Navigating market changes to secure protection for PFAS exposures

In advance of policy renewal, a water utility faced challenges with its incumbent insurer regarding coverage related to its PFAS chemicals exposure. Marsh's team of environmental insurance specialists developed a tailored insurance program that provided additional coverage on a dedicated pollution legal liability program for the client's PFAS exposure and delivered a satisfactory solution to complement the company's existing insurance program.

The challenge

During the excess liability renewal, the utility was offered two options by the incumbent insurer:

1. File a notice of circumstance under the expiring policy for potential claims arising out of exposure to PFAS to reserve access under the policy. This action would result in an exclusion for PFAS on the renewal.
2. Accept a five million dollar sublimit of affirmative coverage for PFAS claims on the renewal policy, but lose the ability to file a notice of circumstance on the expiring policy as a result.

PFAS exclusions are appearing more frequently in renewals for property and casualty insurance policies, which is leading many companies to look to the pollution insurance market for a solution. However, securing coverage for site and products pollution exposures on a dedicated pollution insurance program without a PFAS exclusion is increasingly challenging in the pollution market due to the claim activity, current/pending regulations, and lack of sufficient underwriting data. Yet, the utility still wanted to explore whether the pollution insurance market would be willing to cover the site and products pollution exposures without a PFAS exclusion before deciding which option to accept from the existing insurer.

The solution

Our Environmental Practice leveraged the utility's sophisticated environmental health & safety department and the extensive body of work they developed on assessing, managing, and mitigating their PFAS exposures. Relying on our knowledge of market appetite, we facilitated underwriting meetings with their technical staff, gathered specific information to directly address the underwriters' concerns for claim potential, and let the client tell their very positive story. This approach resulted in attracting pollution insurer interest to write a program covering cleanup and toxic tort liability for pollution claims arising from their facilities, as well as the potable water they distributed to their customers. The primary program was negotiated to afford coverage without an exclusion for PFAS, and our team garnered support from an excess pollution insurer to provide additional limits of liability over those underlying terms.

Since the client was able to secure dedicated capacity for their pollution exposures and PFAS, they elected to file a notice of circumstance on the expiring policy and rely on their pollution program to address pollution incidents involving PFAS going forward.

The result

The new insurance program allowed the utility to address and augment its overall strategy for managing PFAS exposures, as well as secure additional insurance for other pollution exposures inherent to the organization by filling perceived gaps in the overall property and casualty insurance portfolio.

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