The cleanup and liability issues linkedto per- and polyfluoroalkyl substances ("PFAS") couldbecome 'the next asbestos' in terms of claims and costs. (ALM Mediaarchives)

Throughout the insurance industry, the nation and even world,the health risks and liabilities surrounding per- andpolyfluoroalkyl substances ("PFAS") are rising at a feverpitch.

In use since the 1940s, PFAS consists of approximately 4,000separate chemicals and compounds. They've been widely used in suchproducts as non-stick cookware (Teflon), floor wax, fabrics,coatings, firefighting foams, soap, architectural resins,cosmetics, sandwich wrappers and a vast number of consumerproducts.

These chemicals have been so immersed in mainstream consumerism that it's likely "mostpeople in the U.S. have one or more PFAS compounds in their blood,"says Matt Burns, leader of contaminated land services at WSPUSA.

Since the development and implementation of this ubiquitouscompound, PFAS use has become more suspect as its negative effectsincreasingly come under the public spotlight.

Within the last decade, numerous health and environmental groupshave raised concerns about these "forever chemicals," so calledbecause of their long-term resilience and resistance to breakingdown naturally. PFASs are steadily rising from the ranks of"emerging contaminants" to the "emerged" category because of theirprevalence and the growing awareness of their toxicity and potential hazards.

For instance, recent scientific research has linked PFAS to suchhealth concerns as low-infant birth weight, immune system weakness,cholesterol increases, cancer and thyroid problems due to theirability to bio-accumulate in the bodies of living things for yearsand consequently grow in concentration much like mercury infish.

Regulatory and insurance concerns

One of the biggest problems facing today's insurance carriers and property owners is thatuntil recently, the testing of PFAS and related constituentcontamination levels was not part of the required historicalsampling at chemical plants, manufacturing facilities, airports,fire stations or military bases. This is mainly due to theEnvironmental Protection Agency's emphasis on known hazards; PFASonly recently emerged into this category.

To further complicate the issue, the EPA has since demanded theretesting of sites for PFAS and Perfluorooctanoic acid (PFOA)contaminants. As a result, many environmental insurance markets arenow including PFAS exclusions in their policies as precautionsagainst the eventual passage of established state and federal PFASregulations.

As for the environment, the latest remediation techniques arerepeatedly uncovering new PFAS exposures in both groundwater andsoil to create a continuing flow of concerns.

What now?

What are the next steps for identifying and combating potentialPFAS 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 stillon the ground floor when it comes to figuring this out. That'sbecause no one will be immune to PFAS hazards, exposures andliability. Look around: Nearly every industrial or commercial siteis 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 theofficial liability will start and stop. Companies like 3M andDuPont are already defending product liability and environmentallawsuits. Numerous utilities nationwide are facing claimssurrounding the quality and contamination of local drinkingwater.

Both state and federal regulating bodies also are initiating thenext wave of legislation. In early 2019, the U.S. EPA released a PFAS Action Plan that designatedrelated constituents, Perfluorooctanoic acid (PFOA) andPerfluorooctanesulfonic acid (PFOS), as hazardous chemicals, whilealso issuing a drinking water health advisory that sets 70 partsper trillion as a maximum contamination level. Multiple billsconcerning PFAS restrictions are also currently under evaluation inthe U.S. Congress, but to date have not been adopted.

Dissatisfied with the present array of guidelines, 17 separatestates are now moving to adopt stricter guidelinesto address cleanup requirements, drinking water safetyand/or use prohibitions/restrictions. For example, Connecticut hasestablished an Interagency PFAS Task Force charged with thedevelopment of guidelines that minimize health risks, futurecontamination issues and cleanup scenarios. And the Vermont Agencyof Natural Resources has also mandated the testing of all publicand non-community water systems for PFAS by December 2019.

Planning for the inevitable

As a result, risk management strategies and the proper planningprocedures should be underway for such insureds as water treatmentplants, refineries, airports, military bases and manufacturingoperations. Any company, business or facility that either used ordistributed these harmful chemicals is facing financial risk.

PFAS coverage options

Fortunately, the insurance marketplace is responding to theseconditions with policy forms that are evolving to protect theinsureds of closed sites, many of whom have even received NoFurther Action (NFA) letters. This includes re-opener liabilitycoverage for locations that are being required to retest by stateenvironmental agencies for potential PFAS groundwater and soilcontamination.

Under these conditions, as a key risk transfer tool, PollutionLegal Liability (PLL) coverage forms are becomingincreasingly valuable. This coverage can financially manage thepollution liability risks associated with on- and off-site clean-upand remediation expenses as well as third-party bodily injury,property damage, defense expenses and known pollution conditionsidentified in contaminated property transfers.

In addition, with the threat of PFAS claims clearly rising,environmental insurance carriers are also adding PFAS exclusions onall new and renewal quotes for properties that are suspected ofusing PFAS or might have been exposed to the PFAS from neighboringproperties.

Foreseeing the unknown

An informal poll recently performed by RT Specialty found thatbrokers, agents and insurance companies are most concerned by theunknown. The truth is that many risks can be adequately addressedand handled as long as they're predictable and foreseen.

However, the greatest and most costly pitfalls from an insurancestandpoint 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 toundo the damage?

Again, no one is quite sure where the PFAS issue is headed.Testing is still in the developmental stages. Many of the lawsregulating their use, cleanup and the potential exposures are nowbeing formed. The only sure thing is that the claims and liabilityissues are coming, and they're sure to be costly.

Other challenges surround the federal, state and local governments legislatingthis space. As of now, a clear-cut pathway for universalstandards does not appear likely. Several states are presentlydeveloping guidelines that are demonstrably stricter than thoseproposed 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 thatmay take years to properly sort out. In the meantime, carriers mustcontinue to keep an eye on the known. That means covering insuredsthat have done their due diligence by sampling sites for PFAS andexcluding locations that have not been previously tested for PFAScontamination.

Even then, the industry is still figuring out the extent of thedamage, harm, liability and costs from an extremely toxic exposurenow thought be "the next asbestos," or worse.

John Heft ([email protected]) is senior vicepresident and Brittany Negron ([email protected]) is a consultant in RTSpecialty's National Environmental and Construction ProfessionalLiability Practice.

RT Specialty regularly posts stories and headlines relatedto PFAS news in its corporate blog.

See also:

• The emerging risks in environmentalinsurance
• Environmental insurance market update2019
• 4 questions to identify the risk ofpollution-related D&O exposure
• Identifying and managing pollution-relatedexposures