Environmental Liability

This Environmental Underwriter Wants You to Take PFAS Seriously

Toby Smith of Ironshore Environmental explains how the market should react to this emerging contaminant, and why it’s important to stay disciplined.
By: | October 15, 2018 • 6 min read

Polyfluoroalkyl substances (PFAS) are the next big environmental threat. The man-made chemicals, which resist degradation and can persist in the environment for decades, have already been alleged to cause a variety of health impacts, including cancer. Used in everything from non-stick cookware, grease-resistant packaging, textile stain repellent and firefighting foams, PFAS were used heavily by manufacturers for about 50 years.


Now that the threat to public health is known, regulation is inevitable. Class action litigation has already yielded multimillion-dollar verdicts.

But much is still unknown, including the severity of the chemicals’ impact on health and the extent of litigation exposure borne by manufacturers, product distributors, waste disposal and any party in the PFAS supply chain.

That makes it difficult for environmental insurers to know exactly what to make of this risk. We spoke with Toby Smith, president, Ironshore Environmental, to find out how environmental underwriters are reacting.

R&I: What’s your approach to underwriting facilities with PFAS exposure?

Toby Smith: The first step is going through and identifying all of our insureds who have exposure to PFAS, which could include paper mills, food packaging plants, airports, landfills and smaller manufacturers.

Certain industries have higher exposure, but we’re not going to put a blanket exclusion on those sectors. We don’t want to lose business because we decided to exclude PFAS on a site that really doesn’t need an exclusion. We’re making sure we don’t overreact, while still taking this very seriously.

We’ll look at each account independently and decide if the exposure warrants an exclusion. Some will, some will not.

R&I: What factors play into your decision? How will you determine if an exclusion is necessary?

TS: We start with the assumption that no changes or exclusions are necessary. We look at traditional environmental data and other factors that could minimize or maximize the PFAS exposure. One factor to consider is where a facility is located in relation to sensitive receptors. Are they near drinking water intake for utilities? Are they near heavy residential areas? Or bodies of water that can transport the chemical over long distances where they could impact drinking water? One of our goals is clearly to not overreact to the exposure and amend coverage where it isn’t necessary.

What I would suggest to insureds is that the more open they are, the more information they provide, the better able we are to take a more open stance in terms of how much risk we can accept and what we have to exclude.

Toby Smith, president, Ironshore Environmental

We’ve had cases where we asked, ‘Have you ever used PFOA, PFAS or related chemicals?’ And the answer is ‘I don’t think so.’ That makes it harder for us to get to a point where we are comfortable accepting that risk. Having more data allows us to structure something that is less prohibitive.

R&I: Is there any new product opportunity here for the environmental market?

TS: I don’t think so, because there is still so much uncertainty. We still don’t know the extent of the litigation exposure for properties that used these chemicals for decades. Is it $10 million? Tens of millions? We’ll find that out in the coming years as more lawsuits roll in. Right now, it would be irresponsible and dangerous for us to try to protect clients from that exposure if there is material known exposure or contamination.

To be honest, one self-serving objective in talking to people about PFAS is trying to make sure that all of our competitors are taking it as seriously as we are, and it appears that they are.

R&I: Why is that?

TS: Because to a certain extent, if there are a lot of classes exposed to this and people aren’t taking it seriously, it will be hard for us to write business in those classes. There’s always a new entrant into our market who might not look at some of these really systemic issues.


If they don’t take a careful and thoughtful approach and don’t exclude the exposure where it is warranted, then their product will look much better to insureds and will certainly take opportunity away from us. But it will be very painful for both parties in the long run. For perspective, it is important to note that very few of our policies so far have required changes in coverage due to the PFAS exposure, but those limited number of exposed policies present material financial risk if not properly managed.

I would like other environmental insurers to do exactly what we’re doing — educate underwriters on PFAS, how they’ve been used and their effects on both the environment and people’s health. If we all take a disciplined and technical approach to this issue, it will help ensure stability in the market.

R&I: Because these chemicals were used for so long and are so persistent in the environment, there’s going to be a lot of legacy exposure. How will environmental insurers manage that?

TS: Moving forward, especially on new policies we’re looking at, most of the coverage we provide is claims-made. On a claims-made form, we roll off the exposure when the policy expires so the ongoing exposure only resides in the new policy. That’s a benefit if there’s an overwhelming exposure to PFAS and related chemicals.

On our occurrence-based policies, it’s not so simple. The exposure will remain solely because of the fact that the contamination exists. Most site pollution policies, however, are claims-made.

R&I: The evidence linking PFAS to certain health impacts is still not definitive. How might developments in that arena change your approach?

TS: This issue is being studied uniformly by state and federal agencies alike. There seems to be a consensus that this requires regulation, and we are seeing a massive uptick in both enforcement actions and private litigation, regardless of what any new studies say.

There is enough evidence to suggest this is here to stay. The bigger question will be: How severe are the injuries that will be linked to PFAS?

R&I: What about regulatory standards? The EPA set an advisory level at 70 parts per trillion; what changes from an underwriting perspective if that becomes an enforceable regulation?

TS: I don’t think the fact that the EPA level is only an advisory level affects the way we underwrite. The industry is already evaluating these risks as if there was a comprehensive maximum concentration level established for the individual chemicals.

It’s also important to know that a number of states have already implemented or have announced the implementation of their own standards, many of which are stricter that the EPA advisory level. New Jersey, for example, is moving toward 14 parts per trillion.

There are currently about 15 states that have or are implementing their own maximum concentration levels, but that number is always changing. If there are 15 states today, there could be 20 three months from now. It’s moving very fast.

The absence of regulation also does not hamper plaintiff action. The mere fact that you have a chemical concentration above an EPA advisory level that is associated with bodily injury is enough to pursue toxic tort litigation.

R&I: This is an expansive exposure that could create liability for companies all along the PFAS supply chain. What other types of coverage apply, and what do these insurance markets need to know?

TS: If you’re a distributor of a product containing a chemical in the PFAS family, you would have product liability rather than site pollution liability exposure. You may also have site liability if you purchase a property that previously used PFAS. Under CERCLA and state environmental laws, you’re liable for any contamination on that land, even if it was caused by the previous owner.


In areas where it’s difficult to get coverage because the contamination is a known issue, these parties might have recourse against a historical general liability policy. It will depend on the time frame of the damages and the coverage you had at the time.

I think the general casualty market probably knows less about this issue than the environmental market, but they are just as exposed, because this risk predates pollution exclusions. These chemicals have been used since the 1950s, and robust pollution exclusions didn’t come about until 1985. After 1985, a lot of manufacturers will also have products completed operations exceptions to the pollution exclusion.

There is still a lot of coverage to be found. &

Visit Ironshore.com for all disclaimers

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at kdwyer@lrp.com.

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

High Net Worth Clients Live in CAT Zones. Here’s What Their Resiliency Plan Should Include

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.


Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”


Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.


“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at riskletters@lrp.com.