The effects of PFAS chemicals are yet to be seen as health problems slowly come to light. BHSI’s Javier Villalba, explores the litigation landscape risk managers are facing
This special report was produced in conjunction with BHSI
PFAS (per- and polyfluoroalkyl substances) are a group of chemicals used in numerous industrial processes and consumer products, such as cookware, waterproof clothing, cleaning products and food packaging.
The long-term health and environmental effects of these substances are concerning.
PFAS do not break down easily, which means they can accumulate in soil, water and living organisms.
These compounds have been linked to health problems such as cancer, liver damage, decreased immune response and developmental problems in children and foetuses.
To date, the full harmful potential of these compounds constitutes a “phantom threat” – the full implications will only become known as medical damage is proven and the origin of these pathologies are determined by advances in forensic medicine.
”In the United States, the Environmental Protection Agency (EPA) has developed an action plan to address the risks associated with PFAS”
In Spain and the United States, PFAS have been a growing concern for health and environmental authorities. Their regulation has been the subject of intense debate.
In Spain, the Spanish Agency of Medicines and Health Products has banned the use of some products containing PFAS, while the Ministry of Agriculture, Fisheries and Food has banned the use of these compounds in certain packaging materials.
In the United States, the Environmental Protection Agency (EPA) has developed an action plan to address the risks associated with PFAS and has established a provisional reference level for two of the most common compounds, perfluorooctane sulfonate (PFOS) and perfl uorooctanoic acid (PFOA).
Products containing PFAS
PFAS chemicals have been referred to as “forever chemicals” as it is believed they linger on in our bodies and in the environment long after the products that contain them have broken down. They are found in:
- Grease-resistant paper and other fast-food wrappers or containers
- Microwave popcorn bags
- Pizza boxes
- Confectionary wrappers
- Plastic water bottles
- Nonstick cookware
- Cleaning products
- Stain-resistant coatings for carpets or upholstery
- Stain-resistant and water-resistant clothing
- Dental floss
- Eye makeup
- Firefighting foams
- Paints, sealants, varnishes
- Nail polish
- Drinking water
The litigation landscape
Already, a number of lawsuits in courts around the world have sought to hold manufacturers and distributors of goods containing PFAS liable for damages these chemicals may have caused.
In many of these cases, defendants have also sought the protection of their insurance to cover defence costs and damages.
As the courts have addressed these cases, several important precedents have been established on insurance coverage for PFAS-related claims.
At the same time, varied interpretations have highlighted the complexity of determining whether insurance wording covers liability for PFAS contamination.
”One of the most prominent PFAS cases involved a chemical company, which faced a series of contamination claims related to its use of these chemicals”
While each case is unique and depends on the specific terms of the insurance wording and the circumstances of the loss, it is generally accepted that insurance companies will argue PFAS contamination results from a known risk and is therefore excluded from coverage under the insurance contract.
This is in cases where there is not already a specific exclusion expressly for PFAS, which is becoming increasingly common.
One of the most prominent PFAS cases involved a chemical company, which faced a series of contamination claims related to its use of these chemicals at its US plant.
The company sought coverage under its general liability policy, but the courts ruled that PFAS-related claims were not covered under the insurance contract due to the contamination exclusion.
”It is generally accepted that insurance companies will argue PFAS contamination results from a known risk and is therefore excluded from coverage”
In another case, a firefighting foam manufacturer sought coverage under its insurance wording to defend against a lawsuit alleging that the company had contaminated drinking water with PFAS.
In this case, the courts ruled that the insurance did not provide coverage for environmental damage claims but allowed the manufacturer to seek coverage for defence costs.
In a more recent case, a federal court in the US ruled that the pollution exclusion in an insurance policy did not apply to a PFAS-related claim because PFAS do not meet the definition of a pollutant under the policy wording.
This decision is considered an important development for plaintiffs seeking insurance coverage for PFAS-related claims.
Watch this space
The jurisprudence surrounding insurance coverage for PFAS-related claims remains an evolving issue, and each case will depend on the specific circumstances and provisions of policy wording.
The continually emerging nature of these risks and current lack of reliable and consistent data on PFAS contamination, exposure and harm, makes it difficult (if not impossible) for insurers to determine the level of risk associated with these chemicals and to set appropriate insurance premiums.
However, assessing and facilitating the transfer of emerging risks is what our industry has done for centuries, always rising to the challenge of new risks.
PFAS are more of the same: The industry must now embrace the challenge of determining the level of risk associated with PFAS and what the appropriate insurance response should be.
Javier Villalba is Head of Claims at Berkshire Hathaway Specialty Insurance, Spain