Experts say the U.S. Environmental Protection Agency’s recent establishment of so-called forever safe levels of chemicals in drinking water could lead to litigation between organizations and their insurers to recover the costs of updating municipal water supplies.
He says lawsuits alleging personal injury and property damage caused by PFAS are also likely to increase.
PFAS, short for perfluoroalkyl and polyfluoroalkyl substances, are potentially harmful substances that have been found in many commercial and household products from firefighting foam to nonstick cookware. They have also been found in drinking water and soil.
Under the EPA’s drinking water regulation, which was finalized last month, the agency limits PFAS in drinking water to four parts per trillion — “the lowest level that is feasible for effective enforcement,” according to the agency.
While municipal utilities will be most affected by the regulation, it will have a “trickle-down” effect that reaches wastewater treatment facilities and companies that are allowed to discharge wastewater containing chemicals forever, said Marsh McLennan of Environmental Services in said Vice President Suzanne Deegan. Agency, a unit of Marsh LLC.
However, federal bipartisan infrastructure legislation passed in 2021 provided $9 billion to help communities affected by forever chemicals in drinking water and $12 billion for general drinking water improvements, but some municipalities are struggling to fix water systems. The cost to be faced can be three to four times. Much more than they could achieve through legislation, he said.
“What’s going to happen is, these utilities are going to be looking for responsible parties to help them share the cost of fixing their systems and fixing the infrastructure. They’re going to start looking for the pollutants that introduced PFAS into the drinking water supply,” she said.
Although EPA’s regulation obviously applies only to public drinking water suppliers, it will also affect agricultural companies, farmers, airports, private waste companies, and any entity that is either actively releasing PFAS into water or has historically disposed of PFAS, Lydia Zaharia said. An environmental marketing director at the Marsh McLennan Agency.
He said companies could face the risk of reputational damage as well as potential liability for contamination.
The regulation had been anticipated for some time, but the four-parts-per-trillion protection level is “significant” and would have a “huge” financial impact for insurers, said Washington-based Glynis Priester, national environmental practice leader at USI Insurance. Said. Services LLC. “Regulation will lead to a large increase in litigation,” he said.
“Our biggest concern for many of our clients is litigation risk, and, while they may have limited or low exposure, the cost of defense can be very significant. This EPA regulation has a real financial consequence for many companies across the defense risk chain,” Ms. Priester said.
The cost of settling lawsuits over PFAS-related liabilities could reach billions of dollars. On April 1, St. Paul, Minnesota-based 3M Co. announced final approval of its $10.3 billion settlement with U.S. public water suppliers by a federal judge in South Carolina. Johnson Controls International PLC also recently disclosed a $750 million settlement between its subsidiary Tyco Fire Products and certain US public water organizations over PFAS. The agreement is expected to receive preliminary approval in May.
The EPA’s announcement could later impact potential liability for companies as it increases awareness of PFAS-related risks among the public and plaintiffs, said Michael Hamilton, a Philadelphia-based insurance coverage attorney and a partner at Goldberg Segalla LLP.
Although commercial general liability policies routinely exclude pollution claims, some jurisdictions restrict the application of pollution exclusions to traditional environmental pollution, said John Ewell, a New York-based insurance coverage attorney at Cozen O’Connor PC.
“It will be prosecuted whether or not there has been a ‘release, dispersion, release or migration’ of PFAS. “This questioning would be particularly fair against manufacturers that use PFAS in their products,” he said.
Mr. Ewell also said an initial question would arise as to what level of exposure to PFAS would trigger coverage as a result of “bodily injury.”
“While the EPA regulation addresses unsafe PFAS levels in drinking water, it does not clearly set a safe limit or even address what blood levels are considered unsafe Is. We need to hear from the medical community about when the exposure actually resulted in ‘physical injury,'” he said.
Ms. Zaharia said some insurers had created manuscript exclusions to create coverage for PFAS, and in May 2023, the Office of Insurance Services will officially ban the chemicals forever in commercial general liability, umbrella liability and business owners policies. Forms and supports were introduced to prepare coverage for. Policies for Auto Dealers.
Historic policy language is key in covering ‘forever chemicals’ liabilities
Experts say the wording in historical and current liability insurance policies will likely determine where companies seek coverage for property damage and injury claims related to exposure to “forever chemicals.”
John Ewell, an insurance coverage attorney at Cozen O’Connor in New York, said companies will look to their insurers for coverage as lawsuits related to perfluoroalkyl and polyfluoroalkyl substances, known as PFAS, reach court.
Insurance recovery attorney Mark Ladd, partner at New York-based Cohen Ziffer Frenchman & McKenna, said commercial general liability policies are most likely to respond to lawsuits alleging bodily injuries and property damage caused by PFAS.
“They are occurrence-based policies that respond to long-term, progressive injury claims lasting several years, and they cover allegations of bodily injury and property damage caused by the insured’s products that contain such chemicals. Costs and expenses may be required to correct and remove.” ” He said.
The pollution exclusion promulgated in 1986 may not bar all PFAS-related injury claims if they result from a person’s direct exposure to the chemicals, as opposed to exposure to traditional environmental pollutants, which the pollution exclusion is intended to exclude, Mr. Ladd. he said.
Although some general liability and excess insurers have already created coverage for chemicals in perpetuity, companies may look to environmental markets for policies covering the risk, said North Dakota-based Lydia Zaharia, a unit of Marsha McLennan is the agency’s environmental marketing director, Fargo said. Of Marsh LLC.
He added, “Following the recent EPA national drinking water standards for PFAS, we believe many carriers will work to quickly establish their position on PFAS coverage, if not already. “
