This practice note addresses potential insurance coverage for tort and environmental liability arising from per- and polyfluoroalkyl compounds, commonly known as PFAS. There are thousands of specific chemicals falling under this category?more than 12,000 substances have been included in the EPA's National PFAS Datasets?and the definition continues to be debated in scientific and regulatory communities. For purposes of this practice note, all such chemical compounds are referred to individually or collectively as "PFAS."
PFAS are synthetic chemicals that were first patented in the late 1940s, commercialized in the 1950s, and used in a wide array of consumer and industrial products. PFAS have strong surfactant properties, meaning they reduce the surface tension between a liquid and another liquid or solid, so they are effective in resisting fire and repelling water, oil, and grease. PFAS are found in materials such as firefighting foam, nonstick cooking pots and pans, paints, coatings for cables and wires, lubricants, food packaging, and textiles. PFAS are water soluble and appear to move through soil. Certain PFAS bioaccumulate in the human body.
For additional information, see Transfer and Purchase of Property, Liability, and Environmental Insurance and Practical Steps For Companies Facing PFAS Risks.
PFAS Liability Threats
PFAS increasingly have become the subject of actual or potential liability for a widening group of companies. Potential liability for PFAS arises from both private tort lawsuits and governmental enforcement of environmental laws and regulations.
Regulatory and Statutory Liability Threats
Despite having been manufactured for decades, it was not until the late 1990s that the EPA first identified this family of chemicals as a potential regulatory concern. While chronicling the regulatory history of PFAS is beyond the scope of this discussion, some highlights are as follows:
- In 2006, the EPA entered into voluntary agreement with prominent PFAS manufacturers to generate studies on certain PFAS and to implement a phase-out/stewardship program.
- In 2009, following a determination that a common PFAS was a likely carcinogen, the EPA implemented an action plan for that chemical.
- In 2016, the Department of Environmental Conservation added certain PFAS to the list of regulated hazardous substances by emergency regulation and issued a non-enforceable health advisory establishing a maximum recommended concentration of PFAS in drinking water.
- In 2021, the Biden administration issued a "PFAS Strategic Roadmap" establishing deadlines for federal regulatory action and expanding regulation to include additional PFAS compounds. The Bipartisan Infrastructure Law of 2021 authorized $5 billion in grants to states and localities for PFAS-related technical assistance and water quality improvement.
Regulatory efforts related to PFAS continue to develop, including importantly a pending proposed rule for the listing of two common PFAS chemicals as CERCLA hazardous substances, which if finalized and after any legal challenges, appears likely to result in additional investigation and cleanup liability for potentially responsible parties.
As of the currency date of this practice note, there are more than 45 bills pending before the U.S. Congress relating to PFAS.
At the state level, several states including California, New York, and New Jersey have issued mandates for investigation and/or remediation of PFAS. In addition, a number of states have drafted legislation to eliminate PFAS usage. For example, in 2021, the Florida State Senate approved a bill that mandates the examination of alternatives by which the state can eliminate PFAS and related chemicals in state commerce. The bill also would create a PFAS Task Force within Florida's Department of Environmental Protection. State action continues to proliferate as the scrutiny of PFAS intensifies.
Tort Liability Threats
Studies on PFAS exposure are by no means conclusive, but allegedly PFAS has been connected to cancer, pregnancy-induced hypertension, and thyroid disease. Beginning in 1998, several lawsuits were filed against DuPont by employees at its Parkersburg plant in West Virginia and local residents claiming they suffered illnesses linked to PFAS used in the production of Teflon. DuPont settled one class action in 2005 by agreeing to pay up to $235 million for medical monitoring of over 70,000 people.
Other, similar lawsuits have followed. More than 6,400 PFAS-related lawsuits have been filed in federal court since 2005, including more than 1,000 filed in 2021 in connection with multidistrict litigation concerning firefighting foam. See In re Aqueous Film-Forming Foams Prods. Liab. Litig., No. MDL No. 2:18-mn-2873-RMG, 2021 U.S. Dist. LEXIS 16470 (D.S.C. Jan. 25, 2021). Targets of such lawsuits to date mostly have been primary producers of PFAS, such as chemical companies and manufacturers of fire-suppressant foams. But this may be changing. Recent litigation also has targeted secondary manufacturers, textile manufacturers, cosmetics manufacturers, fashion and fast food companies, among others. Causes of action include toxic tort, products liability, negligence, and intentional torts.
The plaintiffs in these cases include individuals (including in class actions and multidistrict litigation), water utilities, and state governments. At least 15 state attorneys general have sued chemical companies that designed, manufactured, sold, used, or disposed of PFAS for alleged natural resource damage and expenses to remediate and monitor PFAS in the environment. See, e.g., Alaska v. 3M Co., Case No. 4:21-cv-00020, Fourth Judicial District, Fairbanks (filed April 6, 2021); California v. 3M Co., Case No. 3:22-cv-01013, U.S. District Court for the Southern District of California (filed July 13, 2022); and Wisconsin v. 3 M Co., Case No. 2022-cv-01795, Circuit Court of Wayne County, WI (filed July 20, 2022). Minnesota settled with 3M Company, which produced nonstick chemicals that entered into groundwater in the Twin Cities area, for $850 million in 2018. Delaware also reached a settlement, but the other lawsuits are ongoing.
Individual plaintiffs allege bodily liability from both direct and indirect (i.e., environmental) exposure to PFAS. Some examples of direct exposure are contact with PFAS-containing firefighting foam by firefighters or contact with PFAS by factory workers in manufacturing processes. Allegations of indirect exposure, by contrast, are based on drinking the water from public water supplies containing elevated levels of PFAS or proximity to locations, such as factories, with heavy concentrations of PFAS in the environment. Damages sought include those for personal injury and property value diminution.
Insurance Coverage for PFAS-Related Liability
For organizations facing lawsuits or regulatory action from PFAS, there may be insurance coverage available to protect against those losses, including for the immediate defraying of costs defending against such matters.
Commercial General Liability Insurance Policies
Most companies and other organizations maintain (and often have long maintained) commercial general liability (CGL) insurance policies, formerly titled comprehensive general liability policies. These policies have several characteristics that make them attractive as a potential bulwark against personal injury or environmental damage claims from PFAS-related actions.
For additional guidance about CGL coverage, see Commercial General Liability (CGL) Insurance.
First, CGL policies typically have broad insuring agreements that cover amounts an insured "becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage,'" with both those terms broadly defined. If based on an "occurrence" form (the standard before 1986 and still sometimes in use today), CGL policies cover "bodily injury" or "property damage" that occurred during the policy period, even if the liability giving rise to a claim does not arise until decades later. Further, all of the policies in effect during the time frame when such injury "occurred" may provide coverage (i.e., are "triggered").
For more information on triggers of coverage, see Occurrence or Claims-Made Policies.
Second, primary-level CGL policies typically obligate the insurer to provide a legal defense once its insured is sued or receives the equivalent of a suit (e.g., a regulatory directive requiring monies to be spent). Each triggered policy separately imposes on the insurer the "right and duty to defend the insured against any 'suit' seeking [covered] damages." Depending on the applicable state law, a single policy may obligate the insurer to shoulder the entire defense. Further, depending on the policy wording, the costs of such a defense may not reduce the policy's limit (e.g., are "non-eroding" or "outside limits"), so that the primary insurer must provide a defense until its indemnity limit is fully exhausted.
For more guidance on the duty to defend, see Duty to Defend and Duty to Indemnify, Duty to Defend and Duty to Indemnify Checklist, and Insurer Duty-to-Defend Standard State Law Survey.
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Originally published by LexisNexis' Practical Guidance
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