The Scale of Potential PFAS Liability
The financial exposure from PFAS contamination — encompassing site remediation, drinking water treatment, health damages, and regulatory penalties — potentially exceeds trillions of dollars globally. This scale of liability has prompted the insurance industry to systematically reassess coverage for PFAS-related risks and to exclude PFAS from general liability and environmental impairment liability policies.
Landmark PFAS settlements exceeding $11 billion from just two manufacturers demonstrate the materiality of PFAS claims for insurers. The Superfund designation of PFOA and PFOS further expands potential liability exposure for any party in the PFAS value chain — manufacturers, distributors, users, and in some cases property owners.
PFAS Exclusions in Insurance Policies
By 2022, most major commercial general liability and environmental liability insurers had added PFAS exclusions to new policies. These exclusions typically bar coverage for cleanup costs, third-party bodily injury, and property damage arising from PFAS release or exposure. The exclusions vary in scope — some target specific PFAS like PFOS and PFOA, while broader exclusions cover all fluorinated compounds.
Municipalities operating wastewater treatment plants that cannot avoid PFAS pass-through face significant insurance gaps, as do fire departments that used AFFF and agricultural operations that received PFAS-contaminated biosolids. The loss of insurance protection has led many entities to carry uninsured PFAS risk.
Regulatory and Litigation Implications
Insurance exclusions have an important regulatory effect: by pricing PFAS risk out of the insurance market, they create powerful financial incentives for companies to eliminate PFAS use. Companies that cannot insure PFAS-related risks must either self-insure through reserves or exit PFAS-dependent markets.
Insurance exclusions may also accelerate regulatory reform by eliminating a financial backstop that historically allowed PFAS-using industries to externalize environmental costs. Legislative efforts to require PFAS insurance coverage — as recommended in some state proposals — face significant actuarial challenges given the difficulty of pricing uncertain long-tail PFAS liabilities.