Municipal Water Authorities in the PFAS Crosshairs
Municipal water authorities—trusted institutions responsible for one of society’s most essential services—find themselves at the intersection of multiple PFAS liability vectors: regulatory compliance obligations with multi-billion dollar infrastructure cost implications; litigation from customers claiming health damages from historical PFAS exposure; supplier claims against PFAS manufacturers; and ratepayer pressure over cost recovery. Managing these overlapping risks requires a sophisticated approach that balances legal strategy, public communication, compliance planning, and financial risk management—increasingly with PFAS-specific expertise that most utility legal and risk teams are still developing.
The MDL 2873 Settlement Model
The Multi-District Litigation case MDL 2873, consolidated in the US District Court for the District of South Carolina, resolved claims by 3,500+ US water utilities against AFFF manufacturers—principally 3M and DuPont/Chemours/Corteva—for PFAS water contamination remediation costs. The $10.3 billion 3M settlement and $1.185 billion DuPont settlement, while not covering all utilities’ full remediation costs, provided significant funds for treatment infrastructure installation, ongoing operations, and monitoring. Utilities that opted into these settlements received pro-rata distributions based on PFAS contamination levels and system size. The settlement model established several important precedents: manufacturer liability for utility compliance costs is legally cognizable; class-wide resolution is possible for diffuse water contamination; and settlement distributions can be used for point-of-use filter programs as well as capital treatment installation.
Ratepayer Claims and Public Trust
Beyond manufacturer litigation, utilities face potential claims from ratepayers—both for past PFAS exposure when utilities were aware of contamination but failed to act, and for rate increases attributable to PFAS compliance costs. The legal basis for ratepayer claims varies by state: some states provide public utility immunity for compliance with then-applicable regulatory standards; others impose strict liability for utility-delivered water that causes harm. Utilities that can demonstrate good-faith compliance with applicable standards at the time, proactive monitoring programs, and prompt notification upon discovery of exceedances are in the strongest legal position for ratepayer claims. Documenting the utility’s PFAS response timeline—from first detection to public notification to treatment installation—is a critical risk management priority.
PFAS Insurance for Water Utilities
Water utility PFAS insurance options have narrowed significantly since 2020. Most commercial general liability and pollution legal liability insurers have added PFAS exclusions. Specialty municipal liability insurance through JPIA (Joint Powers Insurance Authority) pools and GFOA-affiliated programs varies by state and pool. Some utilities have found coverage through legacy “occurrence” basis CGL policies written before PFAS exclusions were common—creating coverage litigation with insurers over whether PFAS claims fall within historical policy terms. Utilities should conduct comprehensive insurance portfolio reviews with environmental coverage specialists to identify available PFAS coverage under existing policies and assess gaps requiring supplemental risk management measures (higher self-insurance retentions, PFAS reserve funds, alternative risk transfer).
Proactive PFAS risk management for municipal water authorities—combining regulatory compliance, transparent public communication, litigation readiness, and financial risk planning—is no longer optional: it is a core function of responsible utility governance in the PFAS era.