There's no question that when a piece of commercial or residential property is found to be polluted, it should be cleaned up before it presents a threat to public safety.

That imperative led to the enactment of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 and as further defined by a number of subsequent court decisions.

Unfortunately, while it's equally clear that someone must pay for the cleanup of hazardous waste sites -- gas stations with now-leaky storage tanks, former paint factories, abandoned dry cleaning plants, and the like -- what often happens if the property's owner can't or won't pay is neither fair nor logical.

Liability of Owners

With rare exception, the environmental law and its progeny hold owners liable for the environmental condition of their properties. That's as it should be. After all, the proprietor of a gas station chain, shopping mall or former factory site should not be able to simply walk away from the property if it is found to be polluted, leaving someone else to clean up the mess.

Moreover, holding such owners financially liable leads them to be good custodians of their properties and to guard against destructive actions perpetrated by others.

But where is logic or fairness when, in the absence of an owner able or willing to pay, the bill for cleanup of a polluted property is sent instead to the property owner's mortgage banker, trustee, or other fiduciary?

If it's a property that had been pledged as a collateral on a mortgage loan and on which the bank lender has foreclosed, the bank already has a big problem: The market value of a polluted property is likely to be zero.

Cost May Exceed Worth

But if, by virtue of having foreclosed, the bank is designated a responsible party and is required to bring the polluted to property into environmental compliance, the cost of doing so may run into millions of dollars -- potentially far more than the property ever was or will be worth.

Imposing the burden on a bank's balance sheet and capital base hardly seems fair to its shareholders, customers, and depositors -- or, if multiplied by thousands of potential occurrences -- good for the banking system.

Transfer Risk to Insurance

Nor is the alternative soltution some have proposed -- making taxpayers foot the bill -- any better. Although the American taxpayer has often been the "deep pocket" of last resort, it's difficult to see why taxpayers should be required to pay for the environmental cleanup of a private property and for those who stand to benefit from the use or sale of property once it has been brought into environmental compliance to get a free ride.

There is, believe, a better way. It's an approach that allows property owners and other potentially responsible parties to transfer the risk of environmental pollution to a sector of the economy that knows how to measure and manage risk: the insurance industry.

There's nothing new or radical about paying a third party to assume an identifiable risk. Insurers hav been writing policies against death and disability, fire and flood, earthquake and tornado, for decades, and in some instance centuries.

Insurers can offer financial protection against such catastrophes and still make money because they understand risk -- and how to apportion it in an efficient, equitable manner.

This market-based approach, which has long worked well with other kinds of risk, would work just as well if applied to the risk of unforeseen environmental pollution.

Insurers Writing Policies

In fact, it already has. Over the past few months, a small but growing number of environmental insurers have begun to write pollution insurance policies.

The policies protect both borrowers and lenders through insurance contracts that name both as insureds. In the event of an environmental problem, the burden of cleanup would fall, quite rightly, on a third party who has been paid to assume this risk.

The charge for that protection is driven by market forces -- long recognized as an excellent determinant of risk and reward.

In many instances, property owners are charging their tenants a proportionate, generally nominal share of the policies' costs. That, too, is as it should be.

The insurance industry has long been a vital adjunct to sound public policy. How many of us, for example, would want to work in a building that passed its building inspection but could not qualify for fire insurance? Or ride in a car whose owner could not obtain auto insurance?

We all benefit from the fact that building and vehicle inspectors are backstopped by insurance companies that won't issue policies involving unacceptable levels of risk.

Costs of Coverage Declining

One year ago, there was insufficient capacity in the insurance markets to handle pollution risk at a reasonable cost. That situation has changed in the last six months. Costs for this coverage have declined and services and coverage have broadened.

It's time to look to the market for a solution to pollution cleanup liability -- rather than reaching for the wallets of lenders, trustees or taxpayers.

Pollution coverage should be as standard a form of property and casualty insurance as fire or collision coverage is today.

With 35,000 known hazardous waste sites across the United States, countless more waiting to be discovered, and the list of toxic substances growing longer every year, the sooner that happens, the better.

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