Download e-book for iPad: Managing Environmental Risk Through Insurance by Paul K. Freeman
By Paul K. Freeman
Can assurance be used as a method to procure compliance with environmental coverage? Answering this question calls for exam of a huge mosaic of educational concerns, together with present platforms to be had for supplying reimbursement and deterrence, use of contracts (including coverage) as substitutes for tort legislation, boundaries of regulatory policy-making by means of govt enterprises, pre-conditions for construction of assurance items, and marketplace mechanisms invaluable for assurance to be bought or bought. the aim of Managing Environmental RiskThrough Insurance is to spotlight the capability position that assurance and function criteria can play in coping with environmental probability. assurance can play an important function in facing the most difficult concerns dealing with society this day - the right way to make amends for environmental exposures.
This e-book analyzes the facility of coverage to play a task in dealing with environmental possibility. It starts off by means of outlining the position coverage performs in society unlike different societal instruments for addressing possibility: govt gain courses and imposition of involuntary legal responsibility utilizing the courtroom method. by means of so doing, the ebook describes the comparative benefits of coverage. The ebook then analyzes the insurability of the hazards. eventually, the ebook applies the insurability research to 3 concrete environmental examples.
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531-536. 14 Even with these clauses in an insurance contract, the insureds may still behave more carelessly than they would if they did not have coverage, simply because of their protection against a large portion of the loss. For example, they may decide not to take precautionary measures otherwise adopted without insurance. The insured may view the cost of these measures as too high relative to the dollar benefits potentially received from this investment. If the insurer can learn in advance the relative likelihood that an insured develops less interest in loss reduction activity after purchasing a policy, then it can charge a higher insurance premium to reflect this increased risk - or require specific protective measure(s) as a condition of insurance.
13 A fourth way of encouraging safer behavior is to place upper limits on the amount of coverage an individual or enterprise can purchase. If the insurer will only provide $500,000 worth of coverage on a structure and contents worth $1 million, 12 This is an example of ex post moral hazard where the insurer does not know the nature of the accident and hence cannot detennine whether the damage claim is exaggerated. For a more detailed discussion of ex post moral hazard in the context of insurance problems.
While asbestos and CERCLA liabilities differ greatly, transaction costs associated with the use of the tort liability system to seek redress are surprisingly similar. RAND conducted a study of the costs of asbestos litigation in order to understand the magnitude of these expenses. 2o Note that 37 cents of every dollar spent on compensation actually goes to the plaintiff. RAND scientist Deborah R. Hensler provided further support for this figure by testifying at the House Judiciary Committee hearings in October 1991, that transaction costs are 60 percent of total asbestos-related claim expenditures.