Reed Smith’s Ellison: “Bellwether” SC PFAS case to determine future litigation
The industry will be closely following the multidistrict litigation (MDL) that’s currently pending in the federal court in South Carolina in relation to per- and polyfluoroalkyl substances (PFAS), viewing it as a “bellwether” decision that will either encourage or discourage the plaintiff bar in the future.
Speaking to The Insurer TV on its News in Focus programme, John Ellison, partner at Reed Smith, said the industry is “monitoring this case very closely - everybody is”.
“There haven't really been any determinative decisions made yet on liability for PFAS,” he said. “But I think in the US, South Carolina is likely where the threshold decisions or the real key decisions are going to be made.”
He added: “There's a lot of parties involved in that and a lot of money being spent on the plaintiff side to prove their case, so we’ll have to see how that plays out.
The MDL at the centre of this has been established in South Carolina and concerns PFAS contained in Aqueous Fire Fighting Foams.
It is part of a growing trend of environmental product liability claims against manufacturers and the MDL itself now contains over 2,000 claims.
PFAS are referred to as “forever chemicals” because of their very slow degradability, mobility and persistence in the environment, due to their composition. These chemicals are abundant in people’s daily lives, including cookware, carpets, food packaging, medical devices, cosmetics, clothing and firefighting foam.
“The thing about PFAS that's fascinating and of concern to society and to the industry is its prevalence in so many products and the variety of uses it has been put to for decades,” he said.
“It really transcends industries and interacts with people in thousands and thousands of different ways. I doubt anybody has actually counted how frequently or often you have the potential for exposure to PFAS chemicals, because PFAS covers over a thousand registered types of chemicals that, at least in the US, the Environmental Protection Agency (EPA) has identified as falling within this umbrella category of PFAS. So, it really is an omnipresent substance in our environment and in the products we deal with every day,” he said.
Exposure impact from hazardous substances
As the number of PFAS-related claims grows, it is becoming increasingly important for insurers to consider the extent to which their policies might be affected.
Product liability, employer’s liability, public liability and environmental liability policies might all be susceptible to being triggered by PFAS claims.
And from an underwriting perspective, Elliuson said insurers are considering the extent to which they are comfortable with underwriting PFAS as a risk going forward.
“I'm sure that they are tracking it probably as closely as the government is now and have also engaged in the process with the government about defining what is hazardous and what isn't,” he said.
“The US EPA has now put out the first potential national drinking water standard for certain PFAS chemicals and that will certainly be something the industry is going to watch closely.
“Because once a chemical or any substance gets on the list of hazardous substances that's monitored and regulated by the government, that's really a game changer for exposure, because I think that typically gives the plaintiffs bar a much easier case to prove that there's some danger,” he explained.
Insurers are “ahead of the game”
It’s perhaps unsurprising, given the similarities, that many comparisons have been drawn between PFAS and asbestos, but Ellison said the industry is better prepared for PFAS - “lessons have been learnt, that’s for sure”.
“I do think the industry is doing far better than they did in the asbestos context because they’re responding a lot quicker and earlier. They’re kind of getting ahead of the PFAS problem before it’s really a huge problem. WIth asbestos, it was a much more delayed response,” he said.
Ellison is referring to some of the exclusionary language that’s already emerged since this came on the plaintiff’s radar as potential fertile ground for litigation. As an example, PFAS specific exclusions have been included in some general liability and D&O policies.
“I was really surprised to see how quickly the PFAS exclusions surfaced, because other than 3M, DuPont and a couple of other big manufacturers, nobody’s really paid very much yet. So for the insurers to be out there and putting exclusions on some policies for companies that really haven’t even had an liability expense, that’s getting ahead of the game,” he concluded.
Next week, The Insurer TV will be publishing its interview with Shannon Totten, SVP, casualty insurance practice, Bermuda, Sompo International, during which we’ll be going into more detail around the exclusionary language, exposure management and looming impact on the (re)insurance industry.
In the meantime, watch the 15-minute interview with Reed Smith’s John Ellison on where the litigation landscape currently stands and what insurers need to be keeping an eye on.