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#358 - Fixing Superfund -- Part 2: Why Superfund Generates So Many Lawsuits, 06-Oct-1993

Congress passed the Superfund law in 1980, instructing EPA (U.S.
Environmental Protection Agency) to find uncontrolled chemical dumps,
identify the polluters, and make them pay for cleanup. In Superfund
lingo, the polluters are Potentially Responsible Parties or "PRPs."
PRPs can include a site's past or present owners or operators; the
people who created the waste in the first place; and anyone who
transported waste to the site.

If PRPs cannot be identified, or have gone out of business, the federal
government (i.e., the taxpayer) bears the cost of cleanup, but the
basic principle of Superfund is "the polluter pays."

To make sure that the polluter pays, Superfund contains language that
says the PRPs are subject to strict, joint, and several liability.[1]
That is to say, each individual PRP can be held liable for the entire
cost of cleanup at a site. Furthermore, damaged parties need not prove
that a PRP was "negligent," merely that the PRP contributed to the
problem in some way. This means that PRPs are liable for costs of
cleanup of chemical dumping that may have been perfectly legal (though
not very smart) when it occurred.

Superfund got off to a slow start, but by the late 1980s, many dump
sites had been identified, along with many PRPs. The PRPs naturally
asked their insurance companies to pay up. In most cases, the insurance
companies refused, saying their policies only covered "sudden" events
and did not cover chemicals seeping into somebody's drinking water for
decades. So PRPs started suing their insurance companies.

By the early 1990s, the insurance industry estimated that the cost of
total Superfund cleanup would range from $26 billion to $213 billion in
1993 dollars.[2] The insurers weighed this against all the money
available for insurance, and found that Superfund might actually
bankrupt the insurance industry. At the end of 1992, the Property
Casualty Insurance Industry's surplus, its financial cushion against
catastrophe, stood at about $165 billion.[3] That is for all risk, not
just Superfund.

Since it is possibly fighting for its very existence, the insurance
industry has become aggressive about denying responsibility for the
cost of Superfund cleanups. First they argued that Superfund problems
aren't damages covered by normal liability insurance but rather are
court-ordered mandates, which aren't covered. When the courts began
rejecting that theory, in 1992 insurers developed a new legal argument
which, if accepted by the courts, would let the insurance industry off
the hook completely. Insurers are now arguing that the Superfund law
imposes "novel" responsibilities that weren't foreseen when many
insurance policies were issued to PRPs; as a result, the argument goes,
the courts should nullify these insurance policies as a matter of
fairness and equity.[4]

According to the Rand Institute for Civil Justice,[5] 88 percent of the
money spent by insurers has gone to legal and related costs, and 12
percent to cleaning up contaminated sites. Insurers spent an estimated
$418 million on Superfund in 1992.3

For their part, the major PRPs developed their own strategy for
discrediting Superfund. In some cases, it starts with simple denial of
responsibility. Secondly, as we have seen, PRPs sue their insurance
companies. Thirdly, PRPs sue other PRPs and other entities, such as
local governments and small businesses, claiming they should share the
burden of cleanup costs.

Denial of responsibility means, basically, stonewalling pollution, even
on your own property. For example, Monsanto's plant in Sauget, Illinois
has over a dozen chemical dumps on it, according to the WALL STREET
JOURNAL, several of them containing substantial quantities of cancer-
causing PCBs, at concentrations as high as 74,000 parts per million
(ppm), or 7.4 percent.[6] For years, Monsanto's Sauget plant was the
nation's largest single manufacturer of PCBs.

Monsanto officials insist that the PCBs on their property do not
necessarily belong to them. Anyone could have dumped PCBs there, they
say. All told, there are more than one million tons of chemical wastes
on Monsanto's property--chlorinated pesticides, PCBs and other
chemicals that Monsanto manufactured on the site for decades. Monsanto
insists the wastes did not necessarily come from their plant, located
half a mile north of the dumps. It is company policy to destroy waste
records after 4 years. Meanwhile the state of Illinois has spent 12
years and $1.3 million trying to get the Monsanto site listed on the
federal Superfund. An estimated 13 tons of chemical wastes leach off
the Monsanto site into the Mississippi River each year, according to
the WALL STREET JOURNAL.

Unocal Corporation denies responsibility for toxic wastes found in 1991
at an oil tank farm in San Diego, Calif., that the firm owned for 60
years. The present owner of part of the site has had to sue Unocal in a
federal court, alleging that toxic waste found at the site doesn't
match chemicals that have been stored in the tanks since the present
owner bought them.

In Azusa, California, high levels of contaminants were found in
drinking water wells just south of an Aerojet Corp. rocket plant, toxic
solvents used by Aerojet and others in the area for decades. It took 13
years of wrangling before Aerojet--without admitting any wrongdoing--
agreed to reimburse the federal government for the cost of water
studies.

But denial does not develop a political movement to overturn the
principle that "the polluter pays," so industry developed a much more
aggressive strategy in the early 1990s. PRPs figured out that, if they
sued local governments and small businesses they would rapidly build a
political movement that would lobby for Superfund "reform."

About 25 percent of the sites on the Superfund list are municipal solid
waste landfills. Municipal solid waste is about 0.5 percent toxic
materials, and this has given the big PRPs an opportunity to sue
everyone in sight. DuPont, Rohm & Haas Co., Texaco and others are suing
50 municipalities in federal court, insisting that they each should
contribute to the costs of cleaning up a dump in Gloucester County,
N.J. B.F. Goodrich and Uniroyal have hauled 24 Connecticut
municipalities into federal court on the same basis. General Electric
and Polaroid have sued 12 Massachusetts local governments for taking
waste to a local landfill.[7]

"The private sector is using its many years of experience with this
statute to hit the unknowing, little-trained cities in the pocketbook,"
says Kevin Murphy, city manager of Alhambra, Calif., one of 29 Los
Angeles suburbs being asked by Occidental Petroleum, Lockheed Corp.,
Proctor & Gamble and 61 other companies to fund 90 percent of a huge
landfill cleanup that could cost as much as $800 million.

Even more effective at undermining support for Superfund have been PRP
lawsuits against small companies. Louis Petrone, a Utica, N.Y.,
attorney has brought a lawsuit against 603 defendants on behalf of two
big corporations --Special Metals and Chesebrough-Pond's, the cosmetic
giant. The lawsuit has hit an Elks Club, an exercise gym, a donut shop,
a sausage factory and a pair of nursing homes, in addition to 44
municipalities. Doreen Merlino, owner of a two-table takeout pizza
business was hit with a 2-inch-thick lawsuit brought by Special Metals
and Chesebrough-Pond's. It accused her of sending hazardous waste to
the landfill. The accusers didn't know what kind of waste Ms. Merlino
had sent to the local dump, but their attorney said he surmised that it
might have included empty cleanser or pesticide cans. The lawsuit asked
$3000 from Ms. Merlino, with an offer to settle for $1500 if she paid
up within the month. Ms. Merlino paid the $1500 because she could not
afford to defend herself in court. She cut her employees' hours and
stopped paying herself to come up with the $1500. "You don't have a
choice," she says. "Small business can't afford to fight these large
corporations." Special Metals and Chesebrough-Pond's have so far raised
$5 million by this strategy.

"I have seen people sued --and settle --for waste no more hazardous
than cardboard," says New Jersey Deputy Attorney General John
MacDonald. "The strategy is to make the entire Superfund system so
ineffective that one way or another, Congress is going to be forced to
scrap it."

--Peter Montague

=====

[1] Richard Fortuna, "Testimony [of] Richard C. Fortuna, Executive
Director, Hazardous Waste Treatment Council, on Technology Development
and Transfer in the Superfund Program Before [the] Subcommittee on
Oversight and Investigations [of the] Committee on Science and
Technology, U.S. House of Representatives, April 29, 1993. Available
from the Council at: 5th floor, 915 15th Street, N.W., Washington, DC
20005; phone (202) 783-0870.

[2] And this estimate did not include the costs of three other cleanup
programs: sites covered by the Resource Conservation and Recovery Act
($234 billion, estimated); or administered by the Department of Defense
($30 billion, estimated) or by the Department of Energy ($240 billion,
estimated), a total of $504 billion. These estimates are probably not
in 1993 dollars, so the 1993 cost-equivalents would be lower by a
factor ranging from 2 to 5. Even discounted by a factor of 5, however,
the cost in 1993 dollars would still be $101 billion. See William K.
Burke, "The Booming Business in Waste," E MAGAZINE (May/June, 1993),
pgs. 39-43.

[3] James V. Faulkner, Jr., citing a June 1993 study by the Insurance
Information Institute, quoted in "Corporate Legal Times Roundtable,"
CORPORATE LEGAL TIMES September 1993, pg. 27. Thanks to Thomas Brown of
Foresight Films, and to Nexis, for this information.

[4] Jonathan M. Moses, "Insurers Argue Superfund Law May Void Some
Liability Policies," WALL STREET JOURNAL September 2, 1992, pg. B6.

[5] Jonathan M. Moses, "Insurer Payouts Over Superfund Flow to
Lawyers," WALL STREET JOURNAL April 24, 1992, pg. B1.

[6] Scott McMurray, "Denying Paternity: Monsanto Case Shows How Hard It
Is to Tie Pollution to a Source," WALL STREET JOURNAL June 17, 1992,
pg. A1.

[7] Robert Tomsho, "Pollution Ploy: Big Corporations Hit By Superfund
Cases Find Way to Share Bill; They Sue Small Businesses, Others That
Put Garbage Into the Same Landfills; An Effort to Change the Law?" WALL
STREET JOURNAL April 2, 1991, pg. A1.

Descriptor terms: superfund; cercla; prps; liability; lawsuits;
insurance industry; costs; monsanto; sauget, il; il; pcbs; water
pollution; mississippi river; unocal; san diego, ca; ca; azusa, ca;
aerojet; dupont; rohm & haas; texaco; bf goodrich; uniroyal chemical
company; ge; polaroid; alhambra, ca; occidental petroleum; lockheed;
procter & gamble; louis petrone; lawyers; special metals co;
chesebrough-pond's; john macdonald; doreen merlino;