Document re4eaYQg3m2mqEvXVMDrN0Y0J

Monsanto . i . fMl-M NWl LO^illON. February 16, 1972 * PCB Indemnity Program l < t**J NCI TO Mr. W. R. Corey cc Messrs. R. B. Chapman R. C. Hellwig . H. S. Bergen As you know, Messrs. Bergen, Chapman, Hellwig and Stapleton have been designated an ad hoc MICC committee to coordinate the cor porate Monsanto policy of continuing sales of PCB-containlng products only to customers whose intended use is as a dielectric fluid in the manufacture of transformers and capacitors, and provided each executes a meaningful hold harmless agreement. This same dielectric program has recently been extended to a small group of customers using PCB fluids in the manufacture of closed switch gears, electric magnets and hermetically sealed electric motors. ' In our original transformer/capacitor program, after much con sideration, including a review of pending litigation._we o or o "i ' i d that for our hold harmless to be meaningful, we shou 1 ^ ' j i no .that the indemnlfylng customer shou 1 d have a net; v:o r t n o? ,- J ,010.000 or 10 , -J . - H - - 12~:- ^,>1 - m n im+* . WJ.. i <* Ji^i >i i -- i > Hh ' '-> .y ; ^ * - --t-:vi m i nT--V<i * ; mj these levels was not easy and reflected a consensus o. Vmving at -he combined judgments of the committee members. I; .abiishir.r; these criteria we then felt .exposure .whoth^ a c>']?r- p- nvrrnases ? ^^ ' Q"* ** is^r-^ CL material from us if the fluid were to escaoe to the environment. In attempting to decide whether we should require the same levels of net worth or insurance from customers engaged in the switch gear, magnet and motor manufacture, the additional thought given the matter suggested that while the potential for damage from a spill might be equally great regardless of the volume of purchases, the. likelihood of an incident would probably be diminished if quantities purchased were small, and the damages sustained might be reduced as well. We felt that if we could verify our thinking in this regard with others, we might reasonably protect Monsanto if we were to require less insurance from customers whose volume of purchases fell below some level. Bob Chapman verified our rationale with underwriters from Travelers. They confirmed our tninking that tr.~y "m;!: -? ^r ' : In dollar amount of for a particular level o: insurance coverage, to companies using a small volume of g3s than companies using a hlrh voicing, and they felt our attempt to make a dls^- tinetion was justified. ~ " J " ' IK-1 0L 003^235 PCB-ARCH0748034 Mr. W R. Corey -2- February 16, 1972 We then ranked all proposed PCB customers (transformers, capacitors, switch gears, magnets and electric motors) in descending order of purchase volume for both 1971 and 1970, a copy of which is attached. On review of this data, JLt seemed 200,000 rounds per vear of pur chases was a loglca 1 breakpoint; above vnich to request 310,"000,000 ~ofrTh surahce anet celo-? which 1.^7000.000 of coverage ought to be enough. . " -- The committee also considered the possibility of reducing the requirements for net worth in some relationship to the reduced level of insurance coverage being required. It was felt this over complicated the criteria, and that below $50,OOfh00.0._ret wortji. v;e j?LC>ul_d Look to_Jnsuranc.e for protection, and that the risk to pound usage relationship Quid be our criteria for requiring -110,000,000 or .GOO, cover^. p^e Units . The committee realizes the extreme difficulty in supporting factu ally that 200,000 pounds/year is the absolutely correct breakpoint, that $5,000,000 is the foolproof level of insurance, or that there is real distinction between purchasing 199,000 pounds per year and purchasing 201,000 pounds per year. Again our decisions reflect a consensus of our judgments. We assumed, also, ,wa_ woulp ..Hevlew on a case bv case basis any particular sithat_ fell loi5i pear, marnot and motor customer, v-3 1 ""to those transformer r.r.ei cuy:rmers who /..'ere origina-Liy advised of cur requirement of 010.000.COO In insurance^ ` k We, therefore, recommend for approval a revision of our original policy. The new policy would require from all PCB dielectric fluid customers (whether manufacturers of transformers, capacitors, switch gears, magnets or motors) that. If their; net_worth were less .than $50^000.000. -they supoort the ir 1 r.de r n: tv v;ith $10, CO0, '.-00 of insurance if their purchases are to re 200.000_.p_Qi;nd3..-Q-r_.:~io.re per year, or that they support their indemnity with 05.000,COO of insurance if their purcnases are to be less Chan ^00,000 pounds per year. ' " **" Can you advise us if we are authorized to proceed in this manner. If clearance is given to do so. we will advise &ll.._trars former and capacitor ma.rufuctuners previouslv err tec.;~~ -r.-rL,-_e_nunc ~~ ~es f>feTbB c^r ar mat cur_.r^t.nciTare cr^y (or ,f)5ruj.0.000 of insurance. If it is felt the distinction we are attempting to draw is not appropriate; we will continue to require net worth of $50,000,000 or $10,000,000 of insurance from all customers. JFS/mm Attachment '*y\ QjLf tfhn F. Stapleton 1 (or the Committee 03*2i6 PCB-ARCH0748035