Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Insurance
Reexamination Certificate
1998-10-09
2002-01-01
Hafiz, Tariq R. (Department: 2166)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Insurance
C705S001100
Reexamination Certificate
active
06336096
ABSTRACT:
BACKGROUND OF THE INVENTION
This invention relates to a system and method for evaluating liability and settlement opportunities, and more particularly, to a system and method for concurrently evaluating environmental liability and settlement opportunities among multiple potential responsible parties (PRPs) and multiple insurers at multiple environmental sites.
This invention also relates to a system and method for evaluating how an aggregate insurance premium may be allocated among multiple PRPs and their insurers when insurance is used to transfer risk at an environmental site.
An environmental site (site) is a location where an environmental event has occurred resulting in liability to one or more parties as a result of such parties' actions at the location. Environmental sites frequently arise after disposal of hazardous substance by multiple parties over numerous years. The Government established Superfund legislation which made all parties who contributed or transported waste to the site and all owners and operators jointly and severally liable for the cost of cleaning up the site. Superfund legislation creates a very complex situation for allocating liability and settling claims among often hundreds or thousands of parties at a single site, each of which may be seeking some insurance coverage under multiple policies from different insurers. Many state environmental cleanup laws follow the federal model.
Pursuant to authority granted under Superfund, or equivalent state laws, the Environmental Protection Agency (“EPA”) can force site cleanup. Because the EPA is not required to allocate liability and the joint and several nature of the imposed liability, it is usually left to the multiple PRPs to divide and allocate total costs. The funding of the cleanup costs is further complicated by demands by many PRPs for contribution from different and often numerous insurers. The obligation of insurers to contribute can vary greatly depending on what state law applies. The willingness or ability of PRPs to resolve their differences may depend on the extent to which the numerous insurers agree to contribute.
Environmental and related insurance coverage claims have generated an enormous amount of litigation. Such litigation is often complex and difficult to settle. However, even the successful resolution of a claim of a single PRP against its multiple insurers still leaves unresolved the allocation issues between that single PRP and the multiple other PRPs at the site. Indeed, the fact that a single PRP's issue of relative liability in respect of other PRPs at a site is unresolved often impedes the resolution of the single PRP's claim with its insurers. As the liability horizon is expanded beyond a single site to multiple sites, the entire complexity increases accordingly.
The fragmented, yet interdependent, nature of the liability structure, the importance of differing state insurance coverage law and the large number of sites make traditional claims resolution processes slow, inefficient and costly. A study of major insurers revealed that eighty-eight percent (88%) of their total dollars for environmental claims was being spent on transactional (claims processing and evaluation) costs.
Settlement is further complicated in cases where there are large numbers of small or “de minimis” PRPs, i.e., parties having minimal contact with the environmental site. For example, in a battery reclamation operation a service station owners collect old batteries and deliver them to a reclamation facility. Literally, many hundreds of small companies may have delivered minimal waste to the site. The entire pool of such PRPs may have only a small portion of the total liability. For example, 1200 PRPs may be identified as having involvement at a site, where 1000 of the 1200 contribute only to 5 percent of the total pollution.
To facilitate settlement, the Government may offer the small PRPs the opportunity to settle for a de minimis amount, say $25,000. While often a nominal amount, the de minimis settlement offer is often twice as high as the party's volumetric share of the cleanup costs. Not all of the small POPs may accept the offer, indeed often many do not. Those that do not accept the de minimis settlement are then included with the remaining 100, complicating final settlement. The parties having substantial liability may wish to seek contribution from the non-settling de minimis PRPs. However, litigation against a large number of small parties with small liability can be expensive.
Many de minimis PRPs also have insurance coverage for their liability. The insurance coverage claims for these de minimis claims have the same degree of complexity, but the relatively small dollars at issue for each individual party makes the traditional claims resolution process inefficient and disproportionately costly.
There is a need for a system and method of concurrently evaluating liability among multiple PRPs and their insurers which can facilitate a qualitative determination of likelihood of outcome to all parties. There is a need for a system and method of efficiently obtaining from large numbers of interdependent parties their realistic settlement positions and then evaluating these offers of settlement among multiple insureds and insurers to facilitate a qualitative determination of likelihood of outcome to all parties. These is a need for a system and method which incorporates an independent state law adjustment factor and an objective, independent and legally based means of allocation of liability among insurers of a PRP in order to facilitate a qualitative determination of likelihood of outcome to all parties. There is a need for a system and method to review and evaluate simultaneously the positions of multiple parties and multiple sites so as to provide a qualitative likelihood of outcome that addresses the fragmented and interdependent nature of the underlying environmental remediation liability cleanup scheme.
The risk of liability that all PRPs or a significant group of PRPs (and their insurers) have with respect to a given site can be insured. Such insurance can both reduce total costs to the parties and bring finality and certainty to the involved PRPs and their insurers. However, a critical and difficult step in obtaining such insurance is the agreement of a sufficient number of PRPs to transfer their risk through the purchase of insurance. This may require that each PRP obtain contribution under some number of past insurance policies. There is a need to efficiently assemble the contribution from multiple PRPs to pay the aggregate premium for insurance which will assume the aggregate liability of the covered multiple PRPs at an environmental site. There is also a need for a method to evaluate the proportionate share of the aggregate premium contribution for each of the multiple PRPs to be covered by such insurance.
SUMMARY OF THE INVENTION
A system and method of evaluating liability among multiple potential responsible parties (PRPs) and their insurers relating to multiple environmental sites according to the invention supports mediating and arranging settlements of environmental cleanup liability between PRPs and insurers and in appropriate cases between multiple PRPs. The system resolves, addresses and handles fragmentation in effecting settlements and handles the interdependence among the parties. According to the system and method, data is gathered, relationships among the data are calculated, the allocation of liability among a PRP and its multiple insurers is evaluated and a state adjustment factor is applied to the data. Deviations from a consistent independently determined expected outcome is calculated (“normal value”), and a qualitative decision pertaining to the likelihood of outcome is proposed to the parties.
While the system and method for evaluating liability may be used by anyone, it is anticipated that only independent third parties will use the system and method. The system and method depend upon the parties having environmental liability providing their co
Fitch Even Tabin & Flannery
Hafiz Tariq R.
Parisi Joe
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