PFAS is short for ‘perfluoroalkyl and polyfluoroalkyl substances’, and they are a group of man- made chemicals that have been in commercial production since the 1940s to make surfaces resist stains, water and grease due to their water- and oil-repellency. These properties make PFAS ideal for use in a wide range of everyday products such as Teflon non-stick products, stain and water repellents, paints, cleaning products and food packaging. They are also used in firefighting foams which account for around a third of total global production.
There are two reasons why PFAS should be a concern to businesses and insurers. Firstly, they are known as “forever chemicals,” because they do not break down easily in the environment and can move through soil and drinking water sources. Secondly, PFAS exposures are linked to human health concerns from growth, learning and behavioural problems, to cancers, immune system disorders, thyroid disease, fertility issues and obesity according to toxicity studies.
Even though there is much we do not know about the specific effect of PFAS on human health and the environment, they certainly pose a lot of risks. There has been a growing wave of litigation over water contamination and therefore rising concerns among insurers that the PFAS could expose them to the same kind of expensive, unanticipated claims similar to the ones caused by the asbestos crisis.
This emergence of PFAS litigation is happening worldwide. By way of example, a municipal water company in Sweden was sentenced in April 2021 to pay damages to residents of Kallinge, a small town of approximately 4,500 inhabitants, who for many years drank municipal water from a source that was contaminated by fire-fighting foam that was used in fire drills in a nearby area. The District Court ruled that the municipal water company was responsible for compensating the plaintiffs for personal injury in the form of elevated levels of perfluorinated alkyl substances in their blood, causing increased health risks and physical changes. Similar cases can be found in the U.S., for instance residents in Peshtigo, Wisconsin reached a $US 17.5 million settlement with manufacturers of firefighting foam in January 2021. The class action arose after dozens of privately-owned drinking water wells were contaminated by PFAS from a nearby testing and research site leading to property damage, personal injury and medical monitoring expenses. Evidently, many different types of actors and industries can be exposed to liability and litigation risk.
The fact that PFAS do not degrade easily and require complex and expensive remediation can pose grave environmental and public health threats and consequently several insurance coverage issues can arise, starting of course with what type of insurance a party facing claims involving PFAS has (environmental, commercial general liability etc.). There might be a trend of adding specific PFAS exclusions for properties that are suspected of using PFAS or might have been exposed to the PFAS from neighbouring properties. Typical pollution exclusion clauses will need to be closely analysed, dependent on the specific facts of a matter, to see if they will apply to preclude coverage for PFAS claims.
For now, identifying liability and analysing coverage in relation to PFAS contamination is not straightforward and this will continue to be a space to watch.
