Max Dorfman, Research Writer, Triple-I
Per- and polyfluoroalkyl substances (PFAS)—a diverse group of man-made chemicals used in a variety of consumer and industrial products—present a new potential liability for insurers as the US regulatory landscape continues to change, with court results indicating that this an issue that will continue to evolve.
PFAS, which have been around since the 1930s, are causing concern because of their ubiquity, as well as their potential to harm people’s lives. They are used in everything from Teflon coatings to food packaging to firefighting foam, due to their ability to resist oil and moisture. These properties are also potentially harmful because they often stay in the human body, never fully breaking down.
Although studies on PFAS are inconclusive, they have been linked to cancer, pregnancy-induced hypertension and thyroid disease. Their pervasive nature means that everyone is likely to have some amount of PFAS in their blood. There are also fears about their presence in the water supply.
“PFAS are water-soluble and dissolve easily in soil,” said Cindy Wilk, Global Environmental Liability Expert, Allianz Risk Consulting at AGCS. “An industrial accident or firefighting incident can result in their release into water sources, leaving local communities vulnerable, but PFAS can also migrate rapidly through groundwater pathways to contaminate areas far from their original source.”
PFAS disputes continue to increase
PFAS litigation has seen tremendous growth over the past 20 years, beginning with a lawsuit against DuPont, the company that makes Teflon. DuPont was accused of contaminating water from a West Virginia facility – resulting in a settlement to provide up to $235 million for medical monitoring of over 70,000 people. Several similar lawsuits have followed.
As of 2021, more than 5,000 PFAS-related complaints have been filed in 40 courts, with 193 defendants in 82 industries.
In addition, the PFAS Action Act of 2021 passed the House and put the Environmental Protection Agency (EPA) on the latest course toward developing new PFAS standards. The law does not include a liability exemption for water and wastewater utilities, even though these entities are not the source of PFAS, causing concern that they will be subject to civil litigation
How can insurance companies react?
Although the Insurance Services Office (ISO) has not developed a PFAS-specific exemption for commercial liability insurance, it is working on a draft exemption, which could be published by the end of 2022. With that process still ongoing are several PFAS-related exemptions. circulates, some as a modification of the overall contaminant exclusion or by establishing a stand-alone PFAS exclusion. Still, insurers must be wary of the potential liabilities, as the Biden Administration’s regulatory focus on PFAS could lead to increased litigation.
Reinsurer Gen Re recommends that insurers:
- Inventory previously guaranteed risks;
- Carefully consider new risks in submissions; and
- Stay abreast of PFAS, both in terms of scientific developments and the litigation it creates.