PFAS litigation and exclusions to grow in Europe, experts warn

European companies should brace for much more litigation over the use of so-called forever chemicals, or PFAS, and more insurance exclusions for the risk, said experts gathered in Munich this week.

The German risk management association conference GVNW is already worried about the issue. It recently came out strongly against new blanket insurance exclusions for PFAS that emerged during the last set of renewals, and called on the insurance industry to work with customers to better manage this exposure.

There is certainly reason for corporates and insurer to be concerned about PFAS risks and litigation. According to brokers EPIC, PFA-linked litigation in the US has cost companies $16bn since 1999. Recent regulatory action by federal bodies such as the Environmental Protection Agency is raising the stakes even further.

The situation in Europe is not as acute. But Alfredo Alonso, global head of Liability at Allianz Commercial, warned risk managers at the GVNW Symposium that PFAS regulation at EU level is coming. He also warned them that there are already legal precedents for European companies being sued by individuals who feel their health has been damaged by the presence of PFAS in drinking water.

The most relevant was a ruling by the Swedish Supreme Court in December. The judges ruled against a water utility and in favour of 150 citizens of the towns of Kallinge and Ronneby, who claimed that their drinking water was contaminated by forever chemicals.

“That decision is keeping insurers awake at night,” Alonso said.

He noted that the insurance market is already adding exclusions to product liability policies sold to companies with higher exposure to PFA litigation. In some cases, blanket exclusions have been applied to whole sectors but generally the market continues to treat the risk on a case-by-case basis, said Alonso.

If the US market is an example of what is to come, however, this situation could get much worse for European companies. Companies in the US can hardly find any kind of coverage for PFAS risks. The only alternative available to some clients is to get protection as part of an environmental insurance cover, said Haendel Conil, a senior vice-president at EPIC.

“Exclusions are due to regulatory uncertainty and toxic tort activity,” he said. “And underwriters are only now developing models for PFA risks.”

GVNW board member Mathieas Kohl, who is head of corporate insurance at medical tech company Drägerwerk, reiterated that the GVNW feels blanket exclusions are the wrong way to deal with PFAS risks. He also warned that replacing existing PFAS materials in production processes can result in lower quality products, creating other kinds of liability.

The costs of complying with forthcoming PFA regulation should not be ignored either. Tandis Hassid Nili, a managing principal at EPIC, said it is estimated that the cost of removing PFAS from drinking water systems in the US will reach at least $175bn, as utilities try to toe the regulatory line.