The annual ABA Insurance Coverage Litigation Conference was held in March and proved to be a great conference for connecting with others that work in the same industry as I do but also for enhancing my knowledge through the myriad of informative panels and plenary sessions.  One panel that caught my attention was “Five ‘Forever’ Fights: The Top Five Coverage Issues for PFAS Claims” which included my KCIC colleague, Nick Sochurek.  The panel focused on some classic issues that come up in most, if not all, insurance coverage battles around environmental issues, new issues stemming from PFAS claims in particular and questioned what might be the next PFAS coverage issue.  This blog will provide some details on the “forever” fights.

If you are reading this post, I suspect that you have heard of PFAS and know that it is in many products - from those you use every day like food packaging, dental floss, nail polish and non-stick cookware to products used in various industries such as firefighting foam, batteries, and pesticides.  Because of the widespread use of PFAS, everyone has some level of exposure to it, and a simple blood test would likely reveal that fact for all of us. Certain levels of some PFAS chemicals are alleged to be linked to various health conditions such as kidney and testicular cancer, cardiovascular risks, damage to liver function and diminished antibody response to vaccines.  All of this has led to many claims being filed by individuals and local and state municipalities, including a consolidated multi-district litigation (“MDL”), and this in turn, has led to battles over insurance coverage.

What Coverage Will Respond? 

The first fight related to PFAS coverage is an obvious one – what coverage will respond to these types of claims?  You will likely get a different answer to that question if you ask a PFAS defendant and their counsel as compared to asking a PFAS insurer and their counsel.  The most likely policies to respond are general liability and pollution legal liability, but arguments might be made for coverage under first party property; D&O; aviation; and owners, landlords and tenants policies as well. 

To prepare for the insurance battle, a PFAS defendant must make the effort to locate any and all possibly responsive policies before they face hundreds or thousands of claims.  Finding the policies does not answer the coverage question but it is the first step in securing coverage. It is not uncommon for policyholders to turn to others who specialize in insurance archeology in an effort to find coverage details.  Once found, the next steps are to understand the policy language and then determine if the policies are still available. Insolvencies, prior claim payments, policy buy-backs and other releases can have a significant impact on what remains available for PFAS claims. Once the policies are located and efforts are underway to understand their value, the policyholder will have to turn to the next fight for coverage.

Allocation and Trigger

For a traditional toxic tort, there are some typical steps to follow when assessing allocation and trigger, including determining when the injury or damage occurred, figuring out what method of cost sharing will be used and determining the covered costs.

These steps will be much more difficult for PFAS.  Determining the method for PFAS allocation modeling is basically starting with a blank slate.  As time goes on, there will be more case law that evolves but today, both policyholders and insurers are testing the waters.  This debate is a lengthy one and will be addressed in more depth in an upcoming blog specifically covering trigger and allocation.

Classic Pollution Exclusions

The applicability of pollution exclusions has been the focus of some of the early PFAS coverage disputes.  These cases have shown that the applicability of pollution exclusions depends on both the type of PFAS claim as well as the type of pollution exclusion.

At one end of the spectrum, when the PFAS claim is a products liability claim alleging direct exposure to a PFAS containing product, even a total pollution exclusion will not bar coverage as a matter of law in North Carolina (Buckeye case).  Pollution exclusions are largely seen as inapplicable to pure products liability claims, even the "absolute" or "total" pollution exclusions.

At the other end of the spectrum, a pollution exclusion applying to a "request" that an insured test for, monitor or clean up "pollutants" was held to exclude coverage for a class action against a recycling facility that discharged industrial wastewater containing PFAS into water systems in Georgia - where "pollutant" has a very broad meaning under Georgia law (Grange).  There the insured was a recycling operator, the matter concerned wastewater discharge, and the pollution exclusion contained language regarding requests for remediation efforts.

Things are grayer in the middle of that spectrum, and there is a lot of room for effective advocacy of differing positions.

• Would the Grange case have been different if the insured had faced products liability claims?
• Would Grange have been different if Georgia law did not apply or if "pollutants" had been defined?
• Would Buckeye have been different if the product liability claims did not involve "direct exposure" elements?

We can expect these issues to be litigated extensively in the future, and we can expect the classic battles related to the interpretation of language.  Some examples are:

• Drafting history of the policies
• Custom and practice (i.e. other claims, prior applications, etc.)
• Analogies to other claims and the applicability of exclusions (or lack thereof)
• Existence of more apt coverage (PLL policies, etc.)
• Common sense (is a wrapper for a McDonald’s burger really what the exclusions have in mind?)

New Pollution Exclusions

While the classic pollution exclusions will keep everyone busy, most commercial general liability and environmental policies will include PFAS exclusions going forward – if they don’t already.  These PFAS exclusions were first observed in policies in 2007-08 era and their prevalence has increased overtime.

The wording of PFAS exclusions varies and may depend on the exposure type - environmental, products, premises, bodily injury – and will likely impact a whole spectrum of classes of business (manufacturers, municipalities, etc.).

Because PFAS science is evolving and involves thousands of different fluorinated compounds, new exclusions are broad and are intended to be all encompassing.  But of course, there is always the question as to whether courts will agree. New PFAS exclusions should not alter the interpretation of any existing pollution exclusion as each exclusion should be decided based on its own merits and the facts of a case.  Some will argue that the inclusion of PFAS exclusions now, means prior exclusions did not cover PFAS – but others will argue that is not the case and that a PFAS coverage claim can be defeated by more than one exclusion.

What is Next?

The panel concluded by allowing us to ponder what future coverage issues will there be. Given the widespread use of PFAS, the evolving regulatory concerns and potential magnitude of liabilities, there is no doubt that additional coverage issues will arise over the coming years as the landscape unfolds. 

As promised, stay tuned to KCIC’s blog for a more in-depth review of the allocation and trigger arguments as well as continued coverage of these emerging battles.