Per- and poly-fluoroalkyl substances, known as PFAS, have been a major contributor to many industrial and consumer products for many years. These “endless drugs”, which are related to environmental pollution and negative health effects, have received increasing attention from regulators, plaintiffs’ banks, and, in addition, insurance companies.
A “case to watch” related to PFAS is a multidisciplinary litigation (“MDL”) in the United States District Court for the District of South Carolina, Judge Gergel presided over. The MDL includes more than 2,000 lawsuits brought by individual plaintiffs and federal and state governments over the production and/or use of liquid film forming foam, also known as AFFF. The use of AFFF, which has historically been used in firefighting, including by the United States military, is said to cause the release of two types of PFAS into the environment – PFOS and PFOA.
On September 16, 2022, Judge Gergel denied a motion for summary judgment filed by defendants 3M Company and other accused manufacturers of AFFF on federal security claims. Although not an insurance claim, this claim is important in PFAS cases and may have insurance implications.
Government Contractor Immunity Defense
The government’s contractor immunity defense is designed to protect the government’s interest in getting the products it needs at reasonable prices, even if there are defects in the products. Under immunity, a government contractor can claim immunity from allegedly defective products if the following three criteria or “steps” are met: (i) the government accepts the product’s specifications; (ii) a product consistent with the policy; and (iii) the contractor warned the government of the danger of the substance which was known to the contractor but not to the government. A doctrine known as “continuing use” allows the manufacturer to enforce safety – including the first step – when the government continues to use the drug after knowing full well the dangers of the drug.
In 1969, the Navy announced a military specification (“MilSpec”) for the AFFF. 3M originally supplied a MilSpec-compliant AFFF that contained PFOS. In 2000, 3M stopped producing PFOS, and other contractors using an alternative AFFF production process called telomerization stepped in to fill the gap that 3M had pulled out of the market. Although telomer-based AFFF does not contain PFOS, it can degrade to PFOA instead. Telomer-based AFFF manufacturers included Tyco Fire Products LP, Chemguard Inc., Kidde-Fenwal, Inc., National Foam, Inc., and Buckeye Fire Equipment Company.
Judgment Denying Summary Judgment
In its decision denying the government contractor’s defense summary judgment motion, the MDL court held that: (i) MilSpec did not establish a specific policy under the first immunity clause; and (ii) there are factual issues as to whether the AFFF manufacturers warned the government in a timely manner of the dangers of their AFFF products known to them but not to the government and whether the “continuing” doctrine applies.
The court held that MilSpec was invalid because it was only a “formula,” which allowed “any manufacturer to make [its] a magical beer” made from “several different types [PFAS],” instead of a “symptom” that would require the use of a particular drug.
Regarding the third part and the “continuity” theory, the court said that all AFFF manufacturers “have more knowledge than the government about the properties and risks involved in their products and willfully withheld information from the government.” timely disclosure of critical information to the government, and “willingness to challenge” negative information that was revealed.
Similarly, the court found evidence that AFFF telomer manufacturers, particularly through the Fire Fighting Foam Coalition (“FFFC”), misled the government into believing that their AFFF products would not convert to PFOA, despite learning that their products would. or they can do that. In addition, the court noted that the government’s risk management actions after 3M’s late disclosure, and the government’s subsequent decision to restrict the use of telomer-based AFFF to only “difficult applications,” cast the “remaining use” doctrine into further doubt.
The court’s rulings and opinions, although not made in the insurance industry, could have far-reaching consequences. Most liability policies cover any injury or damage that the insurer claims is caused by an “occurrence,” which the policy defines as an “accident.” To the extent that the insured causes injury or damage intentionally or should have known that it would cause injury or damage, liability for such injury or damage may fall outside the scope of coverage. Courts generally place the burden on the insured to prove that the injury or damage was caused by an accidental “occurrence”.
In addition, many liability policies contain “anticipated or expected” clauses that do not include the provision of injury or damage that the insurer expects or intends. Therefore, if the insured expects or intends to cause injury or damage, coverage may not be available. Courts often place the burden on the insurer to prove that the “anticipated or intended purpose” applies.
The MDL court decision reflects evidence presented by the plaintiffs that 3M and the makers of AFFF telomeres intentionally concealed information about the dangers of their products. Depending on how the court interprets the meaning of the process of “circumstances” and/or “expected/desired”, the decision and the evidence it refers to (if proven) may provide support for the defense based on either or both. provided by policies.
However, the governing law in use may provide additional information. For example, if there was an “incident” or if the injury or damage was “expected or intended” it would depend on whether the only thing that caused the loss or damage was expected or intended, or if the injury or damage was expected or intended. . Similarly, proof of the insured’s actual knowledge or intent, as opposed to what the insured should have known, may or may not be required.
In addition, the plan and proposal may have implications for the facts that, if any, are caused by claims of PFOS and PFOA being harmful. Most liability policies do not provide coverage for injuries or damages that the insured knew about before the policy term. Therefore, policies issued after the insurer has determined that PFOS or PFOA are causing harm may not provide coverage for these claims. Similarly, insurers may argue that they should not be liable for damages that the insured failed to mitigate by failing to disclose risks immediately after becoming aware of the risks (even if they discovered the risks after the statutory period). Again, the court decision discusses in detail what AFFF manufacturers may have known about the dangers of PFOS and PFOA, and when they knew it.
Of course, the court denied summary judgment against 3M and five other AFFF manufacturers. The evidence you mention may or may not apply to other insurers to varying degrees. The parties should evaluate whether the MDL evidence is relevant to them and how the evidence affects them and should also consider other evidence that may be relevant to the types of issues described above.