PFAS treatment contracts involve significant financial exposure for both water systems and vendors. A treatment system that fails to achieve compliance exposes the water system to regulatory enforcement, consumer health claims, and litigation. A vendor whose technology is blamed for a compliance failure faces contract liability, reputational harm, and potential third-party claims. Insurance and liability provisions allocate these risks and should be negotiated carefully.
Required Insurance Coverage for PFAS Treatment Vendors
Water systems should require vendors to maintain commercial general liability (CGL) insurance with limits appropriate to the contract value — typically $2–5 million per occurrence for municipal contracts. Additionally, require environmental impairment liability (EIL) or pollution liability coverage, as standard CGL policies frequently contain pollution exclusions that may apply to PFAS-related claims.
For contracts involving PFAS media disposal or residuals management, require vendors to carry environmental professional liability coverage. Errors in waste characterization, manifesting, or disposal pathway selection can trigger Superfund liability under CERCLA. Contractually require vendors to name the water system as an additional insured on relevant policies and to provide certificates of insurance prior to mobilization.
Indemnification, Limitation of Liability, and Consequential Damages
Indemnification clauses allocate responsibility for third-party claims arising from contract performance. Negotiate mutual indemnification provisions that hold each party responsible for claims arising from their own acts or omissions. Be cautious of vendor-proposed indemnification language that limits the vendor’s obligation to claims arising solely from gross negligence or willful misconduct — such carve-outs can leave the water system exposed for vendor negligence falling below that threshold.
Vendors typically seek to limit their total liability to the contract value and to exclude consequential damages (lost revenue, regulatory fines, third-party claims). Water systems should resist blanket consequential damage exclusions for performance guarantee breaches, since the most significant costs of treatment failure — public notification, alternative water supply, regulatory penalties — are precisely the consequential damages the exclusion would eliminate.
Engaging water utility legal counsel with PFAS contract experience during negotiation can identify liability provisions that appear standard but materially underprotect the water system, and ensure that insurance requirements are appropriately calibrated to the risk profile of the specific contract.