Spotlight on PFAS: Fall 2022 PFAS National Drinking Water Regulations and the Ensuing Impact on Insurance Coverage

Per- and polyfluoroalkyl substances (PFAS) are commonly referred to as “forever chemicals” because of their persistence, widespread distribution in the environment, and potential human-health impacts. Since they were first created in the 1940s, over 6,300 different chemicals have been produced within this class of compounds, with common names such as Teflon and GORE-TEX, and are found in a variety of products, including carpets, leather, paints, cleaners and firefighting foams. Nearly every American has forever chemicals in their blood, according to the U.S. Centers for Disease Control and Prevention.  

To date, the EPA has regulated more than 90 drinking water contaminants but has not established national drinking water regulations for any PFAS.  https://www.epa.gov/system/files/documents/2021-10/pfas-roadmap_final-508.pdf. In March 2021, EPA published the Fourth Regulatory Determinations, including a final determination to regulate Perfluorooctanoic acid (PFOA) and Perfluorooctane sulfonic acid (PFOS) in drinking water. In the Fall of 2022, the EPA will release its proposed National Primary Drinking Water Regulations (NPDWRs) for PFOA and PFOS.  In formulating this proposal, the EPA is evaluating additional PFAS beyond PFOA and PFOS.  The EPA anticipates issuing a final regulation in Fall 2023 after considering public comments on the proposal.  Id. 

Further, on June 15, 2022, the United States Environmental Protection Agency (EPA) released four drinking water health advisories for per- and polyfluoroalkyl substances (PFAS) under the Biden administration’s plan to deliver clean water.  https://www.epa.gov/newsreleases/epa-announces-new-drinking-water-health-advisories-pfas-chemicals-1-billion-bipartisan.  These advisories indicate the level of drinking water contamination below which adverse health effects are not expected to occur.  These advisories also provide technical information that federal, state and local agencies can use to pursue actions to address PFAS in drinking water.  The EPA is also encouraging states to apply for $1 billion in funds – the first of $5 billion in Bipartisan Infrastructure Law grant funding – to address PFAS and other contaminants in drinking water.  Id.

In addition to the proposed NPDWRs, the EPA also intends to restrict PFAS discharges from industrial sources through Effluent Limitations Guidelines (ELGs).  These guidelines will include rulemaking to restrict PFAS discharges from industrial categories where the EPA has the data to do so (organic chemicals, plastics and synthetic fibers, metal finishing and electroplating); launch detailed studies on facilities where the EPA has preliminary data on PFAS discharges but insufficient knowledge for rulemaking (electrical and electronic components, textile mills and landfills); initiate data reviews for industrial categories for which there is little known information (leather tanning and finishing, plastics molding and forming and paint formulating); monitor industrial categories where the phaseout of PFAS is projected by 2024 (pulp and paper, paperboard and airports). https://www.epa.gov/system/files/documents/2021-10/pfas-roadmap_final-508.pdf

This heightened federal regulatory activity will inevitably drive additional lawsuits regarding PFAS.  PFAS lawsuits to date include those for medical monitoring, personal injury based on PFAS exposure in drinking water, public and private nuisance, and claims for diminished value of property.  Consequently, policyholders have turned to their insurers seeking coverage for such claims.  Since PFAS have been used in manufacturing for many decades, companies that have received citations or cleanup orders relating to PFAS pollution look to legacy general liability policies for coverage of such claims. https://www.law360.com/insurance-authority/articles/1466772/greater-pfas-scrutiny-has-manufacturers-insurers-worried

Coverage litigation for PFAS claims is in its infancy.  The few courts that have analyzed coverage have focused on whether pollution exclusions preclude coverage for such claims.  The rulings in these decisions vary.  For example, a New York state appellate court recently held that an insurer did not have a duty to defend a manufacturer of synthetic materials accused of discharging PFAS into local water supplies because the court found that PFAS fell within the definition of “pollutant” and the allegations did not fall within the sudden and accidental exception to the pollution exclusion.  Tonoga v. New Hampshire Insurance, 159 N.Y.S.3d 252 (N.Y. App. Div. 2022).   The Tonoga court specifically stated that “allegations that a solution was dumped over a period of many years suggests ‘the opposite of suddenness’”.  Id. at 258. 

In contrast, a Michigan district court found that an insurer had a duty to defend the owner and operator of a tannery that used Scotchgard (containing PFAS) in its operations.  The court found that it was possible that the release of PFAS fell within the sudden and accidental exception of the pollution exclusion, thus finding a duty to defend.  Wolverine World Wide v. American Insurance, 2021 U.S. Dist. LEXIS 200978 (W.D. Mich. June 15, 2021).

In Colony Ins. Co. v. Buckeye Fire Equip. Co., 2020 U.S. Dist. LEXIS 194709 (W.D. N.C. 2020), a North Carolina district court focused on whether the underlying complaints against a manufacturer of fire equipment alleged traditional environmental pollution as to fall within the pollution exclusions within the policies at issue.  The court concluded that direct contact with or exposure to aqueous film-forming foams (AFFF) which contain PFAS did not constitute traditional environmental pollution, thus the insurers could not deny coverage to the manufacturer for claims alleging direct exposure.  Id. at *10.

In addition to applicability of pollution exclusions, PFAS claims will give rise to a host of other coverage issues, such as lost policies given that claims will involve decades-old legacy policies, coverage for successor liabilities, trigger and allocation, other insurance, product/non-product limits and aggregate issues, drop down and set off – just to name a few.

Clausen Miller continues to monitor emerging state and federal regulation of PFAS, the claims asserted against companies in light of these regulations, and the coverage issues that arise.  Please contact CM Partner Colleen Beverly if you have any questions regarding these issues.