential environmental liabilities as well as the opportunities and competitive advantage that can come from the right environmental strategies. 

Failure to understand the true costs of decisions, inclusive of the hidden costs of waste [hidden costs = (treatment and disposal charges, permitting fees, record keeping, insurance, utility bills, and potential future environmental liability)]. 

With increasing popularity and attention to proactive methods, structured methodologies are being developed to systematically explore, analyze, and implement energy conservation and waste minimization or cleaner production programs in industries. In many industries, such techniques are now being used as one of the management tools to monitor and control process efficiency and environmental liabilities. 

United States Environmental Agency. (2000), First Responders Environmental Liability Due to Mass Decontamination Runoff EPA 550-F-00-009. Washington, DC, United States Environmental Agency, Office of Solid Waste and Emergency Response, July. Last viewed October 10, 2006, http //yosemite.epa. gov/oswer/ceppoweb.nsf/vwResourcesByFilename/onepage.pdf/ File/onepage.pdf... 

The insurance industry is becoming increasingly concerned about the possibility of long-term environmental liabilities leading to devaluation of companies. Consequently, certain types of cover are difficult to obtain and are also expensive. 

An authoritative, independent review of an environmental report can be a major spur to improving the quality, integrity, and credibility of its content. Different forms of review may be appropriate for different parts of the material presented. Environmental liabilities and costs will be reported in the Accounts and thus subject to financial audit, while physical information in the Operating and Financial Reviews (OFRs) and environmental reports may be scrutinised by environmental auditors. ... 

Finance and eco-efficiency 10 Environmental costs/investments. Environmental liability. Government economic penalties/incentives. Future cost/investments, business opportunities and risks. 

Fines and environmental liabilities are considered key indicators because of the potential impact on both the long- and short-term financial health of the company. It... 

Prosecutions fines no mention is made in the report of any prosecutions or fines, although the annual report identifies provision of 255 million Euros against environmental liabilities. 

Annual report a copy of both the annual report and the CER were received. Bayer s annual report is very much a financial report. Although a separate section discusses Responsible Care issues, and environmental liabilities are mentioned. 

Annual report a copy of the 1999 Annual Report and 1998 CER were received. The annual report is split into separate business and financial reviews. There is no specific discussion of HS E issues or an environmental report in either of these reviews, although the financial review does include mention of environmental liabilities and capital investment. 

Annual report a copy of both the annual report and Responsible Care were received. The management discussion within the annual report includes a section titled Environmental , but consists only of reports on environmental liabilities and expenditure. No mention is made of the existence of the CER. 

Provisions for environmental liabilities are contained in the annual report under other long-term liabilities , which for 1999 were US 156 million. 

Regular processes are stated to be in place for the review of environmental liabilities and provisions. A statement is included that the cost of addressing currently identified environmental obligations is unlikely to impair materially the Group s financial position . 

---