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Common Chemicals Can Cause Cincinnati Manufacturers to Lose Insurance Coverage: 5 Steps to Protect Your Company
A common set of chemicals that appear in our drinking water, food and many consumer products is emerging as the latest threat in insurance. And companies that allow those chemicals to be used in their products likely will be held accountable by insurance companies.
Though a national standard has been set to limit these chemicals, called PFAS, in drinking water and the chemicals have been banned in U.S. manufacturing, they are still permitted to be used in imported products.
Upon finding these forever chemicals in local drinking water, University of Cincinnati researchers are now trying to understand how these toxins can leak into the water supply.
Manufacturers could be held accountable if they use foreign parts that include these forever chemicals, which are commonly used in non-stick pans, carpet and fire extinguishers, to name a few.
Research has linked the presence of PFAS to a host of health problems, such as cancer, high blood pressure and problems experienced during pregnancy, according to the Centers for Disease Control and Prevention. One study by the National Institutes of Health concluded that as many as 97% of Americans have PFAS in their bodies.
And when illnesses get linked to chemicals used in consumer products, lawsuits are likely to follow. Some are dubbing PFAS the “new asbestos,” which started to be linked to serious health issues in the late 1960s. The insurance industry has since paid out an estimated $100 billion in claims, according to AM Best.
It’s easy to see why insurers are nervous about PFAS and are starting to deny coverage to companies linked to PFAS. The reason? One big claim could put the insurer out of business.
Generally, PFAS requires remediation efforts 10 times that of petroleum hydrocarbon, which is found in various types of fuel and can be harmful to the body. This is because the carbon-fluorine bond is one of the strongest covalent bonds in nature. Only high-energy destruction processes are believed to be effective.
This is why the insurance environment is advancing the use of exclusionary wording given the costly nature of this chemical.
Five steps to protect your company
Companies can take several steps to minimize their risk.
- Investigate and understand the company’s link to PFAS.
- Have thoughtful discussions with your insurance company to see if your business is exposed to PFAS. Ask if they can provide some sort of relief or extension of coverage. Include the proper indemnification and hold-harmless wording in contracts.
- Consider captive insurance. It may be necessary to help tailor coverage for hard-to-insure and/or emerging risks, such as PFAS.
- Work with your broker to see if you can extend existing coverage for another one to three years. Discuss adding sublimit coverage to your pollution liability policy.
- Be aware of the potential sources of PFAS exposure and reduce such exposure when possible. This may include using alternative products that do not contain PFAS and ensuring that drinking water is tested for PFAS contamination.
Taking these steps can help protect the health of employees and companies, while reducing the potential negative impact of PFAS on the environment.
This article also appeared on bizjournals.com.
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