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Understanding and addressing PFAS: Risks, regulations, and mitigation strategies

Learn how rapidly evolving regulation around this group of forever chemicals is increasing your risk of litigation.

Organizations across virtually every industry are grappling with pressing concerns related to the current and historic use of a group of substances known as PFAS, or perfluoroalkyl and polyfluoroalkyl substances. These non-biodegradable chemicals, which can lead to significant health and environmental risks, are under increased regulatory scrutiny with two significant regulatory developments in April 2024.

PFAS is a family of more than 4,000 chemicals used since the 1940s, primarily for stain-proofing, waterproofing, fireproofing, and fire suppression. Today, PFAS can be found in many everyday products, from complex electronics to food packaging. They are also commonly used in aqueous film-forming foam (AFFF) to extinguish fires at facilities that store bulk fuel or chemicals.

But PFAS — often described as forever chemicals because of their complex, difficult-to-break chemical compositions — are challenging to clean up once released into the environment. They are believed to cause various impacts to human health, including an increased risk of some cancers. 

PFAS exposure: Is your business at risk?

Different types of organizations could be impacted by PFAS-related regulations and guidelines.

Upstream manufacturing

Organizations that either manufacture PFAS or use them in their manufacturing process.

Supply chain

Businesses that use feedstocks, components, or other materials that were treated with PFAS by upstream suppliers.

Fire suppression

Organizations that have AFFF in their fire suppression systems.

Waste disposal

Companies that accept PFAS and PFAS-containing materials for treatment and disposal and those that repurpose waste materials for beneficial reuse, like scrap or bio-solids, from wastewater treatment.

Downstream products

Businesses that store and sell finished products that contain PFAS.

A shifting landscape of regulation and litigation

While their wide-ranging use has rendered PFAS pervasive in the economy and persistent in the environment, these chemicals only started being monitored and managed like other environmental risks within the last 20 years. Since then, scrutiny surrounding the risks related to PFAS has led to a wide range of regulatory activity and complex litigation.

In the US, the Environmental Protection Agency (EPA) began stepping up its efforts to regulate this group of chemicals through its PFAS Strategic Roadmap, which includes extensive research into the environmental and human health impacts of PFAS and seeks to establish federal cleanup standards. It will also create more publicly accessible data on PFAS, which is expected to further increase public awareness and potentially lead to lawsuits. The EPA is also proposing new regulatory compliance obligations to minimize the release of PFAS into the environment and remediate releases that have already occurred.

The regulations, which were first released in 2021 and are updated regularly, may have a significant impact on organizations that manufacture PFAS, use these chemicals in their manufacturing process or for fire suppression, or even sell products that contain PFAS.

PFAS are currently regulated through existing laws, including:

  • On April 10, 2024, the EPA issued federal standards under the Safe Drinking Water Act, which will require utilities and other water providers to complete initial monitoring and reporting for PFAS in their systems by 2027. They will also be required to ensure that the amount of PFAS in their systems are within EPA standards by 2029. Approximately US$9 billion in federal funding will be made available to help utilities and water providers upgrade their facilities and become compliant with the new standards.
  • On April 19, 2024, the EPA announced the formal designation of two PFAS chemicals (PFOA and PFOS) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). These regulations are expected to trigger requirements for environmental investigations at sites where these two chemicals are known or suspected to have been used and to clean up any that are detected. This could include formerly contaminated sites that were remediated and contaminated sites that are currently undergoing cleanup.
  • The EPA is also expected to make changes to the Resource Conservation Recovery Act (RCRA), which regulates hazardous substances from the time they are generated to when they are disposed.  These changes could introduce new requirements for recordkeeping of storage, transport, use, and disposal of PFAS. 

At the same time, some state environmental agencies are pursuing their own efforts to regulate PFAS and have even sent inquiry letters to organizations.

This regulatory uncertainty, and the potential for differing guidance once the EPA regulates PFAS under CERCLA, is a challenge both for organizations with potential PFAS liability and insurers that are concerned about potential cleanup costs as well as costly litigation outcomes.

Numerous private party lawsuits arising from alleged exposure to PFAS in drinking water, clothing, firefighting gear, AFFF, and soil/groundwater contamination from landfills and facilities that use the chemicals in their manufacturing processes have already been initiated.

Some plaintiffs’ attorneys and private parties have been using geographic information systems (GIS) mapping tools to identify sites where PFAS is known or reasonably believed to be present. They are using this information in lawsuits against current and former owners of these sites who might be implicated due to the retroactive nature of liability.

PFAS litigation, like all toxic tort litigation, often carries high settlement demands, extensive legal fees, and additional regulatory scrutiny that leads to mandated cleanups.

Further, the expense of cleanup can be extremely costly. A study by the Minnesota Pollution Control Agency found that removing and destroying PFAS from certain wastewater streams in the state could cost as much as $28 billion over 20 years.

Concerns lead to more insurer scrutiny and more difficult market conditions 

Environmental exposures are often mitigated through the strategic deployment of environmental risk transfer solutions, such as pollution legal liabilitycontractors pollution liabilityexcess of indemnityremediation cost cap, and environmental liability buyout. However, amid increased scrutiny, property, casualty, and pollution insurers started applying stricter underwriting standards in relation to PFAS. Because of these chemicals’ long-term use, ubiquity, and persistence in the environment, as well as the potential of high losses and limited underwriting data, many carriers are starting to either restrict coverage or exclude it completely.

Organizations have faced challenges gathering sufficient PFAS-related data to present to insurers. And even when they have robust data, carriers may still apply exclusions if they determine that the PFAS exposure is a higher risk than they can accept. Although this trend is expected to intensify amidst increased regulatory and judicial activity, organizations with potential PFAS exposures may still be able to secure coverage, including for:

  • Cleanup of AFFF releases.
  • Cleanup of PFAS detected during an environmental investigation or cleanup ordered by an environmental regulator.
  • An inability to effectively assert immunities to PFAS liability as outlined in various proposals currently being considered by Congress.
  • Third-party bodily injury or property damage and natural resources damage claims.

The key to securing coverage, even if limited, often lies in understanding the true extent of exposures and aligning the various departments across the organization to assess and quantify the risk, and present this data, together with risk-mitigation actions, to underwriters.

3 actions to help minimize PFAS risk

As regulatory activity evolves and the risk of litigation intensifies, organizations with PFAS exposures may wish to consider the following to help address their risks.

1. Manage AFFF in fire suppression

Organizations that utilize PFAS-containing AFFF should assess whether this fire suppression foam can be replaced with an alternative that does not contain PFAS. If alternatives are available and feasible, connect with your local fire department and discuss how they can use AFFF alternatives on your premises.

If AFFF cannot be replaced, consider upgrading the fire suppression and containment systems to minimize the likelihood of an accidental release, or of a release migrating beyond the boundaries of the site and impacting third-party properties and/or environmental pathways, such as rivers and lakes.

2. Limit and control PFAS in your supply chain

Work with the organization’s procurement teams to identify PFAS across all streams of your supply chain and consider sourcing alternatives where feasible.

Consideration should also be given to negotiating liability protections and indemnities in procurement agreements with upstream suppliers.

3. Update environmental due diligence guidelines

Ensure that environmental due diligence for corporate or asset transactions include an assessment of PFAS. Consider the impacts of conducting Phase I or Phase II environmental site assessments and environmental desktop reviews. And consider including PFAS-related clauses in transaction contracts.

PFAS is becoming a watershed moment in pollution liability risk. Assessing exposure to PFAS and developing a mitigation strategy can be key to minimizing losses and crafting an effective plan to transfer the risk.

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