Dubbed as the “forever chemicals” and “the next asbestos”, PFAS is a large group of complex synthetic chemicals that has been used in various consumer products since the 1950s. PFAS is broadly used in the manufacturing of water resistant, stain resistant and non-stick goods that are used in a range of applications from Gore-Tex materials and anti-adherent pans to firefighting foams.

Risk Factors

The main risk factors with PFAS are:

• Widespread historical use: PFAS has been widely used in consumer products for more than 50 years and can now be isolated from various environmental and food samples.
• Environmental persistence: Due its very stable chemical structure, PFAS molecules does not degrade in the environment and continues to persist, hence the name “forever chemicals”.
• Health effects: Even though the understanding of the health effects of PFAS is currently incomplete and fragmented, the exposure has been linked to health issues such as low birth weight, thyroid issues, testicular cancer and increase in cholesterol among many other symptoms.
• Bioaccumulation: PFAS molecules cannot be metabolised and hence slowly build up in the body of animals over time, which further increases the potential health risks.

The next asbestos?

Similar to asbestos, the widespread use and persistence of PFAS in our society makes the scale of PFAS exposure and its potential financial impact through litigation quite significant.

PFAS exposure has been linked to several health issues however, the science is far from settled on this matter. Unlike asbestos, where the connection between historical asbestos exposure and the diagnosis of mesothelioma cancer was established and accepted, there is no “signature” disease that is linked to PFAS. Hence the current litigations are full of questions regarding scientific causation and evidentiary standards governing liability. For further reading on the comparisons of asbestos and PFAS and its potential on the insurance industry, refer to the article here, and for information on current ongoing PFAS litigations, read this article.

Current Regulation

The regulatory landscape of PFAS is rapidly changing with several countries imposing bans or voluntary approaches for minimising the manufacture, import, sale and use of PFAS. Example is the EU REACH proposal in 2023 that requires PFAS restrictions to be effective in 2026. For more information, refer to the article here.

PFAS Litigation

As always with litigation, the USA is leading the way. The first PFAS related case was brough in 1999 and to date there have been more than 10,000 cases involving more than 500 companies. Known settlements now exceed more than $16 Billion for property damage, environmental damage and health impact claims. The two companies impacted the most are Dupont (manufacturers of Teflon) and 3M (manufacturers of AFFF foam for firefighting).

Insurance Implications

The presence of PFAS has the potential to create a range of insurance issues:

• Liability exposures – claims for environmental damage or health impacts where a direct link can be made between a contaminated product and the effect.
• Environmental Impairment – particularly an issue where policies are in place and regulations tighten requiring clean-up to occur.
• Product Recall and/or Business Interruption – contamination found in a product may require the product to be recalled and/or replaced leading to significant loss of sales.

Brokers and clients should be conscious of the presence of PFAS exclusions.

At present @Risk Underwriting does not have a standard PFAS exclusion but can apply it based on underwriters’ judgement.

For more information and enquiries, please contact us.

@Risk Underwriting Pty Ltd understands the unique exposures of the food and beverage industry. Whether your business is a manufacturer, wholesaler, retailer or a distributor, each activity has its own distinctive exposures to consider.  

Contract manufacturer provides manufacturing services for companies that sell products versus services. Contract manufacturing is a form of outsourcing that continues to be in demand, especially in the food industry, where businesses face different risks and challenges when compared to other manufacturing companies. From the raw goods stage through processing, packaging and distribution, operations count on a variety of tools, procedures, and people.  

There are many moving parts in a manufacturing operation, and many food companies run into high expenses and challenges with quality when handling their own manufacturing, because they may not have the resources to meet demand requirements.  

Considering manufacturing is a driving force in today’s economy, there is a growing need for insurance and risk management services. One solution that can be offered under a Liability policy is a Manufacturers’ Errors and Omissions extension designed to cover businesses for manufacturing mistakes or negligent service resulting in third-party financial loss without bodily injury or property loss. It also ensures defense in case of possible legal proceedings and bears the costs incurred.  

Errors and omissions insurance helps protect business from claims of: 

• Negligence
• Errors in services given
• Omissions
• Misrepresentation
• Violation of goods faith and fair dealings

 To reduce the probability of errors and omission, the following risk reduction measures need to be considered: 

Always sign a contract. Contracts need to be clear defining obligations, deadlines, and compensation, to manage expectations from the start. It is essential to work with a legal representative to ensure that the contracts do not compromise the position of the business in the event of an incident.  

Leave paper trail. Document all communication with the clients, as well as any verbal communications. A paper trail helps clear up disagreements when parties to the contract are confronted with dispute.  

Be transparent. Manufacturers are to keep clients up to date on their progress and of any potential pitfalls, reducing the probability of any surprises, building trust between all parties.  

Communicate throughout the job and keep the expectations realistic.

Quality Control Procedures are in place with the use of internal and external audits to check compliance.  

Unlike general liability, errors and omissions is endorsed on a “claims made” basis with a retroactive period. This means that claims made against businesses on or after a certain date is not eligible for coverage. The extended reporting period helps cover claims filed within a certain period after policies expire.  

By not purchasing Errors and Omissions, a company can be taking a serious financial risk. These types of losses are not covered under a general liability policy and even if you are not at fault, litigation is both time consuming and expensive.