Environmental Risk

The ‘Next Big Environmental Threat’ Is Already Here

PFAS have lingered in the water for decades, but regulators are just now realizing their potentially dire effects on human health. Litigators aren’t waiting to hold manufacturers responsible.
By: | September 28, 2018 • 9 min read

The ‘Next Big Environmental Threat’ has been written about before. We were worried about the insidious risks of nanoparticles, for example, and about pharmaceuticals in our water and food supply. But neither of those concerns ever “took off” to the effect that they drew high-profile lawsuits, regulatory standards or reactions from environmental liability insurers.


That is not the case with per- and polyfluoroalkyl substances, or “PFAS.”

“PFAS are a large family of man-made chemicals with unique physical properties. They are water- and oil-repellent, extremely heat-resistant and have surfactant properties. They’re also extremely stable,” said Chris DeCarlo, senior product manager, Environmental Risk Group, The Vertex Companies.

Those properties make PFAS applicable to a wide range of consumer goods.

“They’re used in grease-resistant food packaging like pizza boxes and hamburger wrappers, in nonstick cookware, in water-resistant materials like jackets, tents and tarps, in spray-on stain resistant solutions, and in aqueous firefighting foams,” DeCarlo said.

Manufacturers started using PFAS in these products around the 1950s, and while the goods themselves are safe, the chemicals have made their way into the atmosphere and into groundwater via factory emissions and waste disposal. Communities with prolonged exposure to environmental PFAS have experienced a number of adverse health impacts, including several forms of cancer.

This is what has attracted the attention of both the EPA and plaintiffs’ attorneys.

Regulation Review

On May 22 and 23 of 2018, the EPA hosted a National Leadership Summit in Washington, D.C., with these stated goals: To share information about the risks associated with PFAS; to develop monitoring and cleanup techniques; to outline short-term actions to address challenges currently facing affected communities; and to develop communication strategies. The agency also announced plans to develop a PFAS Management Plan for release later this year.

Chris DeCarlo, senior product manager, Environmental Risk Group, The Vertex Companies

The EPA has been studying the health impact of PFAS since the 1990s, when the chemicals were first found in the blood of U.S. populations. In 2000, manufacturers voluntarily agreed to phase out production. But, “this class of chemicals is very persistent and resistant to environmental degradation,” said Chris Carleo, technical director, The Vertex Companies.

“It’s unknown how long they last in the environment, but studies have shown that PFAS in the blood have a half-life of nine years.”

Though states are free to establish their own rules around testing and remediation, the EPA issued a non-enforceable Lifetime Health Advisory for PFAS in drinking water at 70 parts per trillion (ppt) only in 2016, revising it down from a 400 ppt standard set in 2009. So far, at least 15 states have used the revised guidance to set enforceable clean drinking water standards.

“State-by-state regulations vary for testing. Right now, there’s a very large patchwork of regulation. Some states are setting standards and telling people they have to do some type of remediation; others are waiting to see what happens,” said Greg Sampson, vice president, The Vertex Companies.

“In some cases, environmental regulatory agencies that are not state agencies are requiring remediation even though the state doesn’t. It depends on where you are and who’s in charge of your facility.”

A Web of Liability

On the top tier of liability are the manufacturers that actually produce PFAS and those that utilize the chemicals in the production of consumer goods.

“Some of these materials were utilized to assist in product manufacturing — i.e. non-stick cookware — then baked away, and they go into the smokestacks and into the atmosphere. Industrial emissions of this nature were historically not regulated,” Carleo of Vertex said.

“The chemicals can also be discharged directly into local sanitary sewers in liquid form when mixed in solution within the manufacturing waste product sanitary discharges. Since there was no regulation around PFAS, treatment plants didn’t treat it. When separated out into biosolids, they can also be dumped in a landfill or utilized as agricultural fertilizer. From there they can leech into the groundwater and get into the food supply,” he said.

Some disposal sites and nearby communities have been exposed to roughly 50 years’ worth of accumulated contamination.

Users of products containing PFAS can also face liability for failure to dispose of waste properly. This primarily applies to airports, which use aqueous firefighting foam to extinguish fuel fires, and military bases, and dispense it during training exercises.

“State-by-state regulations vary for testing. Right now, there’s a very large patchwork of regulation. Some states are setting standards and telling people they have to do some type of remediation; others are waiting to see what happens.”  — Greg Sampson, vice president, The Vertex Companies.

“A good number of emergency response organizations for municipal and federal airports have used these firefighting foams to train and whenever they had a fire that needed more than just water. Sites that store this material can also experience spills or leaks. It gets into the groundwater at these sites as well,” said Toby Smith, president, Ironshore Environmental.

Finally, water utilities, treatment plants and landfill operators could face legacy exposures for lack of appropriate testing and remediation. “Treatment plants that don’t get rid of PFAS allow those chemicals to get fed into rivers, streams and other bodies used for drinking water which can affect a large geographical area,” Smith said.

According to a report by the Environmental Working Group (EWG), published in July 2018, “there are 172 known PFAS contamination sites in 40 states.” Additionally, “an EWG analysis of unreleased data estimated that more than 1,500 drinking water systems, serving up to 110 million Americans, may be contaminated with PFOA, PFOS and similar fluorinated chemicals.”

Landmark Litigation

The web of accountability is expansive, but so far, landmark lawsuits have targeted the center of the web — PFAS manufacturers. In 2010, Minnesota’s state attorney general sued 3M for $5 billion, alleging the company ignored the health risks associated with PFAS and irresponsibly disposed of the chemicals by dumping them in a landfill near Minneapolis. The attorney general alleged the chemical caused health problems in nearby communities, including cancer and premature birth.


The case eventually settled for $850 million, but more individual suits against 3M in other communities have since been filed. In July 2018, Michigan’s governor also asked that state’s attorney general to sue 3M for contaminating waterways in 15 communities.

In 2001, thousands of residents surrounding a Dupont plant in Parkersburg, W.Va., filed a class action against the company, claiming it leaked perfluorooctanoic acid (PFOA) into the drinking water, which was subsequently linked to six forms of cancer. That case settled in February 2017 for $671 million.

“Those are the two high watermarks so far, and those settlements appear to have already inspired a lot of PFAS-related litigation,” said Daniel Narvey, an attorney with Godfrey & Kahn S.C.

“The first wave of litigation is targeting the manufacturers actually producing the chemical, but the second wave could be more focused on the entities using them in consumer products,” said Ned Witte, attorney and shareholder in Godfrey &Kahn’s Environmental Strategies Practice Group.

“Another group that may find themselves entangled in this will be municipalities, because residuals of these products find their way into stormwater or waste water discharges, and that’s what treatment and sewage plants are processing,” he said.

The federal government and some state agencies are in the process of cataloging the most likely sites of PFAS releases — primarily but not exclusively focusing on airport and military installations that have discharged firefighting foams. The implications of being on this list — as far as being required to test, monitor or remediate lingering contamination, or be targeted by litigators — are not totally clear.

“That’s why it’s called an emerging contaminant. We’re trying to figure out an appropriate approach to address the issue,” Sampson said.

The Science Behind Health Claims

One reason for the uncertainty is that the scientific evidence linking PFAS to specific health impacts varies. In the Dupont case, the defendants put together a panel of scientists to study any associations between PFOA exposure and disease incidence. They determined that there was a “probable link” with kidney and testicular cancer, ulcerative colitis, thyroid disease, pregnancy-induced hypertension and high cholesterol.

Ned Witte, attorney and shareholder, Godfrey & Kahn’s Environmental Strategies Practice Group

However, more recent studies of communities with PFAS in their blood did not find a statistically significant difference in cancer rates


compared to national trends. In 3M’s case, the Minnesota Dept. of Health said it also did not find unusual rates of cancers.

“There is evidence that PFAS exposure may have adverse health impacts. There’s been some linkage to less scary stuff for the individual like obesity and high cholesterol. From an insurance standpoint, that opens you up to enormous classes. There are more limited findings with respect to more serious conditions such as cancer, but more research is being conducted,” Ironshore’s Smith said.

Clarity may be coming soon; the National Defense Authorization Act of 2017 allocated $7 million to study the health impact of PFAS released in firefighting foams on military bases.

Remediation Requirements

In states that have not set regulations around acceptable PFAS limits in drinking water, there are pros and cons to manufacturers’ decisions to test for it. Addressing elevated PFAS levels demands time, expense and a public acknowledgement of contamination. Choosing to ignore the issue could increase liability exposure in the future.

“In my opinion, those who mitigate the risk now will be in a much better position five to 10 years in the future,” Smith said. At sites where there’s been a known PFAS release, facilities may monitor the levels and watch for migration. Stagnant contaminated water poses no risk to local water supplies.

Manufacturers can collect soil samples and install test wells to collect groundwater samples and determine the direction of flow. “Many of these sites would already have monitoring wells for a variety of reasons,” DeCarlo said. “The relative complexities of cost will have to do with the concentrations in the groundwater to begin with, the size of the area impacted and to what extent the contaminant is [a threat].”

If concentrations are high or the groundwater links to a drinking water supply, facilities should install treatment systems, which can be as simple as activated carbon filters. However, most labs are not equipped to identify concentrations as low as 70 ppt, so the reliability of results may be murky. Finding a suitable lab adds time and expense to the testing process.

Insurance Recovery

Expenses related to PFAS claims can potentially be covered by a pollution policy unless there is a specific exclusion. For now, most buyers can still find adequate coverage despite potential PFAS exposure.


“Once a class of contaminants hits regulators’ radar screens, then more attention is paid, studies are done and ultimately that results in regulations and limitations. Once that’s happened there’s no going back. And carriers will start to specifically exclude PFAS as a pollutant if they hadn’t already,” said Chris Smy, environmental practice leader, Marsh.

“We are starting to see carriers ask questions, particularly if sites have been involved in operations that would have a PFAS exposure or if they’re located in an area where PFAS is an issue. So it’s definitely on the radar of some carriers, but not all.”

Because pollution programs cover multiple years, if there is a regulatory change during the policy period that classifies something as a contaminant that was not considered one before, the policy will still respond to claims triggered by that new contaminant.

“A pollution program can be a very useful way to mitigate something that is not a problem now but could be in the medium-term. In some ways, it anticipates regulatory changes,” Smy said.

Smy said the increased level of attention is enough to spark more claims by residents, special interest groups or businesses. Ironshore’s Smith said the dollars are already piling up.

“Every week there’s a new area impacted by this issue and a new lawsuit,” he said, “but we may not know the full financial impact for another 10 years. It’s still too early to determine how long the tail is.” &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.


Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.

R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.


We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?


Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.


Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now and where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.


More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]