Navigating the changing landscape of PFAS regulations

Marsh McLennan Agency’s Lydia Zaharia, Drew Flynn and Susanne Deegan discuss the impact on businesses of regulatory changes regarding PFAS, and offer a framework to minimise risk for affected firms.

In recent years, concerns over the environmental and health impact of per- and polyfluoroalkyl substances (PFAS) have prompted regulatory bodies to act.

The US Environmental Protection Agency (EPA) and various state and local agencies are spearheading efforts to regulate the use of PFAS-containing materials. The implications of these regulations are far-reaching, affecting businesses across many sectors, both in the US and globally.

As of 13 November 2023, the EPA has implemented the TSCA Section 8(a)(7) PFAS Reporting and Recordkeeping ruling. This ruling is effective for entities involved in the manufacturing or importing of PFAS and PFAS-containing products for commercial purposes.

Most notably, the ruling contains a lookback period through to 2011 for products, and marks a significant milestone in PFAS regulation. The establishment of a concrete deadline represents a ‘call to action’ for businesses. This legislation is primed to spark an anticipated surge in PFAS-related claims and litigation in the coming months.

How the insurance industry is responding

With the changing regulatory landscape and the looming threat of increased litigation, the insurance industry is adapting to mitigate potential risks. Some insurance carriers are proactively incorporating PFAS-specific exclusions into general liability policies.

While the Insurance Services Office commercial general liability form already includes a total pollution exclusion, there are instances where general liability policies will respond to select PFAS claims involving products. By adding PFAS exclusions, carriers are clarifying their position and broadening pollution exclusions to address PFAS-related claims explicitly.

Additionally, the overall capacity for PFAS in pollution liability policies has been reduced. However, to address the evolving challenges, some environmental insurance carriers are exploring innovative solutions.

These include specialty products, sub-limits, high deductibles, or restrictive endorsements to limit exposure while still providing some coverage. Even so, finding adequate coverage for PFAS-related risks will likely remain challenging for the foreseeable future.

Given the heightened regulatory scrutiny and the potential for increased liability, businesses should take proactive steps to mitigate potential future liability for PFAS. While this is a complex and multifaceted topic, there are some immediate recommended actions to help minimise risk.

Conduct internal risk assessments

A great first step is to initiate an internal and confidential on-paper operational risk assessment. By identifying locations, operations, and products/materials that may pose potential PFAS risks, businesses may be able to get one step ahead of forthcoming regulations and potential litigation.

Ensure documentation is aligned with compliance

Recognise the importance of documentation for future reporting. Review all operating permits (air, waste, water) and determine present and future compliance obligations to ensure adherence to regulatory requirements. This will hopefully result in an easily accessible paper trail should there be any questions about how the business is handling PFAS.

Conduct a supply chain analysis

Understanding the potential impact of PFAS exposures in supply chain, vendors, and products can help avoid costly claims down the line. Should you find a vulnerability in the supply chain, address it where possible to maintain regulatory compliance and minimise risks.

Review and provide safe handling practices

Safe handling procedures are crucial to ensure the wellbeing of employees and customers. Establish clear guidelines and safety standards for employees working with or exposed to PFAS.

Encourage warnings for consumers who may be exposed to PFAS through your locations, products, or services. By prioritising safe handling procedures, you can ensure clients create a secure and healthy work environment, safeguard their reputation, and reduce potential future litigation.

Budget for compliance obligations

Whether rethinking supply chain or operations, addressing PFAS risks can be costly. Considering changing regulations, businesses should prepare and budget for ongoing and future compliance obligations.

Allocating resources strategically will help mitigate financial risks associated with compliance requirements, and reduce the potential to be caught off guard by new requirements.

Review insurance and vendor contracts

Being proactive in understanding coverage limitations is essential for effective risk management.

Analyse existing insurance policies and vendor contracts to identify potential coverage implications for unexpected claims, business interruption, or regulatory enforcement actions. As with the previous recommendation, being prepared goes quite a long way in helping avoid costly claims.

Preparing for what’s next

The implementation of new PFAS regulations and reporting requirements signals a critical juncture for businesses. Navigating the complexities of these regulations requires a proactive approach, including internal risk assessments, documentation, strategic planning, and risk transfer where possible.

The evolving landscape of PFAS-related risks presents challenges. However, by taking these proactive measures, businesses can position themselves to mitigate potential losses and ensure compliance with emerging regulatory standards.

Lydia Zaharia is environmental marketing director at Marsh McLennan Agency. Drew Flynn is president of environmental at Marsh McLennan Agency. Susanne Deegan is senior consultant of environmental at Marsh McLennan Agency.