PFAS Insurance Exclusions: How Can They Affect Your Business?

December 14, 2023 | Written by Jerry Nicklow

Understanding PFAS and Insurance Exclusions

As a small business owner, you may have seen some recent changes and exclusions in your business insurance regarding coverage for health issues arising from plastics containing PFAS (Per and polyfluoroalkyl substances). This blog will help you navigate these changes and understand how they might impact your business.

PFAS are synthetic chemicals used in products like Scotchgard®, food handling materials, and medical devices. These chemicals, known for their resistance to oil, grease, and water, have been in use since the 1940s and are found in a wide range of manufactured products. The problem with PFAS is that they do not break down easily, leading to potential contamination of water systems and other environmental concerns.

Common Items That Contain PFAS

PFAS (Per and polyfluoroalkyl substances) are found in a wide range of products due to their unique properties, such as resistance to heat, water, and oil. Some common products that may contain PFAS include:

1. Non-Stick Cookware: PFAS are often used to create non-stick coatings on pans and other cookware.
2. Food Packaging: As mentioned earlier, PFAS are used in various food packaging for their grease-resistant properties. This includes fast food wrappers, microwave popcorn bags, pizza boxes, and other takeout containers.
3. Stain-Resistant Carpets and Fabrics: PFAS are used in treatments for carpets, upholstery, and clothing to make them resistant to stains and water.
4. Waterproof Clothing and Gear: Outdoor clothing, footwear, and gear that are waterproof or water-resistant often contain PFAS.
5. Cleaning Products: Certain cleaning products may contain PFAS for their grease-cutting and stain repellant abilities.
6. Personal Care Products: Some cosmetics, shampoos, dental floss, and nail polish may contain PFAS.
7. Firefighting Foams: PFAS are used in certain firefighting foams, particularly those used to extinguish oil and gasoline fires.
8. Industrial Applications: PFAS are used in various industrial processes and products, including coatings, chrome plating, electronics manufacturing, and more.
9. Medical Devices: Some medical devices and products, such as surgical patches, may contain PFAS for their durable and resistant qualities.
10. Paints and Coatings: PFAS are often used in paints and coatings to improve their durability and resistance to environmental conditions.
11. Electronics: PFAS can be used in electronic devices for their fire resistance and insulating properties.
12. Automotive Parts: Certain parts of vehicles, such as gaskets or hoses, may contain PFAS due to their resistance to heat and chemical reactions.
13. Ski Waxes: PFAS can be found in certain ski waxes for their water- and ice-repellent properties.
14. Shoe Polish: The water-repellent qualities of some shoe polishes can be attributed to PFAS.

The widespread use of PFAS and concerns about their potential environmental and health impacts have led to increased regulation and efforts to find safer alternatives.

PFAS Insurance Exclusions

Recently, insurance companies have started using PFAS-specific exclusions in their policies. In June 2023, the Insurance Services Office (ISO) published endorsements that expressly exclude PFAS-related claims for insurers to use in their Commercial General Liability (CGL) policies. These exclusions typically cover bodily injury and property damage resulting from PFAS exposure.

Pretty much all liability insurance policies across all industries now include these exclusions.

What Does This Mean for Your Business?

If your business involves the manufacturing, distributing, sales, use or handling of materials containing PFAS, this could be a significant concern. With these new exclusions, traditional business liability insurance policies may not cover claims related to PFAS exposure. This could leave your business vulnerable to significant financial risk in case of a lawsuit or claim related to PFAS contamination or health issues.  Even if it is proven you did nothing wrong, the defense costs could bankrupt your business.

Exploring Other Insurance Options

Despite these exclusions in CGL policies, there are still ways to potentially cover PFAS-related risks:

1. Pollution Legal Liability (PLL) Policies:  Specifically designed policies cover pollution-related events, including the costs of cleanup and claims for bodily injury by third parties. PLL policies might provide coverage for PFAS-related issues, but it’s important to review them for any specific exclusions or limitations.
2. Directors and Officers (D&O) Liability Policies:  These policies could offer some coverage for PFAS-related litigation. Cases may arise where people allege company officers or directors of knew about PFAS contamination and failing to take action.  They key word here is to have alleged to have known.  If you actually did know about the PFAS and did nothing about it, then coverage may be denied.  As always, check your specific policy for coverage details.

Best Practices for Businesses

1. Review Current Policies: Check your existing insurance policies for any new PFAS-specific exclusions. You need to understand how these exclusions might affect the scope of your current coverage.
2. Historical Policies: Look into your past insurance policies. PFAS has been around since the 1940s; consequently, some claims might relate to incidents from decades ago.  Furthermore, old policies might still provide some coverage for these claims.
3. Renewal Negotiations: When renewing your insurance, consider PFAS coverage as a critical factor. Discuss with your insurance broker about the potential risks and the best ways to mitigate them through insurance.
4. Stay Informed: Keep up with the latest developments in PFAS regulations and insurance policies. This will help you make informed decisions and adapt your insurance strategy accordingly.

Conclusion

The insurance landscape regarding PFAS is evolving. It is crucial for you as a business owner to stay informed and proactive.

General liability insurance policies might not offer the necessary coverage with their PFAS exclusions.  Therefore, exploring other insurance options and carefully reviewing your current and past policies can help mitigate the risks associated with PFAS.  Always work closely with your insurance agent or broker, and legal counsel, to understand your coverage options.  This can protect your business from potential PFAS-related liabilities.

Stay vigilant and prepared to adapt as the situation around PFAS and insurance coverage continues to evolve.  Contact Huff Insurance if you have any queston or want a review of your business insurance plan.