Environmental Insurers: Climate Change Will be a PFAS Liability Multiplier

In the past decade, two landmark lawsuits set the tone for legal actions regarding per- and polyfluoroalkyl substances, or PFAS for short.

In 2010, Minnesota’s state attorney general alleged that 3M ignored the health risks associated with PFAS after the company dumped the compounds in a landfill near Minneapolis. He sued 3M for $5 billion, eventually settling the case for $850 million.

In the other case, residents surrounding a Dupont plant in Parkersburg, W.Va., settled a class action against the company for $671 million in 2017. They alleged that Dupont leaked one type of PFAS, perfluorooctanoic acid (PFOA), into the drinking water. The chemical was subsequently linked to six forms of cancer, spurring the lawsuit.

The success of the 3M and Dupont lawsuits has inspired similar legal actions. In the last ten years, a bevy of lawsuits against companies ranging from chemical manufacturers to the makers of menstrual underwear have come under fire for using PFAS in their products or for contributing to its slippage into our environment.

Colloquially known as “forever chemicals” because of their inability to break down naturally, PFAS have been used in everything from firefighting foam to non-stick cookware and yoga pants. The group of over 5,000 manmade compounds that fall under the PFAS moniker have been linked to a number of medical conditions, including cancer, liver damage, decreased fertility, increased risk of asthma and thyroid disease.

Jamie Langes, assistant vice president, environmental, Philadelphia Insurance Companies

As more research is conducted into the potentially harmful affects PFAS has on the human body, governments are taking steps to regulate how much of the chemical can be in ground and drinking water. This year, the Environmental Protection Agency (EPA) published its final regulatory determinations on PFAS, paving the way for a national drinking water standard as soon as next year.
When that comes, more and more manufacturers could find themselves liable for PFAS contamination.

It’s not just manufacturers who could bear responsibility for PFAS contamination. When PFAS enters the environment, they don’t just stay in one place. Flooding, catastrophic storms and even the everyday movements in the water cycle can move the chemicals around.

Once regulated, the government could fine property owners if PFAS are found in their ground water or on their property since they could plausibly move into nearby environments.  As global climate change continues to cause increasingly stronger and more frequent storms, climate change effectively could push PFAS into more and more environments.

“Everyone is likely to have a PFAS claim moving forward; climate change is only going to continue to exacerbate the frequency and severity as the PFAS issues emerge and evolve,” said Jamie Langes, assistant vice president, environmental, Philadelphia Insurance Companies. “Everyone has an exposure.”

The Connection Between PFAS and Climate Change

Climate can contribute to the contamination of water and soil by PFAS and other pollutants in two ways

In the first scenario, a hurricane or wildfire could cause damage to a manufacturing or warehouse site where PFAS or other toxic chemicals are used and create spillage or release into the surrounding environment.

Catastrophic pollution has been linked to natural catastrophes in the past. In 2017, chemical plants reported that over 365 tons of hazardous chemicals were released into the water, land and air during Hurricane Harvey.

Due to global climate change, storms are occurring more frequently and with greater intensity, making these types of chemicals more likely to continue expanding their presence around the globe.

“PFAS is the monster that’s being fed by climate change,” Langes said. “A lot of scientists are struggling to understand where PFAS are going and how they’re getting there.”

The other way PFAS are moving through the environment is through the movement of water. If a PFAS-infested river floods, its water can seep into the ground, spreading PFAS into a new environment.

“When water migrates, so goes PFAS, and it might migrate to a more contaminated supply exacerbating a current condition, or might accidentally tap into new sources of contaminated water thereby aggregating the pollution condition further,” Langes said.

The chemicals can also move with the water cycle. When water evaporates and condenses into rain, PFAS go with it. One study by scientists with the Integrated Atmospheric Deposition Network of Great Lakes monitoring stations found 38 different PFAS compounds in air and rainwater.

And as a forever chemical, PFAS are difficult to eradicate once they are present in an environment. One of four different types of treatments — granular activated carbon, powdered activated carbon, ion exchange resins or nanofiltration and osmosis — must be applied to water to remove PFAS and make it safe to drink.

“Once it gets in an environment, the environment can’t break it down naturally like it would other chemicals or constituents.  That’s why they are ‘forever chemicals;’ they persist,” Langes said.

How Insurers Are Responding to the PFAS Crisis

The ubiquitousness of PFAS exposure is setting the risk up to be the next asbestos in terms of liability.  While General Liability (GL) policies have already evolved to include total pollution exclusions in order to avoid emerging environmental exposures, the casualty marketplace has begun to draft specific exclusions towards PFAS.

“Every company in the United States could have some exposure to PFAS and litigation as it goes forward in this country,” Langes said.

The potential universality of PFAS contamination makes it challenging for underwriters to price the risk. A task that will only get trickier as climate change spreads PFAS to even more environments.

“It’s getting almost impossible to be able to truly underwrite PFAS, since it’s everywhere,” Langes said. “Speaking for the environmental liability carriers, we are all watching; we’re analyzing; we’re talking about it on industry platforms like R&I. We’re making sure that we are educated as a marketplace group, and that we are cautious moving forward.”

Given the extent of potential PFAS liability, Langes says some environmental carriers are writing exclusions to get the risk off their books entirely.

“Some environmental carriers are putting a complete PFAS exclusion on every single account,” she said.

Given the potential for expanded risk and tightening market conditions, it’s now more important than ever that insureds treat their insurers as a partner in mitigating and financing risk.

“I’m a firm proponent that insurance policies are a partnership. We partner together with clients via the contract provisions to provide a risk management tool Clients give us enough information in order to really assess the risk. And then we choose to accept pieces of that risk or not,” Langes said.

“The more forthcoming a client can be, and the more they rely on a partnership with us, the better insurance can assist them as a risk management tool.”  &