Editors' Summary: In 1983, the Minnesota Legislature enacted the country's most aggressive and comprehensive state Superfund statute, the Minnesota Environmental Response and Liability Act (MERLA). The statute establishes an extensive private cause of action that includes joint and several liability for economic and personal injury, broadly defined; relaxes standards of proof of causation; and applies this liability retroactively.

Recently, there has been a strong move in the legislature to amend MERLA to remove its most aggressive features. One of the most vigorous criticisms has been that insurance will be unavailable to cover liability for hazardous waste exposure. The authors use the tools of economic analysis to examine the Act and the reasons that have been put forth for amending it. They conclude that MERLA provides for greater safety from hazardous waste disposal than other statutes, and in a responsible and cost-effective manner. Though it will impose greater costs on disposers and generators of hazardous wastes, these costs provide appropriate incentives for responsible behavior. Further, there is no reason to believe that insurers cannot evaluate the risks involved and issue coverage in the same way as other novel risks have been covered in the past.