Estimating Environmental Liability: Quantifying the Unknown

by Paul Schoemaker, Joyce Schoemaker



This article describes a methodology firms can use to estimate their unknown future environmental liabilities. The authors developed it for a U.S. manufacturing firm to help it better negotiate with its insurance carriers about past and future coverage. The basic method can be applied by any company to estimate its own overall future environmental liability. The article examines multiple categories of potential liability such as hazardous waste, community exposure, occupational hazards beyond workers' compensation. product liability, and natural resource damage. Initial hazardous waste estimates can be derived from aggregate clean-up costs for the nation as a whole. The other categories entail more subjective estimates based on possible pathways to exposure, legal proceedings, and comparisons against benchmark cases such as asbestos.

California Management Review

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