Author: Nancy Germond 

What are Perfluoroalkyl Substances (PFAS)?

What's the big deal about PFAS (pronounced “pee-fas"), anyway? They consist of a group of over nine thousand synthetic chemicals used in coatings and product that resist oil, grease and water. PFAS have been in use in manufacturing since the 1940s, and we find them in products such as Scotchgard®, stain resistant textiles, food handling materials such as tissue paper and in fast food bags, medical devices such as surgical patches, microwave popcorn bags, nail polish, shampoos, cleaners, and automotive components, to name a few products. In short, PFAS are everywhere in manufactured products.

According to Brenda Wells-Dietel, Ph.D. Department Chair, Risk Management and Information program, East Carolina University, “These chemicals are in just about everything."

The main problem with the chemicals involved is that they don't break down. They run through our systems including our sanitations systems, including our drinking water.

Each day, more and more news articles appear on the dangers of PFAS.

Who is Exposed to PFAS?

Certain occupations are more exposed to PFAS, including firefighters, those who work in chemical manufacturing and those who work with ski wax.

Most exposed are firefighters from firefighting foam and turnout gear, and experts predict due to a rise in cancer claims among firefighters, this will be a major area of litigation.

In a Centers for Disease Control sample, 97% of the U.S. population had PFAS in their blood samples.

A New Wave of Claims – PFAS

A recent Insurance Journal Academy webinar presented by Dr. Wells presented the following timeline of PFAS research.

• 1950s, 3M discovered the buildup of PFAS in the bloodstream
• 1960s, 3M and Dupont conducted animal testing, which found harmful effects of PFAS
• Late 1960s, PFAS began to appear in human blood samples
• 1998, the 3M alerted the Environmental Protection Agency about the potential hazards of PFAS based on studies conducted on rats and in 2001, an attorney provided the EPA with documents on Teflon-related studies

The EPA set an internal guideline for setting an enforceable legal limit for PFAS in 2019; however, it was not until 2021 that the EPA released its document providing a strategic roadmap to PFAS, calling PFAS “an urgent public health and environmental issue." While the concentration of PFAS in our bloodstreams is trending down since 2000, according to Wells, PFAS continue to be a significant concern.

Carriers Concerned About Future Claims

Insurers have increasingly become concerned with PFAS claims, most of which targeted manufacturers. However, PFAS coverage claims may be the next frontier as insurers rely on the pollution exclusion in most commercial policies. Equating PFAS claims as the new asbestos where coverage cases peaked 40 years ago, Insurance Services Office (ISO) rolled out new exclusions designed to remove coverage for PFAS claim.

Asbestos claims cost the industry about $100 billion up to 2022, according to AM Best.

In past cases, state case outcomes have differed in various states. There is currently no coverage on the market to address PFAS coverage.

Insurance Services Office Adds Endorsements to Address PFAS

In the commercial general liability program (GL), ISO rolled out these forms, designed to “broadly exclude bodily injury, property damage and personal and advertising injury related exposures associated with PFAS definition," as follows, according to the filing.

• CG 34 95 Exclusion – Perfluoroalkyl And Polyfluoroalkyl Substances (PFAS),to use with products/completed operations liability coverage part or Owners and Contractors protective liability coverage part.
  

•  CG 34 96 Exclusion – Perfluoroalkyl And Polyfluoroalkyl Substances, to use with the railroad protective liability coverage part
  
  
• CG 40 32 Exclusion – Perfluoroalkyl And Polyfluoroalkyl Substances to use with the commercial liability coverage part.

In the commercial liability umbrella (CU) and the commercial excess liability coverage parts, ISO rolled out these endorsements, designed to “broadly exclude bodily injury, property damage and personal and advertising injury related exposures associated with PFAS definition," according to the filing.

• CU 34 54 Exclusion – Perfluoroalkyl And Polyfluoroalkyl Substances (PFAS), to use with the commercial liability umbrella coverage part.
  

• CX 21 97 Exclusion – Perfluoroalkyl And Polyfluoroalkyl Substances (PFAS), to use with the commercial excess liability coverage part.

The GL and umbrella filing have an effective date of 5/1/23.

With the businessowners form, ISO rolled out this form designed to exclude PFAS coverage.

• BP 15 91, Exclusion – Perfluoroalkyl And Polyfluoroalkyl Substances (PFAS)

There are also significant changes in this filing to include cyber liability, data privacy, electronic data liability, cyber, and other electronic data changes.

In the auto dealers coverage form, ISO rolled out this form designed to exclude PFAS coverage.

• CA 27 19, Exclusion – Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS), Exclusion For General Liability Coverages

This form has an effective date of 01/24. The form also includes changes to CA 04 – 65, auto hacking expense coverage, to limit covered claims to a discovery period after the policy period and which must occur within the coverage territory.

The endorsements define PFAS that “consists of or contains any such chemical or substance."

The impact of these endorsements is to reduce/eliminate coverage if the underlying policies do not contain PFAS exclusions.

What Do We Tell Our Insureds?

If we can find coverage, that is the best approach, and coverage may be found in some cases in the surplus lines market. However, we do not currently know any markets offering such coverage.

Be sure to alert your clients and document that alert that they will not find coverage in most cases for PFAS-related claims in their current coverage.

At this time, one Midwest agency reports that carriers are adding these endorsements on renewals. A national carrier announced changes by stating in its marketing material, "Litigation and claims involving PFC/PFAS are increasing exponentially." This carrier's announcement continues by saying, "...PFC/PFAS losses including those that arise from goods or products containing the compounds, are excluded."

Clearly, these issue concern insurers and we anticipate most carriers will follow suit in adding these endorsements. Carriers adding these coverage endorsements midterm will depend on state laws, so follow your state's Big I's state association for updates. Many agents report that carrier are including these endorsements on renewals.  

If you are a Big I member, we have many coverage disclaimers and declinations availailable at this link. However, we do not have one specifically designed to alert insureds of lack of pollution coverage risks.

Date Published: July 28, 2023

Updated: May 30, 2024

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