Navigating the Emerging PFAS Liability: Insights for Insurers

Understanding PFAS and Their Potential Risks

Per- and Polyfluoroalkyl Substances (PFAS) are synthetic chemicals that have been in use since the 1930s. Widely utilized in consumer and industrial products due to their oil and moisture-resistant properties, PFAS are now under scrutiny for their potential health and environmental impacts. Studies have linked PFAS to various health issues, including cancer, pregnancy-induced hypertension, and thyroid disease. Their persistence in the human body and the environment raises significant concerns, particularly regarding water contamination.

The Growing Landscape of PFAS Litigation

The legal landscape surrounding PFAS has expanded dramatically, with over 5,000 complaints filed in 40 courts as of 2021. The PFAS Action Act of 2021, which passed the House, has directed the Environmental Protection Agency (EPA) to develop new PFAS standards, potentially increasing the liability for water-wastewater utilities. This legislative move, combined with the Biden Administration's regulatory focus on PFAS, signals a heightened risk of litigation for insurers.

Strategies for Insurers to Mitigate PFAS Risks

While the Insurance Services Office (ISO) has yet to finalize a PFAS-specific exclusion for commercial liability policies, insurers are advised to take proactive measures. Reinsurer Gen Re suggests conducting an inventory of previously underwritten risks, carefully evaluating new submissions, and staying informed about scientific and legal developments related to PFAS. As the regulatory environment evolves, insurers must adapt their strategies to manage this emerging liability effectively.