PFAS – a class of man-made per- and polyfluoroalkyl substances -- is in our groundwater and in our blood. A recent article in The New York Times indicates that this ubiquitous so-called “forever” chemical could trigger a bigger wave of litigation than asbestos. PFAS is in innumerable products, and a study cited by the Times found that nearly a third of groundwater samples taken worldwide had PFAS levels higher than the threshold the EPA deems harmful to human health. In addition to creating groundwater pollution, PFAS is also noted by some as a carcinogen.  We are currently ‘there at the creation’ of the next wave of environmental and toxic tort litigation.

The insurance industry already is circling the wagons against the expected coverage onslaught, asserting polluters’ exclusions, late notice, and a host of other defenses. New Jersey case law indicates, however, that liability for PFAS groundwater contamination and bodily injury should be covered by historic general liability policies – those in effect before 1986, when the absolute polluters’ exclusion was added to the standard commercial general liability (CGL) policy. When pollution being called to account now occurred over the course of decades, old policies often provide coverage. The trick is to find those policies – or legally sufficient secondary evidence that they existed.

Which Policies Apply?

Liability insurance coverage is triggered at the time that damage or injury occurred. Commercial General Liability (CGL) policies are occurrence-based, which means that if a covered event occurs during the policy period it is covered even if it does not manifest itself until years later. In a “slip and fall” or “fender bender”, the time of the damage is easily known. What happens when groundwater contamination is discovered in 2024 that can be traced back to 1980?  While the absolute polluters’ exclusion will usually preclude coverage under policies in effect after 1986, the policies in effect from 1980 to 1986 may respond.

The ‘sudden and accidental’ polluters’ exclusion does not apply.

In or about 1973, the insurance industry introduced its first standard polluters’ exclusion to the CGL policy, excluding coverage discharge of pollutants unless the discharges were ‘sudden and accidental.’  Some state courts have held that this exclusion applies to unintended pollution that occurred gradually. However, the New Jersey Supreme Court ruled in Morton Intern. v. General Acc. Ins. (1992) that the exclusion only applies if the damage was intentional (not accidental). Holding that the term “sudden” pertained only to the initial release of pollutants, not to ensuing pollution over time, the court wrote, “We are fully satisfied that if given literal effect, the standard clause's widespread inclusion in CGL policies would limit coverage for pollution damage to so great an extent that the industry's representation of the standard clause's effect, in its presentation to New Jersey and other state insurance regulatory agencies, would have been grossly misleading.” State courts have split about evenly as to whether the sudden and accidental exclusion applies to pollution that occurs over an extended period.

In about 1986, the insurance industry replaced the ‘sudden and accidental’ polluters’ exclusion with an ‘absolute’ polluters’ exclusion.  While this could be a valid defense against most PFAS claims, polluters’ exclusions (absolute or otherwise) generally do not apply to products liability, completed operations, and personal injury claims. Unless one of these three exceptions apply, no coverage exists for PFAS contamination that commences after 1986.

You don’t need the actual policy.

Most companies do not have copies of their historic insurance policies.  Companies searching for their insurance policies can look to such documents as old corporate minute books.  Insurance brokers are a useful source of information. Many companies, though, use insurance archaeologists. This little-known specialty is expert in locating proof of old policies.

The policyholder does not need the actual policy to prove coverage.  In New Jersey, the insured need only prove the policy by a’ preponderance of the evidence’ i.e., prove that coverage is likelier than not. Secondary evidence is sufficient, and sometimes very little secondary evidence at that. At Anderson Kill, we have literally obtained coverage when a single piece of paper identified the name of the insurance company providing coverage in the period in question. Insurance archaeologists are expert at finding evidence of policies as old as the 1970’s.

You don’t need to be sued to have coverage.

Many companies know to put their insurance companies on notice once they are sued. However, PFAS liability also arises without litigation, in regulatory settings. Coverage can also be triggered, for example, by a “potentially responsible party” (PRP) letter from the EPA or a Directive from NJDEP. Your insurance company is required to defend you in such a proceeding, if the policy covers the type of event that triggered the regulatory action. Providing notice to all potentially responding insurance companies early and broadly is necessary. Late notice can bar coverage.

The duty to defend is outside the policy limits and unlimited. We currently have a case in which a $100,000 policy from 1970 is expending $4,000,000 in defense costs on behalf of the insured.

What to do

If you think you may have PFAS exposure, immediately search for your historic insurance policies. At the first whiff of anything resembling a claim, give notice to your insurance companies early and broadly. Examine when the PFAS contamination is alleged to have occurred. You should retain an insurance expert to help you to navigate the claim, and respond to the inevitable insurance company denial.