There is general familiarity with some chemicals and the risks these chemicals pose to human health and the environment. If trichloroethylene (TCE) is present in soil or groundwater at a former industrial site, the potential risks of exposure and associated liabilities are commonly understood.
TCE, along with vinyl chloride and dioxin, are just three examples of common chemicals regulated under federal and state environmental laws. But, have you ever heard of PFAS (per- and polyfluoroalky substances) or 1, 4 dioxane? PFAS and 1, 4 dioxane are examples of contaminants of emerging concern, or “emerging contaminants.” While neither of these two chemicals are “new,” they are part of a class of chemicals that had historically been unregulated, and not classified as “hazardous” under federal or state laws. However, as knowledge of the health risks associated with contaminants of emerging concern develops, so has federal and state regulation. With the increase in regulation, policyholders and their advisors should understand what contaminants of emerging concern are and be aware of the types of insurance coverage that might be available for the costs of investigating or remediating an environmental impact caused by these contaminants and to cover potential third-party claims.
What are emerging contaminants?
Contaminants of emerging concern form a broad category of chemicals or materials that are characterized by a perceived, potential, or real threat to human health or the environment, or by a lack of published health standards. These chemicals or materials are generally widespread, persistent in the environment, and generally not regulated. Many chemicals and materials considered to be a contaminant of emerging concern have been in use for decades, yet the health risks of such chemicals or materials are only now becoming known.
The group of contaminants of emerging concern currently receiving the most attention are PFAS, a family of nearly 5,000 man-made chemicals. PFAS have been extensively manufactured and used worldwide since the 1950s. These chemicals have unique physical and chemical properties that include repelling water, acting as a surfactant, and repelling oil. PFAS have been used in food packaging, household products such as water and stain repellent fabrics, non-stick products, waxes, paints, and even certain firefighting foams. There has been an increase in regulations of PFAS, particularly related to drinking water standards.
Another contaminant of emerging concern that is seeing increased regulation is 1,4-dioxane, a synthetic industrial chemical used as a stabilizer in certain chlorinated solvents. The chemical 1,4-dioxane is likely found at many sites contaminated with certain chlorinated substances because of its widespread use as a stabilizer for solvents. According to the U.S. EPA, as of 2016 1,4-dioxane has been identified at more than thirty-four National Priority List (NPL) sites and presumed to be present, but not tested for, at additional sites.
Pesticides (such as Glyphosate), pharmaceuticals, nanomaterials, perchlorate, and brominated flame retardants (BFRs) are also contaminants of emerging concern. All these contaminants of emerging concern pose a risk to human health and the environment. Although there is little regulation of these contaminants, the federal government is beginning to implement guidance and regulations that require monitoring and remediation of some of them under existing regulations such as Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), The Resource Conservation and Recovery Act (RCRA), and the Safe Drinking Water Act. Many states are moving to regulate PFAS substances as well. Both Michigan and New Jersey have enacted rules creating some of the nation’s most comprehensive and strictest regulations setting standards for PFAS in drinking water. Ohio has developed an action plan to address this as well, however, without enacting any standards of its own. As this shows, regulation is not widespread on a national scale, so there are different requirements depending on location.
Environmental liabilities related to contamination caused by a contaminant of emerging concern may arise under various circumstances. A policyholder could place itself in the chain of title by acquiring property that might have the potential for soil or groundwater contamination and become a potentially responsible party for the environmental impacts at the site. A policyholder could face liabilities for environmental conditions related to its use or disposal of products that may contain or be a contaminant of emerging concern. The bulk of enforcement, whether it be third-party litigation or government investigations, has been directed at product manufacturers. Since there was no regulation of contaminants of emerging concern historically, when manufacturers used them, they were typically not treated prior to being discharged into a water body, often emitted directly into the air, or disposed of at a landfill not adequate to protect against the release, creating a long list of potential environmental liabilities.
Regardless of the particular circumstance of the policyholder, careful scrutiny is required to determine whether there is insurance coverage available.
Types of coverage that might be available
Potential coverage for environmental impacts related to contaminants of emerging concern could exist under comprehensive general liability policies or pollution legal liability (PLL)insurance. The type of insurance needed to cover liabilities related to contaminants of emerging concern will differ depending on the situation. If an insurer is currently manufacturing or selling products that contain such a contaminant, a thorough evaluation of available policies and potential risk exposures will need to be done to ensure risks of liability from a government-ordered investigation or third-party claim are covered. The policyholder should understand what the contaminant of emerging concern at the property is and the timeframe in which the damage to the property occurred. Once there is an understanding of the potential exposure risks, the next step is to assess the types of insurance coverage available. Performing a historical analysis of the policies available will allow the policyholder to determine whether there could be coverage under a CGL policy that does not contain a pollution exclusion (pre-1985 policy). This type of analysis will also assist in determining if PLL insurance should be considered. A PLL policy could offer more comprehensive coverage, especially since the risks associated with contaminants of emerging concern are still developing and there is limited regulation, therefore, there is less of a chance of a specific exclusion being included in the policy. A PLL policy can manage pollution liability risks associated with on- and off-site remediation expenses and third-party liabilities, as well as known pollution conditions in contaminated property transfers.
- Know which contaminants of emerging concern might affect you;
- Evaluate both current and historic coverage available; and
- Consider adding a pollution legal liability policy to cover certain risks, especially for property transfers.