Reducing PFAS, Plastics-Related Costs and Insurance

In recent years there has been a significant increase in cases involving per- and polyfluoroalkyl substances (PFAS), as previously reported in Bloomberg. Many of these cases involve groundwater near manufacturing facilities, airports, and military bases.

Regulators and special interest groups are now focusing on the presence of PFAS in biosolids, cosmetics, and turf, among other things. Besides PFAS, plastics and microplastics are also under scrutiny. Like PFAS, they are used in many industries, are persistent, and are found in many environments, including people, food, and drinking water.

Cost Reduction

Companies targeted in both PFAS and plastics lawsuits face lengthy lawsuits with high defense costs and, possibly, enforcement and adverse judgments. The need for insurance can reduce many of these costs.

Since PFAS claims and lawsuits related to plastics can affect operations and products that date back several decades — to the 1960s and earlier — insurance coverage can be found for decades of insurance coverage.

Companies with other risks known as the “long tail”, such as environmental and asbestos lawsuits, already know how to drill. A long time ago they rebuilt their old insurance programs, creating charts that showed their main policies and conditions. They know, among other things, the limits of responsibility; which policies have interest on coverage and which do not; self-insured policies; if the law was violated by what he said before; policies that have been lost; the insured is insolvent; when the so-called “qualified” and then “absolute” removal of pollution first appeared in their programs; and how companies’ past experiences affect their programs.

These companies also know the difficulty of getting coverage from their old insurers.

But cases of PFAS and plastics related to plastics can also attract companies that do not have a “long tail”. For these companies, managing these issues may require thinking about many new things.

What Policies Can Be Included?

Policies that must be issued for cases involving bodily injury or property damage are commercial liability or individual policies. Requirement may also be found under anti-corruption laws or, in the case of shareholder suits, directors and officers regulations. Other types of policies may also be affected depending on the situation.

What Policies Should I Consider First?

Some states require that information be verified or are subject to state law, such as New York, and insurers argue that this requires immediate notification. Insurance policies that are currently in effect may be listed on “claims-made-and-issued” or “first-notice-events”. These regulations may contain reporting requirements that, if not followed, may result in a complete loss. Although there are no notification requirements, insurers sometimes state that policies require immediate notification, especially policies governed by New York law.

What Can I Do If I Can’t Find The Rules?

Many companies were initially unable to get old insurance policies. Fortunately, a variety of methods can be used to find lost policies. There are also cases in many jurisdictions regarding lost or limited policies, including issues related to the burden of proof and the types of evidence that may be accepted to prove the policies’ principles. These stories are often based on reality and based on their authority.

What Causes Spreading?

Although there may be significant differences in the language of the policy and the applicable laws, most of the standard legal and commercial policies are triggered by the possibility that property damage or bodily injury occurred during the policy. For example, if a plaintiff claims that a company began manufacturing products containing PFAS in the 1960s, all of the policies that have been in place since then can be applied.

What Happens If Multiple Rules Are Introduced?

These stories have been going on for many years of many cases and there is no single solution.

Under one policy adopted in most states, known as “full coverage,” each individual policy must pay 100% of the company’s premiums, returns, and judgments up to the limit that must be paid.

In a different approach, known as “pro rata,” each individual’s policy bears only a portion of the company’s losses.

Since the strategy taken can have a big impact on how much the company can recover from its insurers, court battles are common, where insurers sometimes file suits to get a better place or rules. Therefore, businesses should focus on these factors in the beginning.

What Should I Know About Excluding Pollution?

Insurers may argue that there is no coverage available for PFAS and plastics-related lawsuits due to the fact that they have stopped polluting the environment. Versions of such an exemption began to appear in other laws in the 1970s, and became popular in the mid-1980s.

Whether decontamination — including so-called “absolute” decontamination — actually covers PFAS bars and plastics-related lawsuits will depend on a number of factors, including the content of the lawsuit, the language involved, and the applicable law.

It is unclear whether PFAS or plastics-related lawsuits will ultimately affect more companies. But the developments in the case are so important that companies with the opportunity can be helped to consider how insurance can fit into their big risk reduction plans.

This article does not necessarily reflect the views of The Bureau of National Affairs, Inc., publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Jeff Kiburtz is of counsel in the Los Angeles office of Covington & Burling LLP. He focuses on representing policyholders in complex insurance matters.