Locating Insurance Coverage for “Forever Chemicals”
Amid Expanding Risks Related to PFAS, Businesses May Find Protection in Historical Policies
Whether your enterprise finds itself on the hook for a legacy chemical cleanup or is facing litigation from residents, businesses or municipalities affected by contaminated drinking water, manufacturing processes, products or property, there may be an opportunity to find applicable commercial insurance coverage to help manage related financial consequences from per- and polyfluoroalkyl substances (PFAS) chemicals.
U.S. Environmental Protection Agency (EPA) regulations governing the use of PFAS, processes, health effects and exposure are prompting environmental compliance. The applicability of commercial insurance to meet these mandates is not new. Beginning in the 1980s, historical liability insurance policies came into play with respect to potentially responsible parties with environmental liabilities associated with Superfund site remediation and cleanups. Their coverages were also effectively tapped by insureds facing asbestos-related litigation and other exposures where problems could be traced to business activity conducted in the past.
Many now believe that mounting exposures may make PFAS “the next asbestos.” Indeed, a new wave of litigation involving PFAS has businesses looking into protection that may have been provided under historical insurance policies of their companies, predecessor firms, or subsidiaries they gained through acquisition or merger.
Although payouts may be unlikely to come from any of your current insurance policies, it may be possible to obtain recoveries from historical commercial general liability policies – whose expiration dates may have been many years or even decades ago, but their “occurrence” coverage wording might mean available limits can apply to current or future obligations.
Tightening regulatory framework for PFAS
Notably, during the past several years, the U.S. legal and regulatory frameworks pertaining to PFAS have been tightening. At the start of 2021, the EPA created a strategic roadmap articulating its “whole of agency” commitment to “safeguard public health, protect the environment, and hold polluters accountable” with respect to PFAS. “In October 2023, EPA published a final rule” … “under the Toxic Substances Control Act (TSCA)” requiring “all manufacturers (including importers) of PFAS and PFAS-containing articles in any year since 2011 to report information to EPA on PFAS uses, production volumes, disposal, exposures, and hazards. The rule became effective as of Nov. 30, 2023 and applies to the reporting year beginning Jan. 1, 2024.”
The rule is the latest initiative on EPA’s roadmap for PFAS, which provides a timeline of specific actions to research and assess dangers of different types of PFAS; inform and engage the public with respect to the presence and dangers associated with PFAS; engage with stakeholders, including government entities and industry; restrict the use of harmful PFAS; and accelerate the cleanup of PFAS-related contamination with a focus on disadvantaged communities.
In 2022, the EPA zeroed in on PFAS in drinking water, updating standards for levels of certain PFAS chemicals and allocating $1 billion in initial funding from the bipartisan Infrastructure Act to assist communities in related cleanups of their drinking water supplies.
Prior to its final rule on PFAS, EPA indicated it will make PFAS ineligible for “low volume” or “low release” exceptions under the Toxic Substances Control Act, which reflects EPA’s focus on preventing additional PFAS from entering the environment altogether.
Groundswell of litigation
Since 2005, there have been 6,400 PFAS-related lawsuits. In June 2023, three chemical companies – Chemours Co., DuPont de Nemours Inc and Corteva Inc. – reportedly reached an agreement in principle to settle claims that they contaminated U.S. public water systems with PFAS for $1.19 billion.
The three companies are among numerous chemical manufacturers facing thousands of lawsuits across the U.S. over their alleged role in polluting drinking water and the environment with PFAS. Subsequently, 3M agreed to a $10.3 billion settlement involving contamination of many public drinking water systems with various PFAS from firefighting foam and the manufacture of household products.
PFAS contamination: A widespread problem
Known as “forever chemicals” because they don’t break down easily, PFAS have been widely used for several decades dating back to the 1950s in the manufacture of firefighting foams, nonstick cooking products, fast-food packaging, candy wrappers, water-resistant clothing, shampoos, dental floss, nail polish, stain-resistant carpets, among other consumer and industrial products. While uses of the chemicals are widespread, one area in particular driving regulation is drinking water.
As medical research into PFAS continues, some of the more than 12,000 chemicals classified as PFAS have been linked to serious health effects, including certain types of cancer, immunological issues, and hormonal problems.
Furthermore, the widespread use of these chemicals over many decades has made them ubiquitous; varying levels have been found in human blood serum, fish and wildlife, surface water, groundwater, drinking water, rainwater, soil, sediment, ice caps, outdoor and indoor air, plants, and animal tissue across the globe.
In 2021, the EPA’s Office of Water issued a preliminary report examining five industry sectors responsible for generating various PFAS: organic chemicals, plastics, and synthetic fibers; manufacturing; metal finishing; pulp, paper, and paperboard manufacturing; textile mills; and commercial airports.
Subsequently, in July 2023, a new study by the U.S. Geological Survey (USGS) found the presence of PFAS in 45 percent of U.S. tap water. According to the study, concentrations are heaviest in water supplies in urban areas, particularly around sites where PFAS were manufactured, stored, or disposed.
As the EPA continues to ramp up efforts to reduce and eliminate the presence of harmful PFAS in U.S. water supplies and the environment, industries involved in the manufacture, application, storage and disposal of these chemicals are increasingly being held responsible for their environmental and health impacts, as well as for the cost of remediation.
Engaging insurance archaeologists to find coverage for PFAS exposure
While certain types of industries, such as construction and environmental remediation, that purchased stand-alone environmental impairment insurance may have been able to obtain some protection against exposures related to PFAS, their coverage may be limited with respect to the overall risk.
For the various industries directly involved in generating or utilizing PFAS, the most practical route for finding coverage involves conducting a diligent search of their past insurance policies. In many cases, historical policies that pre-date the widespread environmental exclusions in commercial general liability policies implemented in the 1990s may offer a more robust source of protection.
Consider, for example, a commercial airport that generated PFAS contamination based on its use of firefighting foam dating back to the early 1970s. In its quest to find insurance coverage for its exposure, the airport retained the services of an insurance archaeologist, which began the engagement by conducting an internal records search.
The search identified the airport’s former insurance broker, who was able to produce records verifying the airport’s insurance. Next, a series of interviews were conducted with the airport’s past risk management personnel who were able to help locate four of the airport’s insurers, one of which had an absolute pollution exclusion in its CGL policy. With the assistance of the insurance archaeologists, the airport tendered the claim and the three remaining carriers agreed to participate in the defense and remediation.
As litigation over PFAS continues to expand throughout the U.S., businesses facing legal action for personal injury and cleanup costs may be able to obtain recoveries by researching and accessing their historical policies. Whether the liabilities arose from their own actions or those of acquired or merged subsidiary or predecessor firms, the use of an insurance archaeologist can review protection available under existing insurance programs and use disciplined research to uncover historical policies that might be applied to current and anticipated future liabilities.