United States    Office of Solid Waste     February 1991
          Environmental Protection and Emergency Response
          Agency      Office of Waste Programs (OS-510)
v/EPA     Report On The Results
          Of The
          EPA-Sponsored
          Consultative Process
          On The Proposed
          Guidance For Section
          119OfCERCLA, As
          Amended
                          Printed on Recycled Paper

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            REPORT ON
        THE RESULTS OF THE
EPA-SPONSORED CONSULTATIVE PROCESS
   ON THE PROPOSED GUIDANCE FOR
       SECTION 119 OF CERCLA,
           AS AMENDED
           FEBRUARY 14, 1991

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                 TABLE OF CONTENTS

                                                      Page No.

A.  Background	  1
    1.  The Consultative Process	  1
    2.  The Results of the Consultative Process	  2
B.  The Context	  3
    1.  Technical Risks Faced by RACs	  3
    2.  Liability Risks Faced by RACs	  5
    3.  Availability of Commercial Insurance Products	  6
C.  Coverage  Issues	10
    1.  Limits	10
    2.  Deductibles	11
    3.  Term  of  Coverage	14
    4.  Exclusions	14
    5.  Sub-Contractor Issues	15
D.  Administration Issues	18
    1.  Due Diligence Requirements	18
    2.  Retroactivity of Proposed  Guidance	20
    3.  Fixed Price Contracts	20
E.  Other Issues	22
    1.  Alternative Approaches to Risk Transfer	22
    2.  Surety  Issues	23
E.  Conclusion	24

Appendices
                               •I-

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A.    BACKGROUND

      Section  119  of the Comprehensive Environmental  Response,
Compensation and Liability Act ("CERCLA"), as amended, requires the
Environmental Protection Agency ("EPA") to develop guidelines to carry
out the response action contractor ("RAC") indemnification provisions of
the statute.  In  1987, EPA issued an interim guidance governing the
indemnification program until a final version  was promulgated;  and, in
October  1989, EPA  proposed  final guidelines for  public  comment.
Approximately 90 sets of comments were received.

      In October  1990,  EPA retained ENDISPUTE, Inc. ("ENDISPUTE"),
through the Conservation Foundation, to assess,  from a neutral perspective,
the utility and feasibility of a consultative process through which EPA
could obtain additional  information from interested organizations on the
proposed guidance.  Unless ENDISPUTE found  that a consultative process
would not be productive, it was to convene, structure and facilitate a full-
day meeting involving EPA and the interested parties.

      1. The Consultative Process.

      ENDISPUTE performed  these  services  between  October and
December  1990.1  It  assessed,  convened and facilitated the consultative
process as follows:

      a)    Endispute developed,  in consultation with EPA  and  with
           input from the Hazardous Waste Action Coalition, a list of
           organizations that either had an interest  in the  proposed
           guidance or had information relevant to the issues  raised by
           the proposed guidance.

      b)    ENDISPUTE conducted an initial set of interviews with the
           organizations that had been identified and that were willing
           to meet.  The interviews were conducted pursuant  to  a
           standard protocol that ENDISPUTE developed.
1   Michael D. Young of ENDISPUTE's New York office served as the senior
convener/facilitator. Katina B. Leodas of ENDISPUTE's Cambridge, Massachusetts office
served as junior convener/facilitator.

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           During these interviews, ENDISPUTE explored

           i)   the  concerns  each  party  had  with  the  proposed
               Guidance;

           ii)  whether that party was willing and able to participate in
               a consultative process in good faith; and

           iii) whether  that party  could  identify other parties that  it
               believed should be involved.

           In addition,  ENDISPUTE gathered the information  and
           insights necessary to develop a  design for the meeting and an
           agenda that addressed the concerns of all interested parties.

           A list of the parties that  ENDISPUTE interviewed is attached
           hereto as Appendix A.

      c)    ENDISPUTE arranged and facilitated a full-day meeting of
           EPA and the interested  parties on November 19, 1990. At
           this meeting  all parties explored various issues that were
           raised  in the initial  interviews relating to the proposed
           Guidance.

           A copy of the agenda for this meeting is  attached hereto as
           Appendix B-l and a copy of the  Ground Rules for the
           meeting is attached as Appendix B-2.  A list of participants  is
           attached hereto as Appendix C.

      d)    ENDISPUTE  conducted a  limited number of  follow-up
           telephone interviews to clarify  some of the views  articulated
           at the meeting or during  the initial set of interviews.

      2. The Results of the Consultative Process

      A full range of views was explored during the consultative process.
Among the parties that were interviewed and participated in the November
19  meeting  were:  organizations  representing  RACs,  including  the
Hazardous Waste  Action Coalition, the  Hazardous Waste Treatment
Council, the National Constructors Association and the Associated General
Contractors; insurance interests,  including the  American Insurance
                                -2-

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Association  and the American Insurance Group; and governmental
representatives, including federal Office of Management and Budget, the
U.S. Army Corps of Engineers and various EPA units.

      The parties that participated  in the consultative process provided
ENDISPUTE, the EPA and each  other with a  substantial  amount of
information regarding the  issues raised by the proposed Guidance.  EPA
has requested that ENDISPUTE, from its neutral perspective, summarize and
organize the information  gathered during the  interview  and meeting
process, including the views articulated by the parties.

      This  report  provides that  summary,  organized  by  issue.2
ENDISPUTE believes that it is accurately reporting the views of the parties
as articulated by their representatives.  It has not  and does not, however,
judge the validity of the beliefs or arguments it is reporting.

      In some instances during the interviews that ENDISPUTE conducted, a
party requested anonymity: it did not want to have a particular statement
publicly attributed to it.  ENDISPUTE has attempted to honor all such
requests throughout the consultative process, including in the  preparation
of this report.
B.    THE CONTEXT

      1.  Technical Risks Faced bv RACs

      Most of the RACs viewed their work as inherently risky from a
technical perspective.  The work is risky because, at a minimum, of the
following factors:

      a)     Superfund sites, particularly those that have been identified
            as "priorities," may contain chemical or other waste that is
            extremely harmful to people and property.
2   In addition to this report, ENDISPUTE orally reported to EPA on the results of the
consultative process on December 13, 1990.  ENDISPUTE subsequently reported on the
results of its follow-up interviews with some of the parties. The substance of these
presentations has been integrated into this report.
                                 -3-

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      b)    The technology of hazardous waste remediation is new and
           continually developing.    The  remediation approaches
           recommended to  the EPA by the design, engineering and
           other technical consultants reflect a substantial element of
           professional judgment and are  frequently  novel.   The
           governing  statutes encourage  the  use  of  innovative
           approaches. It is not guaranteed that these will work; in any
           event they are often subject to second guessing.

      c)    Any underground work is inherently risky because, despite
           extensive testing,  one can  never be certain of what is below
           the ground surface.

      d)    EPA, which is subject to community and other political
           pressures, does not always  accept the RAC's recommendation
           regarding  the  most technically   appropriate or feasible
           remediation approach or action.

      Most of the parties believed that the design  and engineering RACs
faced more risk than the constructors.  The general consensus appeared to
be that the constructors could control the risk  to a greater extent because
they are executing plans, not developing them.  In other words, while the
design and engineering RACs face both technological  and performance
risks, the constructors usually face only performance risks. Although the
Associated General Contractors ("AGC") and the National Constructors
Association ("NCA"), whose members  are almost exclusively constructors,
might disagree with this perspective, those RACs that perform both design
and construction work would agree with the distinction.

      None of the RACs could quantify the technical risk of performing
Superfund remediation work.  In other words, none could state precisely
how risky the work is or, for example, how frequently  they would expect a
pollution  release to result from their  remediation  actions.   Any  risk
assessment, if possible at all, can only be done on a site-specific basis.

      In addition, most of the parties agreed that prior history of release
incidents  arising out  RAC work—there  have been very  few—is not
instructive as to what will happen in the future.   If there are to be
problems, they will not occur  until remediation plans are implemented.  It
                                -4-

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is important to note that the American Insurance Group  takes this position
when it sets premiums.

      Most of  the  RACs argued, however,  that it  is not important to
quantify the technical risk.  As discussed in Section  B (2), they take the
position that a substantial liability risk exists irrespective of how technically
risky the work really is.

      The  only party that disagreed with  the above  analysis was Waste
Management Inc. It views RAC work as involving "some risk" but not at
an "ultra-hazardous" level.   It acknowledged  that  any  analysis of the
technical risk must be site specific.  It is also important to note that Waste
Management does not view itself as a design/engineering firm, so that its
view of the risk may  reflect  the distinction drawn above between
remediation design and construction work.

      2. Liability Risks Faced bv RACs

      The  RACs, the insurance interests and other parties including the
Office of Information and Regulatory  Affairs of the federal Office of
Management and Budget ("OIRA"), all agreed that, whatever the extent of
the technical risk, the RACs faced significant risks of claims being brought
against them. They argue, as set forth more fully in Section B (3), that this
high  risk  of claims is the  primary reason  for  the unavailability of
commercial insurance.

      More specifically, the RACs  believe,  and others agree,  that the
structure of both state and federal law encourages plaintiffs to sue RACs
even if most of the liability  belongs elsewhere.  According to one of the
HWAC representatives, "if you touch a site, you own it."

      Specifically, the joint and several  liability standard that is found in
CERCLA and in many state statutory and common law schemes will lead to
the joining of all "deep  pockets,"  including RACs, even if the primary, if
not exclusive, responsibility for the pollution release or other damage lies
elsewhere.  Although the strict liability standard  in federal law  provides an
incentive to target the "potentially  responsible parties"  ("PRPs") as opposed
                                 -5-

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to the RACs who can be found liable only if fault is proven,3 the RACs
remain concerned because many of them are large companies and many
PRPs are small and unable to fulfill judgments. Under the joint and several
liability rules, plaintiffs need only demonstrate some RAC liability in order
to collect the full amount of the judgment from the RAC, leaving the latter
to try to collect the  proportionate shares of the  other defendants from
them.

      The RACs are particularly concerned about the risk of a catastrophic
judgment and what they believe to be the certainty of high defense costs.
The experience of  the American Insurance  Group, which is one of the
three companies currently underwriting this risk, is consistent with these
concerns:  claims are  not very frequent, but they  are large,  and defense
costs are usually very  high.

      Specifically, the RACs  and the insurance interests  agree that such
catastrophic judgments should not occur very frequently, but the amount
may be so high as to bankrupt all but the very largest of the RACs. Large
judgments are possible because in the event of a pollution release there are
likely to be many injured third parties and remediation costs may be very
high. Moreover, since many RACs are deep pockets, they may be, under
the joint and several liability rules, liable in  the first  instance for the  full
amount of the judgment.  Finally, even if their chances  of prevailing in a
lawsuit are good, the  RACs assume that they will be  forced to incur high
defense costs in exculpating themselves.

      3. Availability  of Commercial Insurance Products

      All  parties,  including  the EPA,  agree  that  indemnification is
necessary  because of problems  with the  availability  of  commercial
insurance.  The  parties disagree regarding the extent of  the unavailability,
the reasons for such unavailability, and whether increased demand will lead
to greater availability.
3   According to the American Insurance Association ("AIA"), RACs may be held strictly
liable for any damage resulting from their actions under the statutory or common law of
twenty three  states.  The RACs acknowledge that Section 119 precludes EPA
indemnification under such circumstances.
                                 -6-

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      All the parties, including the insurance interests and OIRA, disagreed
with the basic  EPA premise that the lack of adequate  insurance for
pollution release liability is a temporary aberration in the insurance market
caused by  being in a low point in an insurance cycle.  OIRA  and the
American  Insurance  Association ("AIA")4 accept the concept  of an
insurance cycle, but discount its significance in this context.  They argue
that the  contraction in the  availability of insurance for environmental
damage has continued even after the insurance cycle "contraction period"
has ended.

      Nor  do they believe  that  lack of demand for insurance  is  a
determinative factor.  While stimulating demand may lead to a marginal
decrease in premiums and a similarly marginal increase in limits, it will
not lead to  a significant expansion in die availability of insurance.

      OIRA, and the AIA and others in the insurance industry, attribute
the lack  of insurance primarily to  factors  other than the insurance cycle
and lack of demand.  The reasons they cite for insurers being  unwilling to
underwrite this risk reflect an understanding of the nature  of  the risk that
is consistent with that of the RACs, as set forth in Sections B (1) and (2)
above.

      These factors are:

      a)     The remediation work that the insurers are being asked  to
            insure is inherently risky, yet  the risk is difficult  to predict.
            A company's past claims experience, while instructive, is not
            necessarily useful in  predicting the risk.   Insurers do not
            want to insure a  risk the size or frequency of which they can
            not predict.

      b)     The long latency period for injuries arising  out of pollution
            release incidents makes  risk  prediction  very  difficult.
4   "Tie AIA has 225 members. They are all stock companies and most of them specialize
in p.operty and casualty lines. Its members include such large companies as CIGNA,
Aetna, and Crum and Forster.  Neither the American Insurance Group or Reliance
Insurance Co., which are the two underwriters currently providing pollution liability
insurance, are members of the AIA.
                                  -7-

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            Moreover since litigation  will not occur until many years
            after the  activity allegedly causing the problems occurred,
            there is a great possibility that courts and juries will second-
            guess the reasonableness  of the  initial activity, applying
            standards of conduct based on hindsight and wisdom gained
            in the interim.

      c)     The strict liability standard found in federal law and in many
            state statutory and common law schemes, as well as the joint
            and several liability rules, have created such a high a risk of
            claims and indemnity that insurers are unwilling to assume it.

      d)     This specific concern with  respect to the law  governing
            liability for environmental  damage is  exacerbated by a
            perception that the  scope of tort law has generally expanded
            and that litigation has become too costly.

      e)     The  insurers are further concerned because  of  what they
            perceive  to be  the willingness of  courts  to  "rewrite"
            exclusions and other insurance policy language in order to
            find a deep pocket. They point to the insurance industry's
            experience with  litigation on the "sudden and accidental"
            language in general liability policies.

      Until  these factors are addressed,  the insurance interests do not
believe that there will be a  substantial expansion of  the availability  of
adequate insurance products.

      According to the AIA, the market for pollution liability insurance
always has been and always will be viewed as a specialty one.  It does not
believe that there will ever be a  substantial number of multi-line companies
selling such policies.   None of the AIA member companies are currently
planning to enter this market.

      Three  companies have  been issuing pollution release liability
policies.   These  companies are Demeter, which is a RAC initiated risk
retention group, the American Insurance Group ("AIG") and the Reliance
                                 -8-

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National Insurance Co.("Reliance").5 The policies are all claims-made,
with a limited and expensive tail.  Coverage limits  are  low.   A chart
comparing  the  terms of  the various policies is attached hereto as
Appendix D.

      For example, AIG sells three basic products:

      a)     a Comprehensive Pollution Liability policy for constructors
            for  environmental pollution  liability,  covering  claims
            brought by third parties.  About 120-130  constructors have
            bought such policies since the product was introduced. AIG
            earned about $15 million in premiums for these policies
            during 1990.  The limits for this policy are $10 million per
            occurrence and $10 million aggregate;

      b)     an Errors and Omissions policy for architects and engineers.
            This is a site specific-wrap around policy that is targeted for
            Superfund sites  and covers sub contractors.   Usually the
            limits are at $1  million  per occurrence and $2  million
            aggregate.  Sometimes the limits are as high as $5 million
            per occurrence and $5 million aggregate, but rarely;

      c)     a newly introduced Practice Policy, that is  designed to cover
            potential environmental damage liability arising out of all the
            work that the contractors do.  The limits are currently at $2
            million per occurrence and $2 million aggregate; AIG hopes
            to increase the aggregate limit to $5 million.

      These policies are all claims-made,  though the RAC  can buy a  tail.
AIG recognizes that both the initial premium as well  as the tail are
expensive, but given what it perceives to be limited  demand, the  only way
that AIG can make a profit is by charging high amounts.   AIG believes
that premium  amounts will decrease  and limits will increase if there is
more demand,  but it also acknowledges that it is unlikely that the limits  will
increase significantly.
5   In spite of several efforts to contact its representatives, Reliance was not interviewed
by ENDISPUTE.
                                 -9-

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      The RACs and the insurance interests disagree regarding the extent
of the effort the RACs are  making to buy  available insurance.   AIG
suggests that RACs are not buying the available products for work on
Superfund sites because of the existence of the  EPA indemnification
program and because of the relative difficulty of passing the cost of the
insurance on to the EPA. They give out quotes out to brokers representing
the Superfund RACs but frequently do not receive responses.  Conversely,
in AIG's experience, RACs are buying the insurance  for non-Superfund
sites because, it believes, the RACs find it easier to pass the costs on to
private clients.

      The RACs agree that little insurance is currently being purchased but
ascribe  the  reason to the difficulties they are having in the application
process  and  in meeting the underwriting criteria.  AIG acknowledges that it
has imposed strict technical requirements — it is reluctant to provide
insurance to a questionable firm or at a risky site. The RACs, particularly
those who  work on  ARC contracts, also point to the administrative
difficulties and  cost they face in trying to obtain insurance for each of the
sites on which they work. They argue that the effort is not worthwhile in
light of  the inadequacy of the available product.

      Finally, it is important  to note that some of the  insurance interests
raised concerns regarding whether there will be commercial  insurance in
the future at the time when the claims start coming in. They suggested that
in the past  AIG  and Reliance have withdrawn from the market  for a
particular type of insurance when there begin to be claims, having  made
their profits by selling  claims-made  insurance prior to  that time.   AIG
denies that this has been  or will be the case.
C.    COVERAGE ISSUES

      1.  Limits

      The RACs acknowledge that Section 119 requires EPA to set a limit
on the amount of indemnification it will offer. The central concern that
the RACs have with the proposed limit of $50 million per contract is the
amount.  They believe that it is inadequate, particularly in light of the  risk,
however low, of a catastrophic judgment.  A related concern is whether the
limit should be set on a per contract basis.
                                -10-

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      Assuming that EPA decides to set an aggregate limit per contract, the
RACs believe that it should be set at least at $200 million and preferably at
$250  million.  They point to  the  $250 million recommendation in the
Tilinghaus report.  The AGC, NCA and HWAC all suggested that a $200
million limit may be adequate, even for design contracts.  Moreover,
HWAC points  out that at the time that claims arise fifteen or twenty years
from now, the  $200 million, or  even $250 million, indemnification amount
will be worth significantly less.

      The representative of AIG suggested that the limit be increased for a
RAC that buys a larger amount of  commercial insurance.  This approach
would satisfy  EPA's  interest in encouraging the purchase of commercial
insurance as well as the RACs  interest in increasing the limits. The RACs
argued that this approach was  not feasible until more adequate insurance
was available.  In addition, a concern was raised that EPA would end up,
except possibly in a  fixed-price  context, paying twice  -- once  if it
reimburses the premium and once through the increased limits.

      There was strong sentiment that, unless the limit was increased to the
$200-250 million range, it should not be set on a per contract basis but
rather per site or per work  assignment/activity. Those RACs  who work on
ARC  contracts felt particularly strongly that setting the limit on a per
contract basis  was unfeasible  and  unfair,  given the number of sites on
which an ARC contractor works. Moreover, as discussed in  greater detail
in Section B (5), setting the limit on a per contract basis causes problems
with respect to the allocation  of the indemnification between the prime
contractor and  the sub-contractors.

      2.  Deductibles

      The deductibles proposed in the 1989 Guidance  are of significant
concern to many RACs. Although they recognize that a deductible layer is
an appropriate way to  share some of the risk,  they are troubled by the
amount of the deductible, that it is per claim or per occurrence, and by
other related aspects of the proposal.

      The RACs believe that the deductible amount is too high, particularly
since, given their concern about catastrophic risks and the need to allocate
the indemnification between  the primes and the subcontractors, they will
                                -11-

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always seek a $50 million limit and therefore  will always have a $3.5
million deductible.  This deductible amount is  larger than the total  net
worth of many RACs.  So, in essence, those RACs would be "betting the
farm" whenever they did EPA work under the proposed Guidance.

      The RACs are particularly concerned about defense costs.  Since the
deductible is "per occurrence," RACs will, on a repeated basis, have "first
dollar" costs.  The claim would not have to be large or catastrophic for the
RAC to incur significant defense costs yet, given the high deductible,  not
exhaust it.   Under such circumstances, the RAC "could  be right,  yet
bankrupt."6

      Most of the RACs were opposed  to there being a sliding scale for
limits and deductibles because, even if the limit amount was  increased and
the maximum deductible amount stayed the  same, the deductible amount
was still "prohibitively high."7 If both the limits and the deductibles were
increased, this sliding scale, like the current  draft of the Guidance, would
serve as a disincentive to a contractor to seek  the level of indemnification it
actually needs.8

      The following recommendations were made by the RAC groups with
respect to the amount of the deductible and the treatment of defense costs:

      a)    HWAC  recommended that defense costs be applied only
            against the coverage  limit, not against the deductible.  EPA
            would pay defense costs from the first dollar.  HWAC could
            accept a high deductible if it only applied to indemnity costs
            and  EPA picked up first dollar defense costs, though  it
6   Several of the parties noted that the proposed deductible approach is contrary to
insurance industry practice. Most of the pollution liability policies that are available cover
defense costs and have a lower deductible than EPA proposes, even on a relative basis
(given the differences in limits). By having a lower deductible, insurers cover most of the
defense costs and therefore can control (and contain) such costs.

7   At the November 19 meeting, the representative from the NCA suggested that the
NCA members may be willing to absorb a higher deductible if the limits were higher.

8   In most commercial insurance situations other than insurance for pollution release
liability, the RACs can increase the limits of the insurance by buying excess policies. This
manner of increasing the limits does not result in an increase in the deductible amounts.
                                  -12-

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            clearly preferred in any event that the deductible amount be
            less than proposed;

            HWAC alternatively suggested that the deductible be lowered
            significantly, to an amount equivalent to the deductibles
            found in  commercial insurance policies.  In these policies,
            costs of defense are included in the deductible;

      b)    The  NCA  recommended that  deductibles  be  measured
            according to contract price,  rather than coverage limit. Its
            rationale  is that a contractor may be willing to bet its full
            anticipated profit margin (possibly 5-6%), but not the entire
            firm.

      c)    Most RACs recommended that the deductible be calculated
            on a per  contract, rather than per  occurrence,  basis.  This
            approach would permit the aggregation of claims against the
            deductible.

      d)    Another party suggested that the deductible amount be set in
            the  same manner as  insurance companies would set it.  A
            deductible is usually set in an amount to  cover the type of
            risk that  the insured can most easily predict and control.
            This party suggested that the EPA  conduct this analysis,
            perhaps with the assistance of an insurance company.

      Finally, HWAC expressed concern about having the  deductible
stacked on top of the commercial insurance layer.  It recommended that the
RACs be permitted to apply commercial insurance  payment against the
EPA deductible.  This approach would provide even  more of an incentive
to the RACs to obtain commercial insurance so as to defray a portion of the
EPA  indemnification deductible.   This approach  might  also  make
acceptable a higher deductible amount.9
9   The RACs acknowledge that under this appro;.- - EPA may be paying for pan of the
deductible if it reimburses the contractor for the premiums for commercial insurance which
arguably defeats the purpose of a deductible. They argue, however, for the reasons stated
in the text, that EPA's interests are better served by this approach.
                                 -13-

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      3.  Term of Coverage

      The RACs acknowledge EPA's interest in setting a limit on the term
for coverage, but they believe that the proposed ten year term is unrealistic
and ignores the nature of the risk. While a ten year term may be sufficient
to cover some claims that will arise from immediately apparent negligence
in the execution of work plans,10 it is not  sufficient to cover long term
pollution release problems, particularly given the latency periods associated
with many of the kinds of injuries such releases may cause.

      The RACs, as well as some of the other parties, recommend that the
term be set, at a minimum, at thirty years. They believe that thirty years is
probably sufficient to encompass the latency periods of most of the possible
injuries that could arise  in a pollution release occurrence.  Moreover, they
point to the fact that  under the RECRA statute owner/operators are held
responsible for a thirty year period after disposal.

      4.  Exclusions

      The RACs are very concerned with the exclusion from coverage of
mixed strict  liability/negligence judgments.   Even  though  they are
immunized from  a strict liability judgment under federal law, they still
face  the risk of a strict liability judgment under the law of at least 23  states.
If the law of those states is  applied, either in a state court lawsuit or as a
pendent claim in  federal suit, the RACs fear that if there is a negligence
finding, it is very likely  that there will also be a strict liability finding.

      The RACs believe that the goal of Section 119 would be undermined
if there was no coverage for such mixed judgments.  Although Congress
did not preempt state  law, it did want to protect RACs from the financial
consequences  of judgments, except when they were  grossly negligent.  It
would undermine that intent if the  same (non-grossly negligent) conduct
would leave the RACs unprotected from judgments. The RACs believe that
the language  of Section 119 can be read to  authorize indemnification for
such mixed judgments.
10 David Coduto of Terra Insurance Company stated that in his experience with Terra and
Demeter, environmental impairment claims are filed about ten years after the construction
work is done — an even longer period of time after the design work is completed.
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      The RACs are also concerned that the references in the proposed
Guidance to  "third party"  liability  can be read to  preclude liability for
judgments or orders in enforcement proceedings.  They would prefer that
the government be prohibited from bringing such actions  against RACs,
but otherwise would like to have the language clarified so that  the current
authority for indemnification in such circumstances is maintained.11

      5.  Sub-Contractor Issues

      In general, sub contractors tend to be smaller  companies  than prime
contractors, although this is not always the case. Some RACs, such as those
that work on ARC contracts, are primes on some jobs and subs on others.
The smaller subs, such as members of the Hazardous Waste Treatment
Council ("HWTC"), are often quite small.12 They are professional service
companies whose assets are their people. Many have been involved in the
rapid development  of new,  advanced remediation technologies.   They
believe that because the field is new, with rapidly evolving state-of-the-art
technology, there will be problems and there is a  substantial liability.13
11  Although they seek indemnification for subsequent remediation costs, RACs are more
concerned with third party liability than with CERCLA liability, for several reasons. First,
third party liability is perceived as potentially far greater, yet less easily predictable.
Second, they believe that their contractual relationship with the government would give
them a greater degree of control over any dispute than they would have with third parties.
Finally, in some circumstances a surety may share some of the costs as EPA may go after
the surety if there was a finding that the RAC had not performed on the job and that the
RAC itself was unable to rectify the failure.

12  These groups articulate a more generalized complaint: indemnification or no
indemnification, they are not getting much work. They claim that engineering firms are
over-studying and over-evaluating sites, perhaps due to EPA encouragement or perhaps
due to the nervousness of the design consultants about liability and the lack of insurance to
cover that liability. Some  smaller speciality firms made substantial capital investments four
or five years ago,  anticipating that these investments would be recouped through
government contracts. Now, they face financial distress as the anticipated contracts have
been slow to materialize.

13  As indicated above, EPA does not  always approve actions recommended by the design
consultants and the specialty subs. The perceived result, they believe, is that RACs that
implement  EPA-directed  remediation face increased risks, since  they  may  take
responsibility for an approach they did  not favor.
                                   -15-

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      The proposed Guidance provides for indemnification of such subs,
but the "flow-down" method set forth  establishes almost an inherent
conflict of interest between the prime and the subs.  The Guidance allocates
indemnification by contract, rather than by contractor.  Prime contractors
are the recipients of the indemnification.   Thus, for  sub contractors to
receive coverage, indemnification must be passed down  from primes to
subs.

      All RACs (with the exception of Waste Management) believe that the
proposed pass-through  scheme  is an  unrealistic means  of distributing
coverage to all the contractors at risk  on a particular job.  They do not
believe that indemnification will trickle down  to  the subs, because they
think the amount of  coverage is too low for primes to be able to  (or to
have  any incentive to) share it.   There is a growing concern that if the
primes resist giving indemnification to the subs, then subs will not work
and remediation will not proceed.

      Moreover, RACs argue,  as indicated above, that the deductible
structure  creates a  similar disincentive  for  the prime  to share the
indemnification with  the subs.  If the prime chooses to obtain $50 million
in indemnification (and most RACs indicated  they would purchase the
maximum) so as to at least attempt to have enough to share  with the subs, it
must meet the $3.5 million deductible. Since the subs will often be unable
to pay their share of the deductible (sometimes,  the sub's entire contract is
for $20,000-$30,000, which is less than their share of the  deductible), the
prime is probably not going to be willing to share the indemnification.14

      A number of groups suggested that EPA  indemnify sub contractors
directly. One group said it thought EPA had attached too much significance
to the notion of privity of contract; this party saw no legal  barrier to direct
14  A related concern raised by one group is that of indemnification pass-through to
individual professionals employed by subs. The professional liability insurance secured by
the  individual almost certainly does not cover pollution liability.  Yet individual
professionals could, conceivably, be the target of third-party claims, if not claims under
CERCLA. If indemnification is not passed down from primes to subs, it is unlikely that it
will be further passed down from subs to individual professionals employed by the subs.
This lack of insurance coverage, real or perceived, may discourage the "best and the
brightest" from developing and testing new technologies and that in the long run the public
will suffer.
                                 -16-

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EPA indemnification of subs.  Others, such as the HWTC, viewed the lack
of privity as a bar to direct indemnification of the subs by EPA.

      Many RACs urged that EPA provide to the prime specific indemnity
amounts for the subs.  The amount could be measured by the size of the
contract or a judgment of the risk inherent to the particular activity that the
sub is performing.  This  approach would satisfy the need of the sub, as
articulated by the AGC and the HWTC in particular, to know at the start of
the job, that  it  is being provided with a particular indemnity amount.  It
throws the allocation function back  to EPA which may not satisfy  the
agency's interest in easing the administrative burden.

      Otherwise, the RACs believed that the EPA could eliminate  the
disincentive to share the  indemnification by significantly increasing  the
coverage limit, either by increasing the per contract amount or by setting
it, in a high enough amount, on a per site or per activity basis.  If  the
increase to coverage limits either way is significant enough, EPA's initial
intent of having the prime be responsible for allocation could be achieved,
although sub-contractor representatives, such as the HWTC, believed that
even  under these circumstances EPA  should mandate and ensure an
appropriate flow down.

      Depending on the extent of the increase in the limit, it might also be
necessary to develop  an allocation  method or standard.15  The RACs
expressed interest in the idea of EPA providing  an indemnification amount
on a per activity basis.  If an activity analysis is performed, EPA could
determine that some activities  are risky enough to justify a large amount of
coverage, but that some are not that risky or that insurance is  available for
certain kinds of activities.  Since  one or  a  limited number  of subs  are
performing  work as part of the particular activity,  it will  be easier to
allocate the indemnification on this basis.

      Finally,  under the proposed Guidance, non-profit organizations
receive the  same treatment as for-profit RACs.  At least one non-profit
15 AIG suggested that the allocation method be similar to that used in commercial
insurance contexts: that the amount of coverage be allocated according to the responsibility
for the loss. This approach appeared unworkable to many of the RACs and, moreover, it
does not satisfy the interest of the RACs in knowing, at the beginning of the work effort,
the indemnification coverage that they will have.
                                 -17-

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group believes that this approach is unrealistic and unfair, given the vast
differences in resources, assets and purpose/mission between for-profit and
non-profit organizations.
D.    ADMINISTRATION ISSUES

      1.  Due Diligence Requirements

      The proposed Guidance restates the statutory requirement that in
order to be eligible for indemnification the RACs prove that they diligently
sought to obtain adequate commercial insurance, but were not able to do
so.  The proposed Guidance  implements this provision by requiring that
RACs obtain 3 quotes for liability insurance for each site they work on,
every year.

      All the RACs (with the exception of Waste Management) complained
that this  level  of due diligence was costly, time-consuming and wasteful.
They  gave the following reasons:

      a)     Only 2  insurance companies — AIG  and Reliance —  are
            selling pollution liability insurance of any kind, at any level
            to the general market.  Hence it  is very difficult to get three
            bids.

      b)     No standard for what  constitutes "adequate" insurance has
            been developed by EPA.  Even if the commercial insurance
            market expands, the RACs can not know, in advance and for
            certain, whether the bid that they are likely to receive will be
            considered adequate.

      c)     It usually takes 4 months to obtain a quote. The application
            process for AIG and Reliance is very vigorous.  Moreover,
            since most other are not actually selling policies, it is not in
            their interest to make delivery of quotes a priority.

      d)     The application process can be very costly.
                                -18-

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      e)    The RACs maintain that some insurers have told them that
           they  will cease giving because of the cost  involved and
           because the available product is never bought.16

      f)    The  RACs  perceive  that EPA  believes that adequate,
           affordable insurance is much more available than it actually
           is.   Since  they believe  that adequate insurance is not
           available, they believe  that they are being forced to waste
           time and money

      As an alternative to the proposed  Guidance, the RACs and others
recommended the following approach  to implementing the due diligence
requirement:

      a)    EPA should articulate a standard for what  constitutes
           adequate,  affordable pollution liability insurance.   Since
           Section 119 contains no definition, EPA has the flexibility to
           develop  a   standard  that   is  reasonable  under  the
           circumstances.17

      b)    The due diligence requirement would be fulfilled if the RAC
           obtain a  letter from its broker which describes available
           insurance. The EPA would  review  that letter to determine
           whether what is available is adequate; if so, the RAC would
           proceed to obtain further quotes.

      c)    EPA should  require a RAC  to  fulfill the  due diligence
           requirement  once annually on each contract, rather than on
           each site.

      If EPA is not prepared to implement  the above approach, the RACs
urged that other means be found to streamline the  due diligence process
and make it less onerous.
16 AIG claims that it is giving RACs quotes, but that the RACs are not presenting those
quotes to EPA
17 On the other hand, one trade organization complained that EPA already has too much
discretion to determine whether the insurance that is available is adequate
                                -19-

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      Finally, the  RACs were very  concerned regarding one particular
consequence of the due diligence requirement  — they are often put in the
position of having  to start to work even before knowing whether they will
be indemnified.   The RACs claim that,  in  particular, on  emergency
contracts they often begin the work  prior to being able to complete due
diligence; the indemnification is granted subsequently, exposing them to a
risk of liability without protection in the interim. They recommend that
EPA  make the effective date of insurance coverage automatically  co-
terminous with the contract starting date.

      2.  Retroactivitv of Proposed Guidance

      The proposed Guidance would apply retroactively to contracts signed
prior  to its final promulgation —  from the  effective date on,  EPA could
offer  indemnification only  according  to its  terms and, therefore, pre-
existing contracts would have to be altered to incorporate these  terms. The
RACs primary concern over the  retroactivity  provision is that  whatever
the final form of the proposed Guidance, it will be less liberal than the
prior  policy;  thus, the change in contract terms would significantly alter
the relationship between profit and risk. There would have  to be a re-
negotiation of their contracts so that they would secure consideration for
the greater risk that they would be  assuming.

      Several people within the  government were concerned that  the
retroactivity provision might cause disruptions in the on-going work.  If
the EPA and the RACs were not able to re-negotiate the contracts,  the
government would have to terminate the  contract "for the convenience of
the government" and then resolve  claims  of the just-terminated contractor
and find new  contractors.

      The RACs proposed that in order to avoid the potential disruption of
contract re-negotiation, that pre-Guidance contracts be  "grandfathered" so
that the  current policy would stay  in place  throughout the  life of  the
contract.

      3.  Fixed Price Contracts

      Under  the proposed  Guidance,  RACs  bidding on fixed price
contracts must indicate in  their  bid  whether  they  are  requesting
government indemnification. EPA determines a value for the requested
                                -20-

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amount of indemnification, imputes that value to the bid total, and selects
the lowest bidder.

      Large and small RACs alike agreed that this scheme has two negative
consequences.  It favors  the large  companies that can self-insure, and
therefore do  not  request  government indemnification, over the smaller
firms.  At the same time, the RACs and others fear that the only other
types of firms that will  bid without seeking indemnification  are  the
"cowboy" firms whose work practices may endanger the public and their
workers.  As a result, the  more responsible, though less capitalized firms
may be driven out of business.18

      Others  agreed with  these concerns.  The Joint Management/Labor
Trust Fund and the Laborers Association General Contractors Education
and  Training Fund both  stated their  concern for  the  safety  of  the
remediation workers.  OIRA is concerned that fewer RACs will bid on
contracts and that reduced competition will drive up contractor bids and,
ultimately, cost the government more than it would cost  to  provide
indemnification directly.

      The  American Association of Surety Bond  Producers  is also
particularly concerned  with this provision of the proposed Guidance
because sureties depend on the quality of RACs to protect their investment
in surety bonds.  Any practice or requirement which drives high quality
RACs out of  the  business  and encourages  the  participation  of less
scrupulous and careful companies is a disincentive to surety participation.

      The RACs generally recommended that this requirement be dropped.
For example, the AGC, whose members frequently work under fixed price
contracts, recommended that EPA offer a set amount of insurance for the
particular job so that the amount of indemnification sought does  not
become a distinguishing factor among bids and that there is no disincentive
to requesting  indemnification.
18 One party at the November 19 meeting raised the legal question of whether the
government had the legal authority to impute values to a competitive bid and whether such
imputation of values constitutes"tampering" with a RACs sealed bid?
                                -21-

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E.    OTHER ISSUES

      1.  Alternative Approaches to Risk Transfer

      David Coduto and Am Re Managers have been circulating the idea
for an alternative approach to risk transfer in this context. The concept is
as follows: A group of RACs would capitalize a risk retention group which
would then be  able to insure the  lowest layer of risk.  EPA  would
indemnify the RACs for the excess risk up to a limit.  EPA would specify
both the limit per contract  or per activity or site, as well as total limit of its
excess pool.

      Coduto  believes that this structure would encourage  commercial
participation, first in the form of reinsurance.  This would occur because
the commercial sector would know that its liability would be capped at the
point that the excess layers kick in.

      The structure presents two advantages to EPA. First, as commercial
sector involvement increases and as  the first layer builds up — premiums
would flow in and interest would build up, but early on there will not be
significant outflow as there will be few claims), the amount of EPA funds
dedicated to indemnification of the excess layer can decrease. Second, EPA
will not have to  be in the initial insurance underwriting process nor will it
have to process claims.

      None of the  RACs  objected in principle to  the idea of a captive
insurance program or risk retention group similar to the one proposed by
Coduto, although HWAC has raised questions regarding the legal authority
for EPA's participation in  a structure such as presented by  Coduto.19  All
RACs, however, were pessimistic about their ability to raise  sufficient
capital  to create a  fund with the resources to  give adequate  (per
occurrence) coverage.  They point to the Demeter experience: Demeter
failed because it was not  sufficiently capitalized to provide an adequate
insurance product. The problem was compounded, they believe, by EPA's
failure to reimburse for the Demeter  premiums.
19  The AIA had previously fought against the changes in federal law that allowed the
establishment of risk retention groups.  It now views them as potentially appropriate risk
transfer mechanisms, though it is concerned about the solvency of many such groups.
                                -22-

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      2.  Surety Issues

      According to one source, only  6 out of 680 surety  companies
nationwide have ever  written  bonds for EPA  Superfund projects.
According to a  1990 U.S. Army  Corps of Engineers study of surety
bonding  for all, not just public,  Superfund sites, about 30%  of existing
bonds were  written  by a company  called  Seaboard.  That company,
however, is apparently no longer writing bonds.

      Surety bond producers  claim  that  public  Superfund  work is  a
potentially enormous market for them, one they would like to tap into.
They are concerned, however, regarding similar technical and legal risks
as are the RACs. It is possible that the recent passage of an amendment to
Section 119 providing sureties with  indemnification  equal to that provided
to the RACs, will increase the  willingness  of the sureties to write bonds,
but that has not yet occurred.20  The sureties appreciate the  protections
afforded by this amendment, but are concerned about most of the same
issues regarding the proposed Guidance as are the RACs.

      Sureties  believe  that they face legal risk,  and  consequently are
hesitant to  bond EPA Superfund projects, because they fear that they will
be exposed to liability for claims outside traditional surety boundaries, i.e.,
the contractor's performance of the work in accordance with the plans and
specifications,  and payment of  covered subs and suppliers.  In  their
February, 1990 comments on the proposed Guidance, the AIA stated that
sureties view environmental law as an area characterized by the expansion
of insurer  liability far beyond  those claims originally anticipated by the
contracting parties.  The sureties believe that it is quite likely that they will
be sued in tort by injured third parties. Twenty years from now,  when a
liability claim is made on a hazardous waste cleanup  project and there is no
liability insurer and no RAC capable  of satisfying the claim,  the sur.ty
bond producers fear that they may be the only avenue left for payment to
the injured party. They argue that such a "misconstruction" of policy terms
is not unheard of in current court decisions relating  to personal injury and
environmental damage.
20  AGC members have not been able to secure bonding for EPA    irfund sites. Even
major contractors like Bechtel are unable to get bonds without posting assets equal to the
value of the bond. Unless this situation changes, the result will be that larger firms with
greater assets will have a competitive advantage over the smaller firms.
                                -23-

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E.    CONCLUSION

      In  spite of significant differences  among  those  involved  in this
process about the validity of the assumptions underlying EPA's proposed
Guidance and about EPA's efforts to resolve the many indemnification
issues, the interviews and November 19 meeting produced constructive,
and partly candid, discussion between the agency and those affected by the
Guidance. At the conclusion of the meeting, several participants expressed
appreciation for the opportunity to exchange  information and views with
the EPA on what are very complex questions.   All in  attendance
contributed to the dialogue in a constructive fashion and await the outcome
of EPA's  decision-making on the issues.
                                -24-

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APPENDIX A

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     ENDISPUTE interviewed the following  individuals during the
convening stage of the consultative process.  Many of these interviews were
conducted in groups and some were conducted by telephone.
     Jack Curtin
     Jane Dudley
     Gregory Brown
     Lynn Schubert
     James Kimble
     Martha Hamby
     Mark Haynes
     Robert Blackwell
     Karen Jordan
     Richard Fiesta

     David Case
     Carol Terry
     Elizabeth Epstein
     Paul Nadeau
     Ken Ayers
     Scott Fredericks
     Ron Minsk

     Richard Belzer

     Tom Gillis
     Susan Brigham
     Jane Seigler
     John Meachem
     Brian Deery
     David Coduto
National Assoc. of Surety Bond Producers
National Constructors Assn.
Stone and Webster
American Insurance Assn.
American Insurance Assn.
American Insurance Assn.
Fluor Constructors Intl.
EBASCO
Joint Management/Labor Trust Fund
Laborers Association General Contractors
     Education and Training Fund
Hazardous Waste Treatment Council.
Environmental Business Assn.
Environmental Business Assn.
EPA-OERR
EPA-OERR
EPA-OERR
OMB-Office of Information and Regulatory
     Affairs
OMB-Off ice of Information and Regulatory
Affairs
EPA
Waste Management Inc.
Waste Management Inc.
Waste Management Inc.
Associated General Contractors
Terra Insurance Company
                               -i-

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Matt Prastein
David Dybdahl
Dennis Connolly
George Barrone
Robert Patterson
William McElroy
Peggy Cutler
Jack Mahon, Esq.
William Topping
Thomas Hickey
Alex Karlin, Esq.
George Gleason
S. Wyatt McCallie
Michael K. Yates
Leonard Kessler
Carolyn Kiely, Esq.
John Schulz
Gary Dunbar
Pete Lederman
James Whitehead
John Curtis
Doug Congdon
Brad Figley
Department of Defense
Carroon and Black
Johnson & Higgins
Am Re Managers
American Insurance Group
American Insurance Group
American Insurance Group
U.S. Army Corps  of Engineers
EPA - Remedial Contracts Branch
HWAC (Malcolm Pirnie)
HWAC (Morgan Lewis & Bockius)
HWAC (NUS)
HWAC (CH2M Hill)
HWAC (EBASCO)
HWAC (EBASCO)
HWAC
HWAC (Bechtel)
HWAC (Los Alamos Technical Associates)
HWAC (Roy F. Weston, Inc.)
HWAC (Badger)
HWAC (COM)
HWAC (Versar)
HWAC (IT)
                         -n-

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APPENDIX B-l

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                             AGENDA
               FACILITATED DIALOGUE ABOUT THE
                   EPA RAC INDEMNIFICATION
                            GUIDELINES
                        November  19, 1990
                    Washington Marriott Hotel
9:30 - 10:00 AM        Facilitators' Introduction
                            •   Objectives for Meeting
                            •   Role of Faciliator
                            •   Ground Rules
                            •   Agenda

10:00 -11:15 AM      Parties' Introduction
                            •   Interests and Objectives
                            •   Constraints

11:15-11:30 AM      Break*

11:30 - 12:45 PM       General Discussion - "Context"
                            •   Statutory Requirments
                            •   Technical Risks of RAC Work
                            •   Legal Risks of RAC Work
                            •   Availability of Insurance
                            •   Surety Issue

12:45-1:OOPM        Break*
                                 -m-
1   The conference room will have side caucus rooms to allow for private meetings during the breaks among the
representatives of a party or between parties.

2   Lunch will be served. Participants should plan to eat lunch during sub-group sessions.

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Agenda (con't)

1:00-3:00 PM          Sub-groups - Issues/Alternatives
                              1 - Administration
                                  •  Diligence Requirements
                                  •  Multi-Site Issues
                                  •  Retroactivity Issues
                                  •  Approval Mechanisms
                                  •  Fixed Price Contracts
                                  •  Subcontractor Issues

                        2 - Coverage
                             •  Limits
                             •  Deductibles
                             •  Term
                             •  Exclusions
                             •  Subcontractor Issues

                        3 - Stimulating Insurance Availability
                             •  How the Guidance fits into this
                                overall statutory goal,

3:00 - 3:30 PM          Breaks

3:30-5:00 PM          General Discussion - Issues/Alternatives
                             •  Sub-groups will report
                             •  Further discussion will occur

5:00 - 5:30 PM          General Discussion -  What did we accomplish
                                             today? Next Steps, if any
                                  -IV-
 We are planning for a longer break than usual to allow any sub-group to extend its meeting.

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APPENDIX B-2

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                      GROUND RULES
               FACILITATED DIALOGUE ABOUT THE
                  EPA RAC INDEMNIFICATION
                           GUIDELINES
                       November  19,  1990
                   Washington Marriott Hotel
1.    Each party that participates in the dialogue agrees to be bound by
these ground rules and otherwise to participate in good faith.

2.    Each party subscribes to the objectives of the dialogue — to help the
other parties understand its interests, concerns and positions with respect to
the EPA RAC Indemnification Guidelines, and the constraints under which
it acts; and to help the  EPA determine whether further consultation with
the parties, or consultation of a different nature, would be useful, feasible
and appropriate — and agrees to act consistently with these objectives.

3.    The dialogue shall be facilitated by Michael D. Young and Katina B.
Leodas of ENDISPUTE, Inc.  The  facilitators shall be responsible for
coordinating the dialogue and for ensuring that it proceeds in an orderly
manner.

4.    The dialogue shall proceed according to the agenda developed by the
facilitators, unless there is a consensus among the parties  represented,
including EPA, to modify it.

5.    Although a party may be represented by multiple individuals, it shall
designate no more than  two individuals who shall generally speak on its
behalf during either general or sub-group discussions.
                                -v-

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6.    No party shall be bound by any statement of any kind made by its
representatives during the dialogue, unless it explicitly agrees to be so
bound.

7.    All  comments made are off-the-record.   No party shall publicly
quote or cite outside of the dialogue the statements of any other party made
during the dialogue, unless permission is explicitly given or unless required
by law.

6.    No formal record of the  dialogue shall be made.  Any  party may
take notes, and each party  agrees that in the future it shall not subpoena, or
otherwise  attempt  to  obtain, the notes  of any other party  or of the
facilitators.
                                 -VI-

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APPENDIX C

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               EPA  INDEMNIFICATION  MEETING
                          November 19,  1990
Name
      Affiliation/Address
Telephone/Fax
John Turner
Warren Diederich
Brian Deery
Richard Belzer
Ron Minsk
S. Matthew Prastein


George Gleason



Thomas J. Hickey



Jack Mahon
Theodore M. Pierce
Alex S. Karlin
Remedial Contractors Institute
National Solid Waste Management Assn.
1730 Rhode Island Ave. NW, Suite. 1000
Washington, DC 20036

Industrial Builders Inc.
General Contractor
P.O. Box 406
Fargo, ND 58107

Associated General Contractors
1957 E Street NW
Washington, DC 20006

Office of Management and Budget
New Exec. Office Bldg., Room 3019
Washington, DC 20503

ODASD(E) 206 N. Washington
Alexandria, VA 22314

Hazardous Waste Action Coalition
1015 Fifteenth Street, NW
Washington, DC 20005

Malcolm Pirnie
Two Corporate Park Dr., Box 751
White Plains, NY 10602

U.S. Army Corps of Engineers
Attention: CECC-C
20 Mass. Avenue, NW
Washington, DC 20314

National Association, of Surety
Bond Producers
6931 Arlington Road, Rm. 308
Bethesda,MD 20814

Morgan Lewis & Bockius
1800 M Street, NW
Washington, DC 20036
  202-659-4613
 701-282-4977
  202-393-2040
  202-347-4004
  202-395-3084
  202-395-7285
 713-325-2211
  301-258-8647
  301-258-9116
 914-641-2949
 202-272-0021
  301-986-4166
  202-467-7158
                                   -vi-

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WyatttMcCallie
Richard Fiesta
Jane Dudley
Herb Blum
David Coduto
Bill Topping
Stuart Ferguson
Arthur Weissman
CffiMHill
P.O. Box 22508
Denver, CO 80222

Connexion, Ray & Simon
(Laborers - AGC Training Fund)
1920 L Street NW, 4th Floor
Washington, DC 20036-5004

National Constructors Association
888 17th Street, NW Suite 400
Washington, DC 20006

Chairman, General Counsels Committee
National Constructors Association
Ebasco Services Inc.
2 World Trade Center
New York, NY 10048

Terra Insurance Company
Two Fifer Avenue, Suite 100
Corte Madera, CA  94925

EPA/PCMD
PM-214F
499 South Capitol Street SW
Washington, DC 20032

AM-RE Managers, Inc.
555 College Road - East
Princeton, NH 08543

EPA/Office of Waste Programs
 Enforcement OS-500
401 M Street SW
Washington, DC 20460
303-771-0900
303-220-5106
202-466-6790
202-659-3458
202-659-6810
212-839-2616
212-839-2825
800-872-0077
415-927-3204
202-382-3184
609-243-4332
202-475-6770
Elaine Stanley
Ken Ayers
OS220-W
Paul Nadeau
OS220-W
EPA/Office of Waste Programs
  Enforcement   OS-500
401 M Street SW
Washington, DC 20460

EPA/Hazardous Site Control Division
401 M Street, SW
Washington, DC 20460

EPA/Hazardous Site Control Division
401 M Street, SW
Washington, DC 20460
202-382-4823
703-308-8343
703-308-8313
                                    -vu-

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BenHamm
George Barone
Tony Guadagno
William McElroy
David Case
Rick Colbert
Karen Jordan
Jane Seigler
Jim Kimble
EPA/Office of Waste Programs
Enforcement
401 M Street SW
Washington, DC 20460

Am Re Managers
685 College Road East
Princeton, NJ 08543-5241

EPA, Office of General Counsel
401 M Street, SW
Washington, DC 20460

Commerce & Industry Insurance Co.
70 Pine Street
New York, NY 10270

Hazardous Waste Treatement Council
1440 New York Avenue, NW, Suite 310
Washington, DC 20005

EPA/Office of Waste Program
  Enforcement
401 M Street SW
Washington, DC 20460

Laborers-Employers
Cooperation & Education Trust
905 16th Street NW
Washington, DC 20006

Waste Management Inc.
1155 Connecticut Ave., NW Suite 800
Washington, DC 20036

American Insurance Association
1130 Connecticut Ave., NW
Washington, DC 20036
202-475-9804
202-382-3106
609-243-4904
609-243-4940
202-475-8880
212-770-5398
212-422-8198
202-783-0870

202-737-2038

202-382-4015
202-783-3545
202-467-4480
202-659-8752
202-828-7100
202-293-1219
                                    -Vlll-

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APPENDIX D

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                     CURRENT POLLUTION LIABILITY MARKET FOR RESPONSE ACTION CONTRACTORS
                                          (Source: Business Insurance, October 8, 1990)
                                                Maximum Policy
                                                Limits (Smillions)
Insurer
AIG
Product
Contractors
Pollution
X
I
AIG         Contractors
             Errors & Omissions

Reliance     Contractors Pollution
                    (Blanket)
                    (Project)

Reliance     Environmental Consulting
             Professional
                    (Blanket)
                    (Project)

Reliance     Consultants Pollution &
             Errors & Omissions,
             Combined
                    (Blanket)
                    (Project)
Per Claim Aggregate ($thousands) ($thousands)
10
2
5
5
5
5
5
5
10
2
5
10
5
10
5
10
50
50
25
25
25
25
25
25
25 ($1 million
50'( " )
20 ( " )
20 ( " )
25 (")
25(")
20(")
20(")
          'For bjyers with other coverage from AIG

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                         RESPONSE f CTION CONTRACTOR PRIMARY RISK SPECTRUM
                                                       &
                       AVAILABILITY OF COVERAGE IN STAiSDARI) INSURANCE POLICIES
Risk

Non-pollution Related

Professional non-negligent

Professional negligent

Non-professional non-negligent

Non-professional negligent

Pollution Related

Professional non-negligent

Professional negligent

Non-professional non-negligent

Non-profewional negligent
Professional Liability Insurance



       Covered

       Covered

       Excluded

       Excluded



       Excluded1

       Excluded 1

       Excluded

       Excluded
General Liability Insurance



Excluded

Excluded

Covered

Covered



Excluded

Excluded

Excluded

Excluded
                                                                                              As of 11/9/90
    1 Except wastewater, potable water & stormwater projects

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