What Are PFAS?
Per-and polyfluoralkyl substances (PFAS)—ominously described by some as “forever chemicals” and others as the “mother of toxic torts”—are becoming common household words. As Miller Nash’s Environmental Team explained, PFAS are a group of long-lasting chemicals that are present in everything from cookware to food packaging to firefighting foam and in the blood of 97% of Americans. Exposure to high levels of PFAS can potentially cause adverse health effects, including cancer and liver damage. So think twice before licking the coating on your Teflon pan.
As state and federal standards and regulations pertaining to PFAS become more onerous, lawsuits arising from these “forever chemicals” are gaining momentum. Some even predict that PFAS may be the “next asbestos,” with losses theoretically exceeding $400 billion in terms of overall liability exposure. This figure, though large even in the age of nuclear verdicts, is not beyond belief given that over $4 billion in PFAS-related settlements have already been paid to date.
Like most environmental and toxic tort claims, claims for harm arising from PFAS will also undoubtedly spawn companion insurance coverage lawsuits seeking to recover (or deny) insurance proceeds for PFAS-related claims. These forever chemicals are not likely to go away any time soon, so this article offers suggestions for how businesses can best position themselves to secure insurance coverage for PFAS-related claims and losses.
What Is the Status of PFAS Regulation and Litigation?
According to Bloomberg Law, over the past two years, the legal landscape for PFAS has undergone a “seismic shift.” While E.I. du Pont de Nemours and Co. was the principal target of early PFAS litigation, the list of named defendants continues to expand. As a result, PFAS lawsuits represent an “existential threat” to product manufacturers’ survival, as a federal judge handling a PFAS multi-district litigation involving over 500 cases opined.
Some of the more recent targets of PFAS lawsuits have been manufacturers of firefighting foam and protective gear, including 3M and Fire-Dex, LLC. In one exemplar lawsuit filed in early 2022, the plaintiff firefighters allege that when exposed to heat, the PFAS degrade into highly toxic particles that are absorbed into the plaintiffs’ bodies, causing cancer and other harms. According to the plaintiffs, the defendants knew or should have reasonably known of that probability, but they failed to warn of potential harm.
Meanwhile, from a regulatory standpoint, on August 26, 2022, the Environmental Protection Agency announced a proposed rule that would designate the PFAS hazardous under the federal Comprehensive Environmental Response, Compensation, and Liability Act (also described as Superfund or CERCLA), which enables the EPA to require polluting companies to clean up environmental hazards. For a more comprehensive discussion of the regulatory environment and history of PFAS, see the June 2, 2022 blog post, the June 17, 2022 blog update, and the August 31, 2022 blog update from Miller Nash LLP’s Environmental Team.
Are Insurance Companies Paying for PFAS Claims and Lawsuits?
Insurer responses to PFAS claims and lawsuits have been mixed, depending unsurprisingly on the type of claim or lawsuit and the policy language at issue. Among other things, coverage for environmental or property damage claims will give rise to different coverage questions than claims for bodily injury. And because PFAS environmental and bodily exposure may extend back several decades—as these are “forever chemicals”—numerous policy periods could be triggered.
Environmental Insurance Coverage Litigation
Because some of the first lawsuits involving PFAS arose in the environmental context, the first insurance coverage cases implicating PFAS involve those claims.
A Michigan federal court found that several insurers breached a duty to defend Wolverine in numerous underlying environmental cases arising from the alleged discharge of PFAS in Wolverine’s tannery operations over a sixty-year period. See Wolverine World Wide Inc. v. Am. Ins. Co.,1:19-CV-10, 2021 WL 4841167 (W.D. Mich. Oct. 18, 2021). Even though the lawsuits alleged that Wolverine engaged in long-term intentional discharges, the cases also alleged unintentional or accidental contamination. In finding a duty to defend, the court relied on the exception to the pollution exclusion, which affords coverage for “sudden and accidental pollution,” reasoning that the insurers had a duty to defend until they conclusively proved that every claim in each of the lawsuits involved pollution that was not accidentally discharged by the insured.
A more recent case in New York parted ways with Wolverine, finding that “allegations that a solution was dumped over a period of many years suggests ‘the opposite of suddenness.’” Based on those facts, the court ruled that the “sudden and accidental” exclusion to the pollution exclusion did not apply. Tonoga, Inc. v. New Hampshire Ins. Co.,159 N.Y.S.3d 252, 258 (N.Y. App. Div. 2022).
Bodily Injury Insurance Coverage Litigation
Bodily injury insurance coverage cases involving PFAS have developed similarly, with insurers attempting to invoke pollution or related exclusions as a basis to deny coverage. As some of these cases demonstrate, some states refuse to apply pollution exclusions outside of the “traditional environmental” context. What is considered “traditional environmental pollution” has been the subject of much debate for years, it typically involves environmental harms involving a discharge into the outdoors, which is regulated by CERCLA and other regulations. See Mackinnon v. Truck Ins. Exch., 73 P.3d 1205 (Cal. 2003) (noting that the term “environmental pollution” is not a “paragon[] of precision”). As a result, some courts applying a “traditional environmental pollution” rule have found coverage for policyholders, at least in the duty to defend context.
For example, in November 2021, the Fourth Circuit Court of Appeals affirmed a district court’s ruling that Colony Insurance Company had a duty to defend hundreds of cases brought by firefighters against a manufacturer of firefighting foam. See Colony Ins. Co. v. Buckeye Fire Equip. Co., 2020 WL 6152381, at *1 (W.D.N.C. Oct. 20, 2020), aff’d 2021 WL 5397595 (4th Cir. Nov. 18, 2021). The policy included a hazardous materials exclusion, which excluded coverage for bodily injury that “would not have occurred in whole or in part but for the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of” hazardous materials, including pollutants. The Fourth Circuit found no error in the district court’s decision that the underlying complaints alleged personal injury caused not only by environmental pollution by also by “direct contact with or exposure to” firefighting foam containing PFAS, and that as such, the pollution exclusion would not apply under North Carolina law. Id.
Despite Colony’s loss, on June 21, 2022, Admiral Insurance Company initiated a lawsuit in the United States District Court for the Northern District of Ohio asking a court to affirm its denial of coverage for the lawsuits against Fire Dex LLC discussed above. Admiral relied on a host of exclusions, including an Occupational Disease Exclusion, a Pollution Exclusion, and Pre-Existing Damages Exclusion. See Admiral Insurance Co. v. Fire Dex, LLC, Case No. 1:22-cv-01087 (N.D. Ohio June, 21, 2022).
A Policyholder Roadmap to Recovery for PFAS Claims
Because PFAS-related litigation varies in scope, no one-size-fits-all answer or solution exists as to whether insurance will cover PFAS liabilities. Policyholders seeking coverage, however, should formulate a plan early to try to maximize their insurance opportunities, including by taking these steps:
- Evaluate all PFAS claims and lawsuits to identify the earliest time period during which the alleged PFAS-related property damage or bodily injury exposure may have occurred. Every policy period starting from the date when PFAS contamination or exposure began may be implicated. If needed, coverage counsel can assist with retaining insurance “archeologists” to help identify historical insurance.
- Identify any historical or current third parties that may be required to provide indemnity and additional insured coverage, and tender requests for indemnity and insurance to those entities and their insurers. Additional insured coverage and contractual indemnity can, and should, be pursued simultaneously.
- Tender notice of a claim promptly to every CGL (and if applicable, excess) insurance carrier starting with the earliest policy period through to the present. This is important because policies issued before the 1970’s may not have a pollution exclusion, and the language of pollution exclusions varies among policy periods.
- Tender notice of a claim to any pollution legal liability insurance policies or other specialty insurance policies that could even potentially apply. Untimely notice of a claim, or failure to provide notice of circumstances that may give rise to a future claim, could prompt an insurer to attempt to deny coverage.
- Push back on denials of coverage that focus on policy provisions or exclusions that may not apply. As stated above, courts in different states employ varying approaches to policy language and may refuse to apply even what appears to be a straightforward exclusion under certain circumstances. As a few examples,
- Pollution exclusions: these vary widely in scope; courts may apply them only to “traditional environmental” pollution; courts may not apply them to bodily injury cases; and courts may require insurers to prove that injury was intentional rather than sudden and accidental. Other exclusions, such as a hazardous materials exclusion, may be interpreted similarly.
- Occupational disease or employee exclusions: these may apply only to claims brought by employees and may have other limitations or interpretations that may afford broader coverage than an insurer may claim.
- Prior existing damages or known claims: coverage will likely present a fact issue regarding when damage first occurred or when the insured first became aware of damage or injury. As such, attempts to deny a duty to defend should be evaluated closely.
- PFAS exclusions: Insurers may include PFAS-specific exclusions in contemporary policies, but these exclusions are unlikely to be present in earlier policy periods that may apply. This is another reason that policyholders should identify the earliest time period possible under which to tender a claim.
In closing, with the uptick in regulation and litigation, PFAS and other emerging environmental contaminants may present an existential risk to policyholders. But with proper investigation and an adept understanding of the full scope of insurance available for a loss, a company facing exposure arising from PFAS can maximize its insurance and mitigate its risk.
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