In June 2023, multinational industrial conglomerate 3M, reached a historic settlement with public water suppliers over the presence of polyfluoroalkyl and perfluoroalkyl substances (PFAS) in drinking water. The settlement concludes multiple class-action suits against the company. Under the settlement, 3M will pay $10.3 billion to plaintiffs over a 13-year period (source 1).
The agreement was reached just weeks before a government study revealed that drinking water from nearly half of U.S. faucets likely contain PFAS, otherwise known as “forever chemicals” that may cause cancer and other health problems. The heaviest drinking water exposures were discovered in cities and near potential sources of the chemicals, particularly in the Eastern Seaboard area; Great Lakes and Great Plains urban centers; and Central and Southern California.16
The massive lawsuit against 3M may be one of the largest involving PFAS, but it’s not the only one. Companies of all sizes and industries face litigation over using and disposing of PFAS, which is utilized in various industrial and consumer-good products and applications. Industrial companies Chemours, Dupont, and Corteva also settled PFAS lawsuits for just over $1 billion in early 2023.2 Even retailers like Kroger have faced lawsuits for selling products containing PFAS materials.3
WHAT ARE PFAS?
Polyfluoroalkyl and perfluoroalkyl substances (PFAS), commonly known as PFOA and PFOS, were developed in the 1940s and initially used by NASA to protect equipment from atmospheric heat and the corrosive effects of water.5 Today, thousands of PFAS chemicals exist and can be found in many consumer, commercial, and industrial products. This makes it challenging to study and assess the potential human health and environmental risks. PFAS have been used in various industrial and consumer products, including stain-resistant carpet, non-stick cookware automobiles, beauty and health products, and more. They’re also frequently found in fire suppression systems, specifically fire extinguishing foam.
PFAS are known as “forever chemicals” because they are bio-accumulative and can build up and persist in the environment, accumulating in wildlife and humans. When products and materials that contain PFAS are disposed of, the PFAS remain in the surrounding environment, which means they can now be found in soil and water - contaminating both food and water supplies. Remediating PFAS contamination can be very difficult and highly expensive. That is made even more difficult by the fact that there is no current national cleanup standard, yet some states have set very strict, and in some cases unrealistic, cleanup thresholds.
According to the EPA, PFAS are present in:
- Drinking water
- Soil near waste sites
- Fire suppression systems
- Manufacturing facilities
- Food and food packaging
- Household products
- Personal care products
Humans can be exposed to PFAS by drinking contaminated water, working in a facility that uses PFAS, eating contaminated food, swallowing contaminated soil or dust, or through other means. Research into the health effects of PFAS is ongoing, but the EPA states that PFAS exposure can lead to the following health conditions:
- Decreased fertility and pregnancy complications
- Developmental delays in children
- Increased risk of some types of cancer
- Immune system deficiencies
- Hormonal imbalances
- Increased cholesterol and risk of obesity5
ECHOES OF THE ASBESTOS CRISIS
Heightened awareness over the dangers of PFAS has led to a wave of litigation and a focus on regulation. Many of the lawsuits are focused on contaminated water. 3M alone faced more than 4,000 lawsuits for its role in contaminating public water supplies with PFAS.7 Personal injury lawsuits related to consumer products could also be on the horizon. Kroger faced a PFAS lawsuit over paper plates and bowls containing PFAS.3 Any company that has used, sold, or disposed of PFAS materials could eventually be the target of litigation.
The Environmental Protection Agency (EPA) has also begun taking regulatory action over the last few years. The agency has developed a PFAS Strategic Roadmap to guide the implementation of new regulations and policies to protect the public against PFAS materials and waste. The long-term plan also directs PFAS research, restrictions, and remediation. Under this roadmap, the agency has established maximum levels for PFAS chemicals in water, designated certain PFAS chemicals as hazardous substances, and passed an order for nationwide testing of PFAS in drinking water in 2023. The results of that testing will almost certainly lead to litigation.8
Evolving EPA regulations could also lead to hefty fines and new litigation for businesses and insurers. Some have suggested that PFAS could be the next asbestos for property/casualty and environmental insurers.4 Even though asbestos was banned in the 1970s, defendants and insurers paid out more than $70 billion in asbestos-related damages through 2005.9 The insurance industry paid out over $16 billion in claims and suffered $11 billion in losses related to asbestos and environmental damages from 2015 to 2020. As recently as 2023, companies are still paying multi-million-dollar settlements for past asbestos contamination.
PFAS IMPACT ON INSURANCE
The asbestos crisis, in part, led insurers to add absolute pollution exclusion endorsements to general liability policies. Some carriers are attempting to get ahead of PFAS litigation in similar fashion by adding PFAS exclusions to new policies and renewal quotes. Many general liability policies include exceptions for pollution exclusions, but it’s possible insureds could soon face other types of PFAS-related damages, like property damage or personal injury. A separate environmental policy may be necessary to achieve protection against PFAS damages.
While the primary focus of PFAS litigation has been on pollution to this point, that may not be the case in the future. As EPA regulations and standards expand, it’s possible that lawsuits could be filed against manufacturers and sellers of consumer products.
A shareholder in the law firm CMBG3, which specializes in pollution and PFAS litigation, recently told AM Best, “In the 1980s, if you had asked any attorney doing asbestos litigation if they could envision a day when roofing and shingle manufacturers would be brought into litigation for personal injury, they would have thought you were crazy. But that's where we are today, and I see no reason why it will be any different for PFAS litigation.”4
Real estate transactions are another focal point. Buyers of manufacturing facilities, warehouses, or other properties where PFAS was used in fire suppression systems or manufacturing processes could be liable for the waste created by that property in the past. Buildings that have had a significant historical fire event or hosted fire-fighting drills using foams containing PFAS could be vulnerable to fines or litigation. That includes industrial facilities, military facilities, airports, municipal fire-fighting installations, and properties adjacent to these facilities.
Potential purchasers of such sites should consider an environmental investigation to determine if there is any PFAS impact depending on the historical use and occupancy. In some cases, lenders may require such an investigation as a condition for obtaining a loan. An “All Appropriate Inquiry” performed by a prospective purchaser can help establish the purchaser as an “Innocent Purchaser” and provide certain safe harbors from EPA actions. The findings of the investigation are also helpful for underwriting the placement of environmental insurance on the site.
PFAS are so pervasive and so long-lasting in the environment that they’ve been found in food, soil and water, even in the most far-flung corners of our planet.13 PFAS damages can be crippling for a business of any size. Remediation costs alone can be hundreds of millions, or even billions, of dollars. 3M is one of the largest companies in the world, but its PFAS lawsuits were viewed as an “existential” threat to the company’s survival.
It’s wise for agents to work with their commercial clients now to understand the scope of their potential PFAS liability and evaluate their insurance coverage needs. As carriers expand exclusions for PFAS damages, it may be helpful to consider standalone environmental policies that provide coverage for PFAS and other environmental liabilities. The regulations and research surrounding PFAS are rapidly evolving. A knowledgeable and experienced broker can help agents and insureds achieve protection against potential lawsuits and damages. Contact your CRC Group Producer today to learn more about how you can help your clients protect themselves against PFAS risk.
- Jim Hamilton is the Environmental Practice Group Leader and Senior Broker with CRC Group’s Denver, CO office.
- Sean McLaughlin is an Inside Broker with CRC Group’s Philadelphia office, specializing in Environmental coverage.
- Chase Stone is a Casualty Broker with CRC Group’s Denver, CO office where he specializes in Environmental coverage.
- 3M settles $10.3bn in ‘forever chemical’ water lawsuits, Retail Insight Network, June 27, 2023. https://www.retail-insight-network.com/news/3m-settles-forever-chemical-water-lawsuits-pfas/
- Chemical-makers settle PFAS-related claims for $1.19 billion, Reuters, June 2, 2023. https://www.reuters.com/business/chemical-makers-reach-pfas-related-settlement-us-2023-06-02/
- If You Purchased Kroger Simple Truth Branded Disposable Plates, Bowls, and/or Platters a Class Action Settlement May Affect You, PFAS Project Lab, September 10, 2021. https://pfasproject.com/2021/09/10/if-you-purchased-kroger-simple-truth-branded-disposable-plates-bowls-and-or-platters-a-class-action-settlement-may-affect-you/
- On High Alert: Rising Risks of PFAS Claims and Litigation Capture New Attention, Best’s Review, April 2021. https://news.ambest.com/ArticleContent.aspx?pc=1009&refnum=306827
- Our Current Understanding of the Human Health and Environmental Risks of PFAS, Environmental Protection Agency, June 7, 2023. https://www.epa.gov/pfas/our-current-understanding-human-health-and-environmental-risks-pfas
- Per- and Polyfluorinated Substances (PFAS) Factsheet, Centers for Disease Control and Prevention, May 2, 2022. https://www.cdc.gov/biomonitoring/PFAS_FactSheet.html
- 3M Heads to Trial in ‘Existential’ $143 Billion PFAS Litigation, Bloomberg Law, June 2, 2023. https://news.bloomberglaw.com/environment-and-energy/3m-heads-to-trial-in-existential-143-billion-pfas-litigation
- PFAS Strategic Roadmap: EPA’s Commitment to Action 2021-2024, Environmental Protection Agency, April 24, 2023. https://www.epa.gov/pfas/pfas-strategic-roadmap-epas-commitments-action-2021-2024
- Asbestos Litigation Costs, Compensation, and Alternatives, Rand Corporation, 2005. https://www.rand.org/pubs/research_briefs/RB9155.html
- Judge approves $54M Wolverine, 3M PFAS lawsuit settlement, M Live, March 30, 2023. https://www.mlive.com/public-interest/2023/03/ judge-approves-54m-wolverine-3m-pfas-lawsuit-settlement.html
- Saint-Gobain, Honeywell, 3M PFOA Pollution Case Settles for $64 Million, Environment and Energy Leader, February 8, 2022. https://www.environmentalleader.com/2022/02/saint-gobain-honeywell-3m-pfoa-pollution-case-settles-for-64-million/
- Historic settlement reached to clean up toxic PFAS contamination in South Jersey, WHYY, June 28, 2023.https://whyy.org/articles/solvay-specialty-polymers-historic-settlement-pfas-contamination-south-jersey/
- 4 Things to Know About Regulating ‘Forever Chemicals’ in Drinking Water, PBS News Hour, March 17, 2023. https://www.pbs.org/newshour/science/4-questions-about-the-epas-proposed-pfas-drinking-water-standard-answered
- Unprecedented Analysis Reveals PFAS Contamination in U.S. Waterways Shows Shocking Levels of Contamination, Waterkeeper Alliance, October 18, 2022. https://waterkeeper.org/news/unprecedented-analysis-reveals-pfas-contamination-in-u-s-waterways-shows-shocking- levels-ofcontamination/#:~:text=In%20a%20test%20of%20114,public%20health%20and%20environmental%20impacts.
- Companies Face Billions in Damages as PFAS Lawsuits Flood Courts, Bloomberg Law, May 23, 2022. https://news.bloomberglaw.com/pfas-project/companies-face-billions-in-damages-as-pfas-lawsuits-flood-courts
- Study Says Drinking Water from Nearly Half of US Faucets Contains Potentially Harmful Chemicals, The Associated Press, July 5, 2023. https://apnews.com/article/pfas-forever-chemicals-drinking-water-813c1323f74d5adb798047eea39c778a