PFAS: How Far Do They Reach?

Could "forever chemicals" like PFAS be the new asbestos for the insurance industry? Join us on the Placing You First podcast as we unpack this pressing issue with CRC Environmental Broker Sean McLaughlin. We explore how these persistent chemicals infiltrate our everyday lives, from kitchen cookware to essential firefighting gear, raising alarming health concerns. Listen as we navigate the complexities of managing PFAS risks and insurance challenges. We discuss the proactive measures clients can take to address PFAS exposure and the critical role wholesale brokers play in managing expectations and ensuring proper coverage.

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Chapters

• 1:20 What are PFAS and why are they called 'forever chemicals?'
• 3:03 Are there some new places PFAS are starting to come to light?
• 5:48 What does the recent $10.3 billion 3M settlement mean for other industries?
• 8:27 What’s the ripple effect for smaller businesses?
• 11:10 PFAS is being called the 'new asbestos' for insurers. What does that mean?
• 13:01 Are there proactive steps brokers and insureds can take and how does a wholesale broker fit into the process?
• 15:37 What’s the key message for listeners?
• 16:43 Rapid Fire!

Transcript

Amanda Knight: 0:23

Welcome back to the Placing you First podcast, where we tackle today's hottest topics in insurance. I'm Amanda.

Scott Gordon: 0:30

And I'm Scott. Today's episode tackles the rising concern of PFAS, commonly known as forever chemicals, and their far-reaching impact.

Amanda Knight: 0:41

From manufacturing to real estate. Pfas are influencing liability regulations and even insurance coverage. Joining us to unpack this all is Sean McLaughlin, a CRC environmental broker. This is the Placing you First podcast from CRC Group.

Scott Gordon: 0:56

This podcast features news and insights from a vast knowledge base of over 5,100 associates.

Amanda Knight: 1:02

Who write more than $35 billion in premium annually. Plus, we give you the latest information on what's happening at CRC. This is the Placing you.

Sean McLaughlin: 1:12

First podcast and now the hosts of the podcast, Amanda Knight and Scott Gordon.

Amanda Knight: 1:17

Welcome Sean. Thanks for having me today.

Scott Gordon: 1:19

Now, Sean, can you give us a quick primer on PFAS and why they're called Forever Chemicals?

Amanda Knight: 1:25

It sounds so ominous.

Scott Gordon: 1:27

Yeah, it does.

Sean McLaughlin: 1:28

Sure, yeah, definitely in the spotlight right now, and I mean I know we've seen some of the billion dollar verdicts come out. Dark water was in the news on the big screen a few years back. And then, from insurance perspective, we're seeing policies from all different coverage points include exclusions. Perspective, we're seeing policies from all different coverage points include exclusions. We are fielding questions all day long on PFAS. Why do I have a PFAS exclusion and how does it affect my client? A lot of nervous phone calls, but PFAS is really all around us.

Sean McLaughlin: 1:59

Pfas was developed, I think, in the 30s, 40s as a polymer to help resist heat, oils, stains, water, you name it on a bunch of different products. It was a DuPont product and frankly, it works really well and that's why we see it really all around us today. It's historically been used in a ton of products, from your Teflon pans to your Gore-Tex jackets to your firefighting retarded. So the concern of our PFAS now is that it's all around us. I believe it's considered a carcinogen too. So it's been linked to, obviously, medical concerns and because it is all around us and in all the products that we use, it's kind of an ongoing hot button issue of who is going to pay to clean it up and who is responsible from a liability standpoint?

Amanda Knight: 3:08

around us right At this point, we know that it is found in about almost 100%, if not 100%, of all humans over the age of 12. And recent research found it in like 84% of 114 tested global waterways. So it's literally everywhere. But you know, we typically have thought about it in recent years as far as like, as like the things you listed right the pans, the firefighting gear and equipment, the firefighting foam, carpet, things like that, stain resistant fabrics but I think that now we're finding that there are even more places than that, more than most people realize, and there are some new places that they're starting to come to light throughout the production or distribution chain. Is that right? That is right?

Sean McLaughlin: 3:52

And we're. You know the concern with it and because it was so widespread over the years, and a bunch of different products. And you're right, I think there was a Netflix documentary or a YouTube documentary years ago which I think they only found a very small segment of the populace in the world that were not cross-contaminated with PFAS in their bloodstream. So it really is all around us.

Amanda Knight: 4:19

I think we've now seen lawsuits with PFAS tied to baby wipes, fertilizers, property contamination, lots of different places.

Sean McLaughlin: 4:28

Absolutely correct. Yeah, I mean we're seeing it from a product standpoint. We're having questions from a contracting standpoint. You know whether or not you know there's an exacerbation of the existing PFAS in the soil or groundwater because of our construction activities. You know, even from a contracting side, the PPE and protective equipment that our contractors and our subcontractors are utilizing. What is the PFAS exposure there? We are trying to adhere to a risk management approach by recommending or not even recommending, requiring some PPE equipment potentially. And what is the PFAS exposure there?

Sean McLaughlin: 5:05

From a work comp standpoint or from an action over standpoint, it's kind of far reaching. We are seeing lenders inquire about it as part of a real estate transaction, private equity groups. We're seeing exclusions from the contracting standpoint, manufacturing distribution. We're seeing some of the standardized markets include absolute PFAS exclusions under their GL. And I think that's the scary part for most in the marketplace and we'll probably touch on that is we're starting to see carriers no longer rely on the pollution exclusion. They're treating it as similar how they would have the asbestos exclusion with a separate PFAS exclusion. They're treating it as similar how they would have the asbestos exclusion with a separate PFAS exclusion.

Amanda Knight: 5:49

Now I know that with this far-reaching impact come lawsuits. Right, that's not a surprise to anybody, I know. Back in June of 2023, you know, multinational industrial conglomerate 3M reached a what is considered by many a historic settlement over PFAS with public water suppliers, because PFAS was present in drinking water. So under that settlement, that company will pay $10.3 billion yes, with a B to plaintiffs over a 13-year period. And that lawsuit is one of the largest to date involving PFAS and I think it served, you know, sort of as a wake up call, because it was everywhere in the media. It really sort of got everyone thinking about PFAS. So when other industries or, you know, verticals look at something like that, what does that mean for them? Does that sort of set off alarm bells and cause them to take any sort of specific action, or should it?

Sean McLaughlin: 6:51

It should. I think right now we are still kind of in that gray area from a litigation standpoint and administrative standpoint as well as, frankly, an insurance standpoint standpoint. As well as, frankly, an insurance standpoint. I think there was a study done a few years ago where Lloyd's put out what is the economic and loss predictor for PFAS claims and it was astronomical.

Sean McLaughlin: 7:21

But we're kind of at a crossroads in some aspects and still kind of in a gray area, because you see these large billion dollar payouts and and frankly you know, we are seeing the claims from different state epas uh impacting different players, whether or not be the contracting, real estate uh transactions or or frankly, just like redevelopment and brownfield cleanup standards. But why I say it's such a gray area right now is it's not universal. There is a push to be implemented a universal standard for cleanup, but where we're seeing a lot of the gray area is who's impacted and where the I guess the fines and penalties from your state EPA or your claims for liability are stemming from there's still different cleanup standards and frankly, some of those cleanup standards are, I would say, a little onerous to some clients from an economic standpoint as well as just a feasibility standpoint.

Scott Gordon: 8:28

Yeah, and it's one thing to talk about big giants like 3M and BP or whoever who can drop billions of dollars on these things and still be in business, but what are the ripple effects for, say, the small guys, small businesses?

Sean McLaughlin: 8:43

That's where it gets scary, because there's no clear-cut answer. You know I'd lie to you if I felt like, oh yeah, I can absolutely get you PFAS coverage right now without you telling me what you do. Is PFAS coverage achievable in the marketplace? Yes and no. It really depends on your operations, the exposures, where it's coming from. There's a lot going into it. It is not a slot-rated insurance. Underwrite it. Really.

Sean McLaughlin: 9:16

You kind of have to understand the exposures, understand what's going on, understand where the claims are coming from. What's the potential to get brought into one a claim or two. The potential to get brought into one a claim or two. The potential of the state, epa or, frankly, any administrative authority in that jurisdiction, to re-brought you in from a cleanup or a BIPD issue? How, from an economic standpoint, how can these small when I say small, anybody outside of a billion dollar that can handle a billion dollar settlement on your balance sheet? I don't know. I think there's a lot more out there that cannot how can they protect themselves?

Sean McLaughlin: 9:56

And I think the biggest answer to that question is understanding your exposure to PFAS, understanding how PFAS one 1 affects your business. What is your exposure to it, whether or not it be from a real estate transaction? What is your historical use of PFAS? What is the historical PFAS of the sites around you From a contracting exposure? Again, we talk about PPE and we do a lot of environmental contractors and so is our environmental contractor being testing for PFAS? Are they sampling? You know we can get brought into suits that way that one maybe our environmental contractor was not testing for it. Or you know the allegation that we didn't test the standards or potential. If we were a driller, you know the exacerbation or the movement of it with soil and groundwater. It's really there's not a straight answer to that. It's knowing your exposure and how PFAS is how you could be potentially liable for it, which, if you don't even know what PFAS is, that's a good starting point.

Amanda Knight: 11:01

Well, and we've got a couple articles out there that can fill you in on all of that background. If you visit crcgroupcom and click on our tools and intel button Now I've been around long enough to kind of be able to make this connection in my mind, and I know, scott, you have too. Maybe, sean, people refer to PFAS as sort of the new asbestos for insurers. There may be some around who are a little newer, younger than we are. Maybe they don't know what that means, but you've been around a little while. You know what asbestos is. What is that? What do we mean when we say the next asbestos, when we're referring to to PFAS? Is it just the extensive, far-reaching nature of it or the severity or both?

Sean McLaughlin: 11:45

I think a little bit of both. If you look at any property constructed prior to 1970, even a little after that, there's the potential of asbestos containing materials throughout that building. So it is widespread in nature. From that standpoint, and to that same regard it's you know what is the liability associated with it. You know, in that case, with the asbestos, the carriers to this day still do not rely on the pollution exclusion under their GL. So it's the fact that an ISO version of the PFAS exclusion was introduced. Iso version of the PFAS exclusion was introduced. I wouldn't say it was a wake-up call, but it was in some aspects the first time agents or insureds were even understanding or hearing about PFAS. So the fact that that was introduced just shows the potential economic impact and concern from carriers, reinsurance partners, everyone really.

Scott Gordon: 12:45

Yeah, I mean, I don't think anyone in this room knew what a PFAS was, say 10 years ago At least.

Sean McLaughlin: 12:53

I didn't. I'll say, I've been doing environmental insurance for a while now and I can tell you, when I started, I never heard of PFAS.

Scott Gordon: 13:01

Are there any proactive steps that brokers and insureds can take, and how does a wholesale broker fit into the process?

Sean McLaughlin: 13:08

I would say yes. I mean it really does start with understanding what your exposure to PFAS is. When I said coverage for PFAS was achievable in the marketplace, it is and it isn't. It really depends on the exposure and I think where the key role of especially environmental wholesalers in that space is understanding the exposure, understanding what's achievable, setting realistic expectations for clients, but also not only knowing where to go. You know, pfas coverage from a cleanup standard might not be achievable, but there are ways that we can still potentially get PFAS coverage, and I say it's excessive indemnity agreements in place, environmental indemnities and a purchase and sale agreement that, in order to purchase a property, we're doing full remediation installing carbon filters, cleaning out the wastewater treatment plants and retention ponds. So there's a lot of, I would say, proactive approach that we're seeing from both real estate transactions as well as ongoing manufacturing distribution ops.

Sean McLaughlin: 14:24

For the contracting side, we're seeing some markets that include full PFAS exclusions on contracting risk, whether it be your GCs and trades or your environmental contractors. For the environmental contractors I kind of equate it to adding an oil spill cleanup exclusion on an emergency response contractor. You can't exclude what they're being paid to do. That's the whole point of insurance, so making sure you're protecting your client for what their true exposures and liabilities are. And it's asking those questions. If we're insuring a manufacturer or distributor, it's asking the question of you know what's their exposure to PFAS?

Sean McLaughlin: 15:05

You know, who are their suppliers, what kind of environmental, what kind of indemnity agreements in place, inquiring about their insurance. You know, if we're being supplied products that contain PFAS, we want to make sure that we are correctly identifying who's responsible and where. You know where our responsibility and liability really lies. It truly is a risk management approach to understanding PFAS and how to protect our clients or at least offer advice, more than anything else.

Amanda Knight: 15:34

Well, we are nearing the end of our time today, so I'm going to take a stab at sort of wrapping up our key message here and, sean, you can chime in at the end if there's anything that you want to add. Pfas exposure is pervasive and the risks are growing. Awareness, compliance and the right insurance policies and relationships can make all the difference. Is there anything you'd add as sort of our key takeaway for our listeners today?

Sean McLaughlin: 16:01

No, I would just say that we're to the point with PFAS, especially with the environmental markets, that we are seeing a I would hate to use the word softening, but we are getting to a point where carriers are at least willing to have the discussion around PFAS, whether or not that'd be a full removal and exclusion, or at least carbacks, or at least potentially, depending on the risk and exposure, having that conversation around coverage for TPOS.

Scott Gordon: 16:28

Yes, like now that we know what it is and it's killing all of us, let's do something. That's a story old as time. We've been using something for our whole lives and then we're like, well, that was bad for us. Well, anyway, okay, Sean, we've made it through the hard part of the podcast. Congratulations, we will be sending you your little ribbon in the mail. But now we have a little fun section here that we like to call Rapid Fire, where you just give us the answer that's right off the top of your head and here we go. First question is what was your last impulse buy and was it worth it? Oh, that's a good question.

Amanda Knight: 17:07

I mean, it is the holidays, the season of all things, impulse buy.

Sean McLaughlin: 17:11

Yeah.

Scott Gordon: 17:13

And it didn't have to be for you.

Amanda Knight: 17:14

It could be like that impulse buy in the toy aisle that kept your kid quiet and calm for the 30 minutes you really needed it to.

Sean McLaughlin: 17:23

Yeah, I have a five-year-old and a two-year-old, so that was probably a safe bet. I tell my kids I'm not getting them toys, and then I get them a toy. I always tell people that I negotiate and broker every day, but when it comes to negotiating with my wife or kids, I'm awful at it. So, yeah, it's definitely an impulse buy around them.

Amanda Knight: 17:42

I know, hey, they can wear you down. Kids can wear you down faster than anyone else.

Scott Gordon: 17:48

Yeah, I got to say you're remarkably well composed for someone who has children those ages Sean.

Sean McLaughlin: 17:53

I agree.

Scott Gordon: 17:53

I cannot believe you were able to be as put together during this podcast as you have been. Our second question is and this is a good one. I like this, amanda Other than email or texting, what app do you use the most on your phone?

Sean McLaughlin: 18:09

Zillow. When I travel, I always look at the homes where I'm traveling.

Amanda Knight: 18:14

It's interesting, isn't it? Yeah?

Scott Gordon: 18:15

Zillow people have a problem. My wife's a Zillow person. I'm like, what are you doing, looking at that $18 million mansion, for what is going on?

Sean McLaughlin: 18:26

you doing?

Amanda Knight: 18:26

looking at that 18 million dollar mansion for what is going on? Yeah, yeah, I'm guilty of that. It's fun to dream and hey, you may be like I'm gonna retire here someday. I have to scope things out, you know it's. It's cold where you are, sean.

Sean McLaughlin: 18:34

You're in philly, right yeah, it's raining and cold right now in the northeast, so I will most likely be headed back to denver um soon wow, where it's nice and toasty right it's nice and toasty. Right, it's nice and toasty exactly.

Amanda Knight: 18:47

Well, Sean, thank you so much for coming on and talking with us about PFAS today. We really appreciate you taking the time.

Sean McLaughlin: 18:53

No, thank you.

Amanda Knight: 18:54

You can visit CRC Group's website or reach out to your CRC broker for tailored advice and support. Don't forget to follow us on LinkedIn for regular updates and insights. Thanks for tuning in to the Placing you First podcast. We'll see you next time.