In April, the U.S. Environmental Protection Agency (EPA) issued the first-ever national, legally enforceable drinking water standard for the presence of per- and polyfluoroalkyl substances, known as PFAS or “forever chemicals." The regulation sets limits ranging from 4 to 10 parts per trillion for five types of PFAS, as well as limits for other PFAS if they are present in combination. 

All public water systems have three years to complete monitoring and must inform the public of their results. If those results reveal PFAS at levels above the EPA standards, water systems have five years to implement measures to reduce the levels. The EPA estimates that 6%-10% of the country's water systems will need to make changes to meet the new limits. 

“The new rules regarding PFAS could have severe impacts on the insurance industry overall," warns Gina Jones, vice president and director of environmental programs, Burns & Wilcox. “We're currently seeing PFAS exclusions being attached every day on many environmental policies. General liability policies are coming out with exclusions for PFAS as well."

As carriers analyze the impacts of the new PFAS regulations over the coming months, “the new rules could lead to changes in underwriting practices when carriers are deciding whether or not to provide coverage and decide on pricing," Jones continues.

Jones anticipates an increase in environmental liability claims, bolstered by the new regulation's concrete limits. “If businesses are found to be responsible for PFAS contamination, they could face significant cleanup costs," she says. “In addition, there could be an increase in health claims if a link is established between exposures to PFAS and certain health conditions. This new rule impacts more than just property and casualty policies. It could impact health insurance and even life insurance." 

“PFAS is the new asbestos," she adds. “This new rule is definitely going to have a big impact on the insurance industry overall."

While cleanup of forever chemical contamination is essential, “it's going to be very expensive and difficult for the water companies," Jones says. “As every municipality will be required to regularly test for PFAs and keep chemicals under the limits, it's going to affect water utilities going forward."

Insurance agents who insure water systems must investigate and understand their clients' exposure and link to PFAS, a difficult but necessary task, Jones says. “Once a link is established, discuss with your insurance company what you're working with to determine how to get coverage," she says. “Make sure the policies that your client has in force do not have any PFAS exclusions. If they do, you may or may not be able to get them removed."

A week after releasing the new limit standards, the EPA classified PFOA and PFOS, two common types of PFAS, as hazardous substances under Superfund law, which authorizes the EPA to use its enforcement powers to require polluters to pay for and clean up contamination. The measure is designed to alleviate cleanup and compliance pressure on municipalities. 

Practically every commercial client should be concerned about their exposure to liability regarding PFAS. Given that forever chemicals can be found in items from firefighting foam to food packaging, from nonstick pans to water-repellant clothing, agents should be taking a hard look at all their commercial insureds for potential PFAS exposure, Jones says.

“Then, analyze and review the insurance policy to see if it's covered, and try to help your client with as much coverage as you can," she adds. “We as an industry have been watching PFAS for a number of years but it's just beginning to take off."

AnneMarie McPherson Spears is IA news editor.