Litigation of PFAS and Other Suspected Contaminants: Mitigating Risk Through Insurance | HUB

The United States (US) has seen an explosion of litigation in recent years regarding perfluoroalkyl and polyfluoroalkyl substances (PFAS), referred to by some as “forever chemicals” because they are slow to degrade and can remain in the environment for many years. PFAS are a large group of synthetic chemicals that are used in a wide range of product types, such as water and stain repellents, lubricants, packaging, electronics and firefighting foams, mainly because of their resistance and low chemical reactivity. .

In recent years, questions have been raised as to whether PFAS represent a cause for concern from an environmental perspective and whether there may be risks to human health from exposure to PFAS. In the US, high-profile lawsuits have prompted many states to pass laws restricting some uses of PFAS. States like Minnesota, for example, have given state agencies authority to ban PFAS in a wide range of products, have enacted PFAS phase-outs in food packaging, and have enacted limits on PFAS in a variety of consumer products, including carpets , carpets, cosmetics and food packaging. Recently, the US Environmental Protection Agency announced legally binding drinking water limits for a group of PFAS compounds believed to be the most dangerous.

Outside the US, greater activity by consumer groups and regulators can be expected, resulting in more widespread PFAS-related litigation in the United Kingdom (UK) and beyond against manufacturers, retailers and others in the supply chain. This will require a range of responses from businesses in the UK and the European Union (EU), including a focus on how insurance policies can respond to these new and evolving risks.

Recent Actions by UK and EU Regulators

A report published by the UK Health and Safety Executive (HSE) in April 2023 commented in detail the extent to which PFAS are used in the UK and made a number of recommendations, including limiting the use of PFAS in foams, textiles, furniture , and cleaning products.¹ From a regulatory perspective, the UK’s REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) regulations apply to most chemical substances that are manufactured or imported into Britain. Currently, there are only two UK REACH restrictions on PFAS, relating to PFOA (perfluorooctanoic acid) and its salts and perfluorinated silane substances. These chemical compounds are commonly used to make clothing that resists heat, oil, stains, grease, and water. However, following the HSE report, the HSE has added PFAS as a category of chemicals to the Rolling Action Plan as prioritized substances for assessment under REACH in the UK.²so it is possible that further restrictions will come into force relatively soon.

As part of its retained EU law, the UK has regulations governing persistent organic pollutants (POPs) resulting in the banning of PFHxS (perfluorohexanesulphonic acid). These regulations further provide that a person who manufactures, places on the market or uses a certain POP, such as PFOS (perfluorooctanoic acid) or PFOA, in contravention of the ban on manufacture, sale or use, is guilty of a breach of liability strict . Both corporations and responsible individuals (such as directors) can be found guilty and will be liable to pay a fine, serve a prison sentence, or both.

Current EU PFAS legislation includes restrictions on PFOS, PFOA and PFHxS. Further restrictions are expected after Denmark, Germany, Norway, Sweden and the Netherlands jointly submitted the EU PFAS Restriction Proposal (Proposal) in 2023, aiming for a blanket ban on all (around 15,000) PFAS chemicals. The proposal is currently in the consultation phase and a final decision can be expected from the European Commission in 2025. The proposal includes some exemptions, for example, for PFAS used in plant protection products, biocides and medicines. If the ban were to continue, companies operating in the EU would have between a year and a half to 12 years to introduce alternatives. This could result in EU companies completely banning the use and production of PFAS.

Dissemination of the judicial process

The volume of PFAS-related litigation has accelerated significantly in the US over the past decade. In addition, US courts have seen a growing number of consumer class action lawsuits against manufacturers that make dental floss, feminine hygiene products, cosmetics and waterproof fabrics that contain PFAS. Such litigation focuses on alleged contaminants in consumer products, but is not limited to the alleged presence of PFAS and extends to other alleged contaminants: benzene in dry shampoo, aerosols, and acne products; titanium dioxide in cosmetics; chlormequat or other pesticides in oat products; formaldehyde and other chemicals in hair relaxers; and microplastics in water bottles and other consumer products. Of these alleged pollutants, all are currently restricted or banned in the EU, while the UK has only banned the use of benzene in consumer products and formaldehyde in cosmetics.

In the UK and Europe, PFAS-related litigation is expected to increase. To cite just one example, a recent claim in Belgium culminated in a €571 million settlement between the government and the operator of a manufacturing plant after it was found that the manufacturer had contaminated the surrounding soil, resulting in levels of high levels of PFAS in the bloodstream of local residents.³ Another claim was brought by a number of Dutch municipalities against a chemical manufacturer to recover damages resulting from alleged soil contamination containing PFAS.⁴

In the UK, it is only a matter of time before we start to see a consistent outcome of claims and class actions relating to PFAS and other alleged emerging contaminants. Such claims could theoretically be brought on a number of different grounds ranging from personal injury, where claimants claim that exposure to PFAS has caused health problems, to product liability, where the presence of PFAS is claimed to make the product in question unsafe. . . There may also be claims for property damage where there are claims of contamination, for example of soil or groundwater, or legal trouble. Even in cases where the discharge of industrial effluent may be permitted by license, these discharges may face legal challenges based on alleged risks to human health and the environment.

Identifying potentially responsible insurance policies

Companies should review their insurance policies for coverage regarding the costs of defending PFAS-related claims and liabilities. The following policies may be relevant depending on the nature of the claim:

Public Liability Insurance or Commercial Liability

Public liability or commercial liability insurance usually provides coverage against liability to third parties for property damage or bodily injury arising from the conduct of business. Such policies usually operate on an “events occurring” or “losses occurring” basis. An “occurring loss” policy provides coverage in respect of liability for loss or damage sustained during the policy period. In the case of bodily injury caused by exposure to a harmful substance, liability usually arises not at the time of initial exposure, but when the disease occurs.⁵

Employers’ Liability Insurance

Every employer carrying on business in the UK must take out employer’s liability insurance to provide cover against liability for bodily injury or illness suffered by any employee in the course of their employment. Coverage applies in respect of illness or disease incurred during the policy period, even if the symptoms appear at a later date.⁶ This means that historical employer liability policies can be implicated in the event of alleged workplace exposures.

Product liability insurance

Product liability insurance provides coverage against liability to third parties for property damage or personal injury caused by the product itself. This may include cases where it is claimed that there is property damage through a contaminating effect on a third party’s product as a result of the introduction or mixing of product supplied by the insured.

Environmental Liability Insurance

Environmental liability insurance provides coverage against liability for certain environmental or pollution risks, including pollution or contamination arising from an industrial or manufacturing facility.

Practical tips to increase coverage

There are a number of steps that corporate policyholders should consider when faced with any PFAS or other alleged contaminant-related claims or potential claims, in particular:

Immediate notification to insurers

Most liability policies provide for written notice as soon as practicable, or within a specified period of time, of any accident or occurrence that may give rise to a claim against the insured and of any claim or legal proceeding that may be instituted . Prompt notification is important and can facilitate access to any coverage for costs incurred before the procedure is issued.

Early Coverage Assessment

Consulting with experienced coverage attorneys will help identify and analyze responsible policies and anticipate any coverage issues insurers may raise. If insurers establish reservations, or rely on coverage defenses or policy exclusions, a coverage attorney can often help fight these arguments at an early stage.

Collect and save relevant documents

Insurers (as well as third party claimants) may require the production of extensive documentation and it is important to take steps early to ensure that potentially relevant documents are found and preserved.

Defense of Claims

Some liability policies provide that the insurer has the right to defend third-party claims, but such a clause does not obligate the insured to accept the services of the insurer’s chosen attorneys. Insureds should seek to negotiate with Insurers to ensure that attorneys with adequate experience and undivided loyalty to the policyholder are appointed.

Negotiating policy terms

Even if such claims have not yet materialized, policyholders should adopt a proactive approach to their liability insurance and take steps to renew it to ensure that their coverage is broad enough to respond to claims of possible. Policyholders should seek to negotiate policy terms, particularly if insurers establish pollution exclusions or specific exclusions for claims involving PFAS or other alleged contaminants. Lloyd’s Market Association has already produced model PFAS exclusions for use in liability insurance policies, but such exclusions are broadly worded and proactive policyholders may be able to negotiate better terms.

Our attorneys can help businesses devise appropriate strategies to prepare for and defend against third-party claims, while pursuing claims against insurers to cover defense costs and any additional losses or liabilities. This is particularly important in the context of claims arising from alleged emerging pollutants as it is an area that is constantly evolving and changing in scope.