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 use those chemicals likely will be held accountable by insurance companies.
They’re called PFAS, a group of thousands of perfluoroalkyl and polyfluoroalkyl substances. They’re used in everyday products such as non-stick cookware, carpet and food packaging. When those products are disposed of in landfills, the PFAS seep into the soil and groundwater, leading to water contamination.
PFAS are also found in foods such as fruits, vegetables and meats. One study by the National Institutes of Health concluded that as many as 97% of Americans have PFAS in their bodies.
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.
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-flourine bond is one of the strongest covalent bonds in nature. Only high-energy destruction processes are believed to be effective. This is again why the insurance environment is advancing the use of exclusionary wording given the costly nature of this chemical.
How 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 1-3 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.
PFAS stands to be the next big crisis facing many companies. Oswald can help you make the right moves to protect your organization.
For more information, please contact me directly or learn more on our Property & Casualty page.
VP, Global Practice Leader
Note: This communication is for informational purposes only, and is not intended to offer legal, tax, or client-specific risk management advice. Information in this communication is not meant to describe specific coverages that may be advisable or available to you or your company, or to interpret specific coverages that may already be in place. General insurance descriptions in this communication do not include complete insurance policy definitions, terms, and/or conditions, and should not be relied on for coverage interpretation. Actual insurance policies must always be consulted for full coverage details and analysis. View our privacy notice.