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 [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]