House Resolution (H.R.) 535 "PFAS Action Act of 2019" passed the Congress in January and is heading to the Senate for final resolution. If it is signed into law by the President, H.R. 535 will be the first measure at the Federal level for addressing the aggregating concerns surrounding the widespread contamination of groundwater in America from Per- and polyflouralkyl substances (PFAS). PFAS have been associated with health concerns and began gaining national attention in the past few years.

Here are the basic elements of H.R. 535:

1. Designation of per- and polyflouralkyl substance (PFAS) as a hazardous substance (including as an air pollutant) to create stronger regulations on storage and disposal practices

2. Requirement for the United States Environmental Protection Agency (USEPA) to set enforceable drinking water standards (Note: USEPA passed interim recommendations for PFAS in groundwater in December 2019, but these recommendations are not a final rule and legally unenforceable. The recommendations represent a voluntary actionable level at this time)

3. Requirement for public water systems to test and monitor compounds (facilitated by governmental grants and financial aid as necessary)

4. Addition of PFOS, PFOA, and GenX (a related compound) to the Toxics Release Inventory, a public database under which corporations report discharges and emissions exceeding permits

5. Provision of guidance to minimize the use of firefighting foam (which contains PFOA)

6. Expansion of EPA's Safer Choice program to alert consumers of household products made with PFAS

Summarized in the above, the bill achieves actionable items called for by public outcry and the environmental community for these contaminants of concern. However, the details of the bill provide limitations to the enforceability of the act and cast uncertainty into how the regulations will be enacted for corporations (and their insurance carriers) under legal liability. Potential impacts on the insurance community include:

1. The insurance community will see a rise in nuisance (and real) allegations of liability that will be onerous for at least legal expense and defense costs and may be costly for remediation expenses (the scope of which are largely unknown at this time).
   
   Only certain PFASs (not all) will be deemed hazardous and the EPA has five years after the bill is enacted to determine if any other PFASs should be designated as hazardous. As such, the federal law will only apply to very specific chemical compounds or components within this large group of potential contaminants in our environment. Uncertainty surrounding legal liability provisions will continue even after the EPA establishes final rules for remediation objectives for some PFASs.
   

2. The insurance community will see a rise in subrogation and filings for exposures to PFASs at airports despite an exemption status for the airport owners.

   
   Public agencies and private owners of public airports that receive federal funding are exempt from remediation liability if PFASs were released into the environment as a result of firefighting foam utilized within Federal Aviation Agency (FAA) rules and regulations for safety/training. While the public agencies and owners of airports will be exempt from the regulations, the bill does not address the legal liability for the applicators of the PFASs/PFOA chemicals at airports which can include Fixed Based Operators (FOB) contractors or the airlines and airline employees which are not public agencies nor owners of the airports.

3. The insurance community will see a continued rise in claims for bodily injury, property damage, and remediation due to compulsory testing and public informational lists being compiled.

   
   While the EPA must require comprehensive toxicity testing to be conducted on all PFASs including development of information by any person who manufactures, possesses, or intends to manufacture or process a PFAS, the bill allows for exemptions on testing or information submission. Despite the ability to have exemptions on testing, information on those exemptions must still be published and made available to the public under Freedom of Information Act (FOIA) disclosures. With a readily available list of perceived "offenders," insurance carriers are likely to see increase in allegations against those listed in the EPA published documents.

4. Carriers who provide pollution coverage to municipalities will likely see an increase in claims for long-term physical effects from water supply that may be contaminated with PFAS.
   
   The EPA must promulgate a national primary drinking water regulation for certain PFASs and publish a health advisory for a PFAS not subject to a national primary drinking water regulation. Further, any owner or operator of an industrial source that introduces PFASs into the treatment works will need to provide specified notice as to the identity and quantity of such PFAS.
   
   With testing of drinking water sources, and commitments for financial capital to monitor the drinking water sources, additional expenditures and claims are likely to arise for bodily injury and remediation of PFAS from drinking water suppliers. Under disclosures, water quality reports will need to provide information on PFAS if these chemicals are subject to a national primary drinking water regulation. Municipalities who utilized Fixed Based Operators (FBO) for maintenance and management of the systems (including testing of drinking water) are likely to also see claims and subrogation potential for their contractual liability establishing legal liability.
   
   Owners and operators that release PFAS into the treatment system under permit will also be in the chain of written manifest and potentially subject to legal liability for the treatment works as a "source" of contamination in drinking water.

Overall, while H.R. 535 establishes much needed guidance and federal environmental law on PFASs, there are caveats to the law that will continue to offer uncertainty to the insurance marketplace. Insureds will continue to find the market challenging for the acceptance of risk transfer for PFAS/PFOA/GenX based upon the uncertainty of the regulations and the severity of the contamination as it exists in the United States.

Several states (including MA, MN, MI, NJ and VT) have already passed regulations on maximum contaminant levels (MCLs) for drinking water and are enforcing actions on insureds and in turn their insurance carriers under those MCLs. Other states (such as CA, NH, NY, NC, PA, WA and as of January 2020, IL) have regulations in the proposal stage leading towards increasing enforceability. Claimants in these states may be postponing their assertions of legal lability until the effective date of the state and federal regulations apply.

This post is a part of the PHLY E&S Solutions Environmental services on protections and liabilities for environmental risks. The information contained herein is for discussions and informational purposes and is not intended to be a full disclosure or complete analysis of the liabilities or risks posed to insured(s) in the marketplace. For additional resources and information, please visit the following websites:

Resources and Additional Information:

United States House of Representatives
Environmental Protection Agency (EPA)
EPA PFAS Groundwater Fact Sheet