PFAS chemicals (or per- and polyfluoroalkyl substances) are an emerging issue in the insurance industry. Increasing litigation, proposed regulations and scientific studies indicate that PFAS may be more concerning than originally understood. The Environmental Protection Agency’s (EPA) newly proposed drinking water standard, announced on March 14, 2023, is one of the many PFAS-related actions that state, federal and international regulators may take this year.
PFAS are synthetic chemicals present in food packaged materials, commercial household products, nonstick cookware, firefighting foam, drinking water and various other products. Due to their persistence and resistance to degradation, these "forever chemicals" are challenging to remediate. Cleanup can be challenging as PFAS can travel long distances and are highly stable and mobile in the environment. Studies are still underway to determine the best cleanup and remediation methods for PFAS contaminated waste. Exposure to PFAS has been associated with harmful health effects in humans and animals.
The EPA's proposed regulation would mandate that public water systems monitor for six varieties of PFAS and alert the public if concentrations surpass regulatory thresholds. According to the EPA, the new rule, if approved, “will prevent thousands of deaths and reduce tens of thousands of serious PFAS-attributable illnesses.” According to the National Conference of State Legislatures, more than 20 states have proposed or adopted limits for PFAS in drinking water and states have also passed legislation to require monitoring for PFAS in public drinking-water systems.
According to some industry experts, the increasing exposure to PFAS represents a liability risk that could be as significant as that posed by asbestos. PFAS, like asbestos, are difficult to eliminate once they are released into the environment and have high costs associated with remediation.
What Do the Proposed Changes Mean?
The proposed changes would expand the regulatory oversight of the EPA over PFAS in several meaningful ways. The EPA would have the authority to order the investigation and remediation of sites suspected of containing those chemicals. Additionally, the EPA would be empowered to seek financial restitution from responsible parties to recover costs associated with remediating. And the EPA would be able to reopen sites that had already been remediated for additional investigation of PFAS.
The proposed regulatory direction creates an opportunity for industries to proactively plan for and be better equipped to respond to forthcoming regulations. By taking a proactive approach, businesses can make more informed decisions regarding remedial strategies and solutions around PFAS.
What Should Clients Do?
Organizations deemed responsible parties at PFAS impacted sites could be liable for cleanup costs. And new (likely more stringent) regulations will result in facility-specific discharge limits and sampling requirements (even perhaps for previously closed sites). This could have a major impact on public entity utility districts that are responsible for complying with drinking water standards, as well as subsequent PFAS-related exposures. Aviation, highway emergency response and firefighting operations should prepare to reduce or transition away from AFFF (aqueous film forming foam).
Clients should be monitoring regulatory changes related to PFAS, as well as state and federal enforcement actions and litigation outcomes while staying engaged with their environmental attorneys and engineering consultants.
Pollution Liability & Site Pollution Policies
Because the handling of PFAS exposures is a developing story in the insurance industry, everyone including insurers, brokers, and public entities will need to review current and past PFAS exposures, controls and policies.
Clients should assess their insurance coverage, specifically the pollution liability policy language governing or excluding PFAS. Pollution liability policies are an important risk management tool for property owners, and site pollution policies provide coverage for cleanup of unknown pollution conditions, third-party bodily injury and property damage and legal defense expenses associated with covered claims.
The new EPA rule and the extent of contamination and estimated high costs to clean and treat drinking water has led carriers to become increasingly hesitant to provide coverage for PFAS in these policies. We are seeing general liability policies that have responded by implementing broad PFAS exclusions. Coverage may still be available for properties where PFAS use is contingent or where testing has been conducted to affirm no existing contamination. One environmental insurance carrier has instituted a PFAS questionnaire as part of its underwriting process to comprehensively evaluate this exposure, and if all questions fundamentally verify no historic or current use of PFAS or current contamination (from onsite usage or offsite migration), the exclusion can be removed. While subsurface evaluation is recommended to obtain the best coverage, testing can also trigger reporting requirements to regulatory agencies, which can then require costly remediation, making this a tricky decision (which should only be made in consultation and coordination with legal, engineering and risk management teams).
Ultimately, concerned entities should review each situation with an environmental consultant and an insurance broker with extensive expertise in the highly specialized and dynamic site pollution liability marketplace to determine the best course of action.
*The views and opinions expressed in the Public Risk Management Association (PRIMA) blogs are those of each respective author. The views and opinions do not necessarily reflect the official policy or position of PRIMA.*
By: Karen Caterino, MBA, ARM-P
Senior Vice President, Alliant Insurance Services, Inc.
Summary of Qualifications
Karen joined Alliant Insurance Services in 2021 and has been in the industry for over 23 years in various positions involving healthcare, risk management and insurance. Prior to joining Alliant, Karen worked at a global insurance brokerage as the Center of Excellence Leader for the western region public sector and higher education practice. Karen also spent 8 years in public service, serving as a city senior benefits/risk analyst and as a state risk manager. She is an active member and presenter with PRIMA and STRIMA and hosts a regular podcast series “Igniting Next Gen” for careers in risk and insurance.
In her role, Karen works with Alliant colleagues and clients, utilizing her knowledge and understanding of their unique risk and insurance needs to optimize risk management and brokering solutions. Her focus is on leading public entity, education and pooling business growth and development initiatives. Her specialty is casualty line placements. Her background in risk management and insurance, consultative sales leadership, innovative program development and client team management is helping Alliant develop deeper client relationships while delivering excellence to the client experience.
23 years working in risk management and insurance.
Helping public entity clients implement ERM, advising on integrating business strategies designed to mitigate or optimize organizational enterprise risk.
PRIMA, STRIMA, NV RIMS, AZ PRIMA, OR PRIMA
Karen graduated with her bachelor’s degree from Roanoke College, Salem VA and from University of Phoenix with her MBA. She has an Associate in Risk Management-Public Entities (ARM-P), is a Certified Public Manager®(CPM) and Certified Government Benefits Administrator (CGBA) and is currently a CPCU® candidate.