Using historic CGL policies to defend PFAS claims | Insurance Business America
Liability insurance claims involving PFAS (perfluoroalkyl and polyfluoroalkyl substances) are expected to increase over the next few years as regulators clamp down on the so-called “forever chemicals”.
PFAS chemicals are ubiquitous, and as such, exposure to these chemicals is almost inevitable. There are many applications for PFAS in everyday products such as cookware, cleaning products, upholstery, carpets, and food packaging. The challenge is that PFAS chemicals can’t naturally break down, so they accumulate in water, on soil, and in blood.
Studies have shown that high levels of PFAS can lead to increased risk of cancer, changes in liver enzymes, and decreased vaccine response, among other health effects. Anyone exposed to PFAS may have cause to pursue litigation, especially if they can prove that exposure caused bodily injury.
Most PFAS claims will likely involve general liability policies, which provide insurance coverage for claims because of bodily injury and/or property damage to third parties. However, most current commercial general liability (CGL) insurance policies do not provide coverage for PFAS claims because of pollution or PFAS-specific exclusions.
Instead, businesses can look to their historic CGL policies (if they have access to them) – meaning those issued before the broad form pollution exclusion was introduced in the mid-1980s – to see if they have coverage. Most historic CGL policies cover bodily injury or property damage caused by an ‘occurrence’ – in this case, PFAS exposure – meaning they will cover any incidents that happen during the policy period, regardless of when a claim is reported.
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The burden of proof is challenging the further back these claims go, but Alex Roje, partner in Lathrop GPM’s Insurance Recovery practice, believes there’s enough information available for plaintiffs to bring cases, and for businesses (and their insurers) to defend allegations. She said there’s going to be a paper trail as to how and where PFAS chemicals were used, and whether they contaminated water sources, such that it’s “probably not a surmountable challenge for plaintiffs” to prove exposure.
“What about the burden of proof with the insurance company? Let’s say a claimant finds one of these old CGL policies [and they want to use it in defense of a claim alleging historical PFAS exposure]. Is the insurance company going to take the position that the claim can’t be proven? I think the answer to that is ‘no’ because these old CGL policies typically have a separate duty to defend the policyholder,” explained Roje.
“These policies require the insurance company to take up the defense of the policyholder in any claims where there is a potential for property damage or bodily injury. It’s the potential for coverage that really triggers the defense obligation. Even if it turns out the claimant has a full defense and they’re able to prove they have no liability, the insurance company still has to defend them through that process. And as anyone who has dealt with long-tail environmental claims will attest to, they are often extremely expensive to defend, so having a strong defense is key.”
Read more: Tackling the rising tide of environmental insurance risks
One mitigating factor in the litigation risk is the ubiquitous nature of PFAS chemicals. While it might be possible for plaintiffs to prove they were exposed to PFAS 60-years-ago, it’s not so easy to prove the connection between that exposure and subsequent bodily injury or property damage.
“From the plaintiff standpoint, even if they could prove their disease was a result of exposure to PFAS, they’d then have to prove a link between that exposure and the particular defendant, which is hard considering the fact that PFAS is everywhere,” said Roje.
However, the plaintiffs’ bar has a knack for creativity. As the litigation landscape around PFAS has evolved, Roje has seen more and more “creative arguments” from the plaintiffs’ bar around the science relating to the exposures. “They [the plaintiff attorneys] will always find a way,” she warned.