The growing concern over perfluoroalkyl and polyfluoroalkyl substances (PFAS), commonly known as “forever chemicals,” is significantly impacting the insurance landscape, particularly for environmental consulting firms. This article explores the challenges posed by PFAS exclusions in insurance policies and how specialists in environmental insurance, like our company, are addressing these issues.
What are PFAS?
PFAS are a group of synthetic chemicals used in various industrial and consumer products due to their resistance to water, grease, and heat. They are found in items such as non-stick cookware, water-repellent clothing, and firefighting foams. Due to their persistence in the environment and potential health risks, PFAS have become a major focus for regulators and the insurance industry.
Impact of PFAS on Insurance Policies
1. Emergence of PFAS Exclusions
In recent years, insurers have increasingly included specific PFAS exclusions in their liability policies. These exclusions aim to limit the insurer’s exposure to the significant risks associated with PFAS contamination. For example, the Insurance Services Office (ISO) published endorsements in 2023 that expressly exclude PFAS-related claims from Commercial General Liability (CGL) policies (The National Law Review) (Business Insurance).
2. Challenges for Environmental Consulting Firms
Environmental consultants often deal with sites contaminated by PFAS, making these exclusions problematic. Without coverage for PFAS-related claims, firms could face substantial financial risks from cleanup costs and third-party liability claims.
3. Professional Liability and Excess Coverage
Some insurers are attempting to add PFAS exclusions to professional liability and excess coverage policies. This is particularly concerning for environmental consultants who rely on these policies to cover claims arising from their professional services. Our company, as specialists in environmental insurance, has been successful in pushing back against these exclusions, ensuring that our clients maintain the necessary coverage (Hinshawlaw) (Huff Insurance).
Key Considerations for Environmental Consulting Firms
1. Review Existing Policies
It is crucial for firms to review their current insurance policies to identify any PFAS exclusions. Understanding the scope of these exclusions can help in assessing potential coverage gaps and financial risks.
2. Explore Alternative Coverage Options
If traditional liability policies include PFAS exclusions, firms should consider specialized pollution liability policies. These policies can provide broader coverage for environmental claims, including those related to PFAS. Additionally, Directors and Officers (D&O) liability policies may offer some protection, particularly if claims involve allegations of mismanagement related to PFAS (The National Law Review) (Huff Insurance).
3. Historical Insurance Policies
Older general liability policies, especially those issued before the widespread adoption of absolute pollution exclusions in 1986, may still offer coverage for PFAS claims. It is beneficial for firms to locate and review these historical policies, as they could provide valuable coverage for long-term PFAS contamination issues (Hinshawlaw) (Business Insurance).
Frequently Asked Questions (FAQs)
Q: What are PFAS and why are they a concern?
A: PFAS are synthetic chemicals used in various products for their resistant properties. They are concerning due to their persistence in the environment and potential health impacts.
Q: How do PFAS exclusions affect insurance coverage?
A: PFAS exclusions in liability policies can leave businesses vulnerable to significant financial risks from PFAS-related claims, including cleanup costs and third-party lawsuits.
Q: What should environmental consulting firms do about PFAS exclusions?
A: Firms should review their current policies for PFAS exclusions, explore alternative coverage options like pollution liability policies, and review historical insurance policies that may provide coverage.
Q: Can older insurance policies provide coverage for PFAS claims?
A: Yes, older policies issued before the widespread adoption of absolute pollution exclusions may still offer coverage for PFAS claims. It is essential to locate and review these policies.
Conclusion
The evolving landscape of PFAS regulation and insurance coverage presents significant challenges for environmental consulting firms. By understanding the implications of PFAS exclusions and exploring alternative insurance options, firms can better protect themselves from potential liabilities. As specialists in environmental insurance, our company is committed to helping clients navigate these complexities and maintain comprehensive coverage.
Sources and Citations
- Hinshaw Law. “Insurers Face Large PFAS-Related Losses.” Accessed May 13, 2024. Hinshaw Law
- National Law Review. “PFAS Regulation and Insurance Coverage Implications.” Accessed May 13, 2024. National Law Review
- Business Insurance. “Federal PFAS Changes Open Floodgates to Liability, Exclusions.” Accessed May 13, 2024. Business Insurance
By staying informed and proactive, environmental consulting firms can effectively manage the risks associated with PFAS and ensure their continued success and protection.
Rick van Oppen, CPCU
