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How can PFAS on a site affect insurance claims?

June 15, 2020

If you’re an insurance professional dealing with a claim, what do you need to know about these emerging contaminants?

PFAS, the forever chemicals, are getting a lot of attention. You may have seen recent movies or documentaries, including “Dark Waters,” “The Devil We Know,” and “GenX—A Chemical Cocktail.” These films explore the PFAS family of chemicals. Known as per- and polyfluoroalkyl substances, PFAS are man-made chemicals that don’t break down in the environment. Evidence shows that PFAS can have negative impacts on human health. Currently, jurisdictions around the world are developing standards to regulate them.

But PFAS have another impact that you might not have heard about: How can PFAS on a site affect insurance claims? If you’re an insurance professional dealing with a claim, what do you need to know about these emerging contaminants?

A site contaminated by PFAS after a fire.

Industry focus

First, some background: PFAS were not manufactured in Canada but in the US and other countries. There are many chemicals within this family but only a small subset has been actively researched and studied. PFAS are chemicals that consist of carbon-fluorine bonds, recognized as the strongest covalent bond in organic chemistry. This means that the chemical is persistent and resists degradation in the environment. It is resistant to heat, water, and oil, and it has a low volatility.

Studies indicate that, when ingested, PFAS readily absorb and tend to accumulate in the blood, kidneys, and liver. The US Environmental Protection Agency has noted evidence that PFAS have carcinogenic potential.

There are many sources of PFAS, including aqueous firefighting foams (AFFF), production and manufacturing facilities, and landfills and wastewater treatment plants (WWTP) that receive PFAS-impacted waste.

Because of their persistence in the environment, and their ubiquitous nature, insurance professionals may need to consider PFAS on future property or casualty claims. Below, I’ll outline some items that you should consider when adjusting a loss where one or more sources of PFAS may be present.

Background concentrations

A typical example of a claim that may involve PFAS would be a fire loss that was extinguished using AFFF. Firefighters may use AFFF at commercial properties located in rural locations that do not have access to fire hydrants. AFFF may also be used at fires that involve chemicals or materials that cannot be put out using water, such as tire fires. As an insurance professional adjusting the loss, you will want to know if background sources of the contaminant exist so that you are able to determine the actual cost related to the peril. For example, was PFAS present at the site before the use of AFFF? If so, in what concentrations? Answers to these questions will help you understand the necessary response and costs associated with the incident. They will also help you avoid incidentally paying for the remediation of another source of PFAS.

Consider the following:

  • Retain a knowledgeable consultant who is up to date on the regulatory framework related to PFAS and available treatment options
  • Ensure that your consultant completes a proper characterization of the site
  • Ensure that the consultant is knowledgeable of potential confounding sources on the site
  • The consultant should obtain a sample of the foam used during the fire event to and compare samples from the impacted environment
The PFAS landscape is constantly evolving. Under this cloud of uncertainty, it is important for insurers to understand some key points.

Sampling methodology

Because of low laboratory detection limits, and conservative sampling requirements associated with PFAS, it is important to retain the right professional to complete a proper assessment on a claim. It is important that your consultant understands the sampling considerations, including the day-to-day items that contain PFAS, that could bias your analytical results.

For instance, a field technician goes into the field to sample for PFAS following a fire loss where AFFF was used. On that rainy morning, the field technician wears a GORE-TEX jacket to the site, then stops for a breakfast sandwich at a popular fast food restaurant. After, he or she applies insect repellant for those nasty mosquitoes. The technician has now been exposed to at least three potential common sources of PFAS—GORE-TEX, the sandwich wrapper, and the insect repellant. This exposure could impact your analytical results.

As noted above, the laboratory detection limits are low. To put things into perspective, when we are analyzing PFAS in water samples, we measure concentrations at the parts per trillion (ppt) level. That is one drop in an Olympic-sized swimming pool. The result? A small contribution from a confounding source can have a big impact on the analytical results. The consultant you hire should have a PFAS-specific sampling protocol that limits the potential for sample contamination.

A typical example of a claim that may involve PFAS would be a fire loss that was extinguished using AFFF.

Lack of provincial standards and regulations

In Canada, British Columbia is the only province that has regulated standards for a small suite of PFAS in their contaminated sites regulations. The Canadian federal government provides guidelines and screening values for human and ecological exposure, and the values change regularly as new information becomes available. The Ministry of Environment, Conservation and Parks (MECP) has issued a trigger value on a project-specific basis, but there is limited information on how to properly apply the trigger value or the science behind it.  

The lack of regulations makes is difficult to manage a property or casualty loss with PFAS contamination. That is one more reason why it is important to hire a consultant who will take the right approach, navigate through the regulatory requirements, have effective dialogue with the appropriate regulatory representatives, and ultimately achieve site closure.

Although risk-based approaches have been effective and are accepted by many regulatory bodies, the vast uncertainties surrounding PFAS fate, transport, and toxicology could make this closure option complex. With the support of the right team of experts, a risk-based approach may reduce the duration of the claim and, ultimately, result in cost savings.

Our team—including my colleagues Sasha Richards, and Dr. Loren Knopper—has several risk assessment professionals. They are well versed in PFAS, their properties, remediation, and risk management approaches.

Action in a changing world

The PFAS landscape is constantly evolving. Under this cloud of uncertainty, it is important for insurers, adjusters, and brokers to understand some key points:

  • Work with the right consultant to achieve site closure and reduce your liability exposure
  • Be knowledgeable about the potential for background influences and other PFAS sources at your site
  • Be cognizant of confounding factors that can influence the analytical results
  • Understand that the regulatory framework is limited in Canada, and as a result, consider exploring a risk-based approaches for your sites

In my next blog, I will provide an overview of environmental property and casualty claims in Ontario related to spills, remedial options, and regulatory requirements. 

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