PFAS 'forever chemicals': The next asbestos for insurers?
Regulators and insurers are still figuring out the extent of the damage, harm, liability and costs associated with per- and polyfluoroalkyl substances.
Throughout the insurance industry, the nation and even world, the health risks and liabilities surrounding per- and polyfluoroalkyl substances (“PFAS”) are rising at a fever pitch.
In use since the 1940s, PFAS consists of approximately 4,000 separate chemicals and compounds. They’ve been widely used in such products as non-stick cookware (Teflon), floor wax, fabrics, coatings, firefighting foams, soap, architectural resins, cosmetics, sandwich wrappers and a vast number of consumer products.
These chemicals have been so immersed in mainstream consumerism that it’s likely “most people in the U.S. have one or more PFAS compounds in their blood,” says Matt Burns, leader of contaminated land services at WSP USA.
Since the development and implementation of this ubiquitous compound, PFAS use has become more suspect as its negative effects increasingly come under the public spotlight.
Within the last decade, numerous health and environmental groups have raised concerns about these “forever chemicals,” so called because of their long-term resilience and resistance to breaking down naturally. PFASs are steadily rising from the ranks of “emerging contaminants” to the “emerged” category because of their prevalence and the growing awareness of their toxicity and potential hazards.
For instance, recent scientific research has linked PFAS to such health concerns as low-infant birth weight, immune system weakness, cholesterol increases, cancer and thyroid problems due to their ability to bio-accumulate in the bodies of living things for years and consequently grow in concentration much like mercury in fish.
Regulatory and insurance concerns
One of the biggest problems facing today’s insurance carriers and property owners is that until recently, the testing of PFAS and related constituent contamination levels was not part of the required historical sampling at chemical plants, manufacturing facilities, airports, fire stations or military bases. This is mainly due to the Environmental Protection Agency’s emphasis on known hazards; PFAS only recently emerged into this category.
To further complicate the issue, the EPA has since demanded the retesting of sites for PFAS and Perfluorooctanoic acid (PFOA) contaminants. As a result, many environmental insurance markets are now including PFAS exclusions in their policies as precautions against the eventual passage of established state and federal PFAS regulations.
As for the environment, the latest remediation techniques are repeatedly uncovering new PFAS exposures in both groundwater and soil to create a continuing flow of concerns.
What are the next steps for identifying and combating potential PFAS threats, health risks and environmental concerns? The truth is — and this is the really scary part — no one really knows.
Nearly every industry, government agency and complex are still on the ground floor when it comes to figuring this out. That’s because no one will be immune to PFAS hazards, exposures and liability. Look around: Nearly every industrial or commercial site is likely contaminated in one way or another.
In addition to the environmental concerns and health problems, the legal implications are staggering since no one knows where the official liability will start and stop. Companies like 3M and DuPont are already defending product liability and environmental lawsuits. Numerous utilities nationwide are facing claims surrounding the quality and contamination of local drinking water.
Both state and federal regulating bodies also are initiating the next wave of legislation. In early 2019, the U.S. EPA released a PFAS Action Plan that designated related constituents, Perfluorooctanoic acid (PFOA) and Perfluorooctanesulfonic acid (PFOS), as hazardous chemicals, while also issuing a drinking water health advisory that sets 70 parts per trillion as a maximum contamination level. Multiple bills concerning PFAS restrictions are also currently under evaluation in the U.S. Congress, but to date have not been adopted.
Dissatisfied with the present array of guidelines, 17 separate states are now moving to adopt stricter guidelines to address cleanup requirements, drinking water safety and/or use prohibitions/restrictions. For example, Connecticut has established an Interagency PFAS Task Force charged with the development of guidelines that minimize health risks, future contamination issues and cleanup scenarios. And the Vermont Agency of Natural Resources has also mandated the testing of all public and non-community water systems for PFAS by December 2019.
Planning for the inevitable
As a result, risk management strategies and the proper planning procedures should be underway for such insureds as water treatment plants, refineries, airports, military bases and manufacturing operations. Any company, business or facility that either used or distributed these harmful chemicals is facing financial risk.
PFAS coverage options
Fortunately, the insurance marketplace is responding to these conditions with policy forms that are evolving to protect the insureds of closed sites, many of whom have even received No Further Action (NFA) letters. This includes re-opener liability coverage for locations that are being required to retest by state environmental agencies for potential PFAS groundwater and soil contamination.
Under these conditions, as a key risk transfer tool, Pollution Legal Liability (PLL) coverage forms are becoming increasingly valuable. This coverage can financially manage the pollution liability risks associated with on- and off-site clean-up and remediation expenses as well as third-party bodily injury, property damage, defense expenses and known pollution conditions identified in contaminated property transfers.
In addition, with the threat of PFAS claims clearly rising, environmental insurance carriers are also adding PFAS exclusions on all new and renewal quotes for properties that are suspected of using PFAS or might have been exposed to the PFAS from neighboring properties.
Foreseeing the unknown
An informal poll recently performed by RT Specialty found that brokers, agents and insurance companies are most concerned by the unknown. The truth is that many risks can be adequately addressed and handled as long as they’re predictable and foreseen.
However, the greatest and most costly pitfalls from an insurance standpoint often surround the next array of unexpected threats, catastrophes and exposures. Is the next asbestos here and if so, who will be affected? How bad will it be? And what will it take to undo the damage?
Again, no one is quite sure where the PFAS issue is headed. Testing is still in the developmental stages. Many of the laws regulating their use, cleanup and the potential exposures are now being formed. The only sure thing is that the claims and liability issues are coming, and they’re sure to be costly.
Other challenges surround the federal, state and local governments legislating this space. As of now, a clear-cut pathway for universal standards does not appear likely. Several states are presently developing guidelines that are demonstrably stricter than those proposed by Congress or even the EPA.
Where does that leave the insurance industry?
We are in the midst of uncertainty in the face of questions that may take years to properly sort out. In the meantime, carriers must continue to keep an eye on the known. That means covering insureds that have done their due diligence by sampling sites for PFAS and excluding locations that have not been previously tested for PFAS contamination.
Even then, the industry is still figuring out the extent of the damage, harm, liability and costs from an extremely toxic exposure now thought be “the next asbestos,” or worse.