Summary:  A new type of exclusionary endorsement is being made available under the ISO program to address exposures of PFAS chemicals. This is an early introduction to the filing, as the endorsements will not be available until at least May, 2023.

PFAS is the abbreviation for perfluoroalkyl and polyfluoroalkyl substances, which are described by the National Institute of Environmental Health Sciences (NIEHS) as a "large, complex, and ever-expanding group of manufactured chemicals that are widely used to make various types of everyday products." According to the Interstate Technology Regulatory Council (ITRC), some industries and products that incorporate the use of PFAS include, but are not limited to, automobiles, pesticides, cosmetics, food processing, textiles, furniture and household products. While potential health impacts that exposures to PFAS could lead to are still being researched and thus remain uncertain, they have come under scrutiny due at least in part to their environmental presence, because they: 

  • do not break down in the environment,
  • can move through soils and contaminate drinking water sources,
  • build up (bioaccumulate) in fish and wildlife.

The CDC has more information on PFAS under their National Biomonitoring Program, contained in this Fact Sheet. The substances are found in rivers and lakes, and also in many types of land and water animals. .

This discussion provides an analysis of the umbrella PFAS exclusion endorsement, CU 34 54, and the excess liability exclusion endorsement, CX 21 97 The underlying CGL exclusion endorsements were previously introduced and are discussed here.

CU 34 54 Exclusion – Perfluoroalkyl And Polyfluoroalkyl Substances (PFAS)

C.   The following definition is added to the Definitions Section:

"Perfluoroalkyl or polyfluoroalkyl substances" means any: 

  1.  Chemical  or  substance  that  contains  one  or more  alkyl  carbons  on  which  hydrogen  atoms have  been  partially  or  completely  replaced  by fluorine atoms, including but not limited to:
  1. Polymer, oligomer, monomer or nonpolymer chemicals and their homologues, isomers,    telomers,    salts, derivatives, precursor chemicals, degradation products or by-products;
  2. Perfluoroalkyl    acids    (PFAA),    such    as perfluorooctanoic acid (PFOA) and its salts, or   perfluorooctane   sulfonic   acid   (PFOS) and its salts;
  3. Perfluoropolyethers (PFPE);
  4. Fluorotelomer-based substances; or
  5. Side-chain fluorinated polymers; or

2.   Good     or     product,     including     containers, materials,   parts   or   equipment   furnished   in connection  with  such  goods  or  products,  that consists   of   or   contains   any   chemical   or substance described in Paragraph C.1. 

Analysis:

CU 34 54 is an optional endorsement. In brief, this is a broad exclusion endorsement precluding coverage for bodily injury, property damage and personal and advertising injury related exposures associated with the PFAS definition, including any loss, cost or expense arising out of abating, testing for, monitoring, cleaning up, or other related activities, of PFAS by any insured or by any other person or entity.

Even though paragraph C, which adds to the Definition section, is last in the endorsement, it is shown first in this analysis for convenience, since the exclusion is tied directly to these added definitions.

Note the application of the word 'any' as it pertains to perfluoroalkyl or polyfluoroalkyl substances. This broadens the definition to include those substances that may contain even only the slightest number or amount of the described alkyl carbons, and is not limited to those that are named. This is what we would generally term a 'total' or 'absolute' exclusion.

A.   The  following  exclusion  is  added  to  Paragraph  2. Exclusions  of  Section  I  –  Coverage  A  –  Bodily Injury And Property Damage Liability:

2.   Exclusions

This insurance does not apply to:

Perfluoroalkyl And Polyfluoroalkyl Substances 

  1. "Bodily  injury"  or  "property  damage"  which would  not  have  occurred,  in  whole  or  in part,  but  for  the  actual,  alleged,  threatened or suspected inhalation, ingestion, absorption, consumption, discharge, dispersal,  seepage,  migration,  release  or escape   of,   contact   with,   exposure   to, existence     of,     or     presence     of,     any "perfluoroalkyl or polyfluoroalkyl substances".
  2. Any  loss,  cost  or  expense  arising,  in  whole or  in  part,  out  of  the  abating,  testing  for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, remediating or disposing of, or in  any  way  responding  to  or  assessing  the effects  of,  "perfluoroalkyl  or  polyfluoroalkyl substances", by any insured or by any other person or entity.

B.   The  following  exclusion  is  added  to  Paragraph  2. Exclusions   of   Section   I   –   Coverage   B   – Personal And Advertising Injury Liability:

  1. Exclusions

This insurance does not apply to:

Perfluoroalkyl And Polyfluoroalkyl Substances 

  1. "Personal   and   advertising   injury"   which would  not  have  taken  place,  in  whole  or  in part,  but  for  the  actual,  alleged,  threatened or suspected inhalation, ingestion, absorption, consumption, discharge, dispersal,  seepage,  migration,  release  or escape   of,   contact   with,   exposure   to, existence     of,     or     presence     of,     any "perfluoroalkyl or polyfluoroalkyl substances".

  2. Any  loss,  cost  or  expense  arising,  in  whole or  in  part,  out  of  the  abating,  testing  for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, remediating or disposing of, or in  any  way  responding  to  or  assessing  the effects  of,  "perfluoroalkyl  or  polyfluoroalkyl substances", by any insured or by any other person or entity.

Analysis:

Paragraph A. of the endorsement adds the PFAS exclusion to preclude coverage for bodily injury and property damage liability, while Paragraph B. adds the exclusion to preclude coverage fro personal and advertising injury liability. As mentioned earlier, the exclusion is broad encompassing and reads similar to the pollution exclusion in the general liability form, except this exclusion applies to "perfluoroalkyl or polyfluoroalkyl substances".  

When attached to policies that do not apply to liability arising out of PFAS, the endorsement will result in a coverage reduction. It must always be shown to be a reduction in coverage whenever a new exclusion is added that was not previously on the policy, or if not otherwise limited or excluded. Even if there is no intent to provide the coverage if it isn't excluded, its covered. This has happened in the past with exposures such as asbestos and pollution, prior to the exclusions being added, and it is happening to some extent now with silent cyber when there is no specific exclusion on the policy.

CX 21 97 Exclusion – Perfluoroalkyl And Polyfluoroalkyl Substances (PFAS)

This endorsement is similar to CU 34 54, except that this endorsement can be attached to the Commercial Excess Liability Coverage Part. This is a follow-form endorsement consisting of Paragraph A., which excludes any "injury or damage" associated with PFAS exposures,and Paragraph B., which adds the definition of "Perfluoroalkyl or polyfluoroalkyl substances". "Injury or damage" is defined in the Commercial Excess Liability Coverage Form to mean any injury or damage, covered in the applicable "controlling underlying insurance" arising from an "event". "Event" means an occurrence, offense, accident, act, or other event, to which the applicable "controlling underlying insurance" applies. Of course, "controlling underlying insurance" means any policy or self-insurance listed as such in the declarations. Thus, the exclusion follows form with the underlying insurance.

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