Role of Insurance in the Development of Environmental Policy
David T. Case
Sheldon B. Sommer
Kirkpatrick & Lockhart LLP
Washington, D.C., U.S.A.
In the 1970s, the United States Congress passed legislation designed to prevent future
environmental problems and to remediate contamination resulting from past practices. This
legislation included the Resource Conservation and Recovery Act (RCRA) of 1976, and the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) of 1980.
The financial requirements imposed under this legislation were staggering, for many industries
confronted increasing expenditures to implement new procedures and to provide required
financial assurances, while also facing the financial obligations of remediating past
contamination. Companies faced with these financial requirements turned to insurance to manage
those risks. In connection with RCRA, the insurance industry developed Environmental
Impairment Liability Policies. In response to CERCLA, industry looked to Comprehensive
General Liability and First Party multi peril policies to fund remediation costs, as well as Cost
Cap/Remediation Insurance to control the risks involved with remediation. The experience in the
United States demonstrates the important role of insurance in the development of environmental
policy. This paper explores the economic basis for implicating insurance in environmental
legislation and regulation. The paper then identifies how insurance has addressed environmental
requirements, and how policy makers and industry can use insurance to control environmental
costs and risks.
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