Per- and PolyfluoroalkylSubstances (PFAS), a diverse group of human-made chemicals used for a variety of consumer and industrial products, are a potential liability for insurance companies. The U.S. regulatory activities continue to change with litigation outcomes indicating that this is an issue that will only get worse.
PFAS have been around since the 1930s. They are a concern due to their widespread use and potential for harming people’s health. Because of their resistance to oil and moisture, they are found in everything from Teflon to food packaging to firefighting foam. They can also be dangerous because they are not completely broken down and remain in the body.
Although studies on PFAS have not been conclusive, there are links to thyroid disease, pregnancy-induced hypertension, and cancer. Because of their widespread presence, everyone is likely to have some PFAS in his or her bloodstream. They are also feared to be present in water supplies.
Cindy Wilk, Global Environmental Liability Expert at Allianz Risk Consulting at AGCS, stated that PFAS are water-soluble and dissolve easily in soil. “PFAS can be released into water sources by an industrial accident or firefighting event, making local communities more vulnerable. However, PFAS can also quickly migrate through groundwater pathways to contaminate faraway areas.
PFAS litigation continues its rise
PFAS litigation has grown tremendously in the last 20 years. The first lawsuit against DuPont, which is the company that makes Teflon, was filed in 1998. DuPont was charged with contaminating water at a West Virginia plant. The settlement provided up to $235,000,000 for the medical monitoring of more than 70,000 people. There have been several similar lawsuits.
More than 5000 PFAS-related complaints were filed in 40 courts with 193 defendants from 82 industries as of 2021.
In 2021, The PFAS Action Act was passed by the House. This set the Environmental Protection Agency on a recent course toward developing new PFAS standards. Despite the fact that water-wastewater utilities are not the source of PFAS, the act does not provide a liability exemption. This raises concern about them becoming the targets of civil litigation.
How can insurance companies respond?
The Insurance Services Office (ISO), although it has not yet produced a PFAS-specific exemption for commercial liability policies. However, work continues on a draft exclusion that could be published in the latter half of 2022. There are a number of PFAS-related exclusions that are still in development. Some include modifications to the Total Pollution Exclusion or establishing a standalone PFAS exclusion. Insurers must be aware of potential liabilities as the Biden Administration’s regulatory focus on PFAS could result in more litigation.
Reinsurer Gen Re recommends insurers:
- You should take stock of any previously underwritten risks.
- Consider all new risks when submitting; and
- Keep up-to-date with PFAS news, including scientific developments as well as the litigation it spawns.