Expanding PFAS liability in the US

July 2023 | EXPERT BRIEFING | RISK MANAGEMENT

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Few words inspire the panic that ‘polyfluoroalkyl substance (PFAS)’ does. Companies producing, processing, distributing and using (whether knowingly or not) these substances must be aware of expanding legal liability and take steps now to minimise risk.

This article outlines key US per- and PFAS developments, the legal and commercial implications of these developments, and measures stakeholders should consider taking to limit liability.

Background

PFAS are a group of synthetic organic chemical substances. They contain at least one alkyl group on which all of the hydrogen atoms have been replaced with fluorine. Well-known PFAS contain fully fluorinated carbon chains of various chain lengths attached to a functional group, such as carboxylic or sulfonic acids. Such groups are called perfluorinated acids and include perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS).

Shorter chain PFAS have been developed more recently to substitute for the longer chain ones. It is important to distinguish between ‘long chain’ and ‘short chain’ PFAS – the properties and hazards are different. The PFAS group also includes polymers (e.g., fluoropolymers, perfluoropolyethers and polymers with fluorinated side chains. Larger polymers are considered less hazardous than smaller non-polymers because PFAS polymers are non-reactive and are too large to cause toxic effects or be absorbed and bioaccumulate in animal tissue.

Thousands of chemicals are considered PFAS in the US and are used to make fluoropolymer coatings and products that resist corrosion, grease, water, stains and heat. They are found in thousands of applications, including pharmaceuticals, medical devices, pesticides, non-stick coating in cookware, stain-resistant fabrics, food packaging, adhesives, electrical insulation wire, tank linings and firefighting foams. PFAS are used to make many more products, such as semiconductor chips, even though the PFAS are not intended to remain in the product.

The US Centers for Disease Control and Prevention (CDC) has measured PFAS in human blood serum, indicating pervasive exposure to these chemicals in the US population. While the measurable presence of a substance in serum alone tells us nothing about whether that presence causes an adverse effect, it is clear people do not want PFAS to contaminate their bodily fluids, consumer products or groundwater supplies. Interestingly, blood levels of PFOS and PFOA have dropped dramatically since the majority of both were phased out between 2005 and 2010, suggesting that perhaps they are not as ‘forever’ as detractors claim.

Expanding regulatory liability

Globally, the number of PFAS restrictions and reporting requirements increases frequently. While this article focuses on the US, it is important to know that the European Union (EU) is currently considering a proposal to restrict more than 10,000 PFAS under the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) regulation. If adopted, this would be the most extensive regulatory restriction on PFAS, in one of the world’s largest markets.

The US regulatory landscape primarily focuses on PFAS in soil and drinking water, given their potential to facilitate human exposure. In 2021, the US Environmental Protection Agency (EPA) announced its ‘PFAS Strategic Roadmap’, laying out a holistic approach to addressing PFAS. The roadmap focuses on three strategies: (i) increase investments in research; (ii) leverage authorities to take immediate action to restrict PFAS chemicals from being released into the environment; and (iii) remediate PFAS contamination. States are also enacting comprehensive regulations that restrict PFAS.

Federal PFAS reporting. The EPA proposed a rule requiring all manufacturers (including importers) of PFAS in any year since 2011 to report information related to chemical identity, categories of use, volumes manufactured and processed, byproducts, environmental and health effects, worker exposure and disposal. This reporting standard would require submitters to conduct a reasonable inquiry within the full scope of their organisations (not just the information known to managerial or supervisory employees).

Toxic release information (TRI) data is reported to the EPA annually by facilities in certain industry sectors, including federal facilities that manufacture, process or otherwise use TRI-listed chemicals above certain quantities. The data include quantities released into the environment or otherwise managed as waste. A law enacted in 2020 identifies certain regulatory activities that automatically add PFAS or classes of PFAS (e.g., EPA issuing a final toxicity value or being subject to a Toxic Substances Control Act (TSCA) Significant New Use Rule (SNUR)).

Clean-up requirements. In August 2022, the EPA proposed to designate PFOA and PFOS, two of the most hazardous PFAS, as “hazardous substances” under the federal hazardous substance remediation law, the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The rule would make these substances eligible for CERCLA clean-up requirements and require entities to report immediately releases of PFOA and PFOS that meet or exceed the reportable quantity of one pound or more in a 24-hour period. More recently, in April 2023, the EPA sought public input on whether to seek similar CERCLA designation status as a “hazardous substance” for other PFAS.

Implementation of these measures is expected to jump-start extraordinary remediation activities, resulting in significant clean-ups, demands for cost recovery, reopening of ‘cleaned-up’ sites and private litigation. The insurance industry is bracing for the impact. Due diligence in M&A will be complicated and costly.

Drinking water standards. In March 2023, the EPA announced the first-ever national drinking water standard for six PFAS. These proposed standards would regulate PFOA and PFOS as individual contaminants and would regulate four other PFAS – perfluorononanoic acid (PFNA), perfluorohexanoic acid (PFHxS), perfluorobutane sulfonic acid (PFBS) and hexafluoropropylene oxide dimer acid (GenX chemicals) – as a mixture.

Expanding commercial liability

Property and personal injury liability. Thousands of lawsuits have been filed alleging personal injury and property damage allegedly caused by PFAS. Plaintiffs’ claims are based on negligence, wantonness, public nuisance and related tort-based allegations. The remediation of sites under CERCLA will almost certainly drive new litigation, implicating a new class of potential defendants. Companies will need to manage the fallout, assess the potential for legal action and prepare accordingly.

Product liability. A growing number of consumer product liability cases are seeking class action certification alleging the presence of PFAS in purchased products. Plaintiffs assert fraud, various breaches of implied or express warranty, negligent misrepresentation, state consumer protection provisions and unfair competition claims, among other novel theories of liability.

A case in point is a class action lawsuit filed against Tom’s Wicked Fresh mouthwash, a product that was found to contain measurable concentrations of PFAS. The case is an excellent example of how consumer protection laws can be used as a cudgel to weaponise state laws that are intended to protect against deceptive marketing practices. Demonstrating personal injury beyond modest economic injury is not necessary to elicit an adverse ruling, significant transaction costs, and unwanted reputational injury and brand damage.

While PFAS manufacturers have so far borne the brunt of the litigation, now product manufacturers intentionally adding PFAS to their products are increasingly embroiled in litigation. Depending on the products’ applications, these marketers should be pursuing all the risk minimisation and mitigation strategies, including reformulation, labelling, disclosure, and contractual protections and waivers, as appropriate, to minimise liability.

What to do?

In the current legal, regulatory and commercial landscape, and with the likely outlook over the coming decade, companies must develop a PFAS game plan. They must consider the supply chain and understand where PFAS might enter it. Given their ubiquity, PFAS may enter a supply chain in an astonishing number of ways – intentionally added, unintentionally added (a byproduct or contaminant) or as a contaminant in process water. The reality is PFAS could be anywhere, so the potential for liability is correspondingly open-ended.

At the very least, a PFAS game plan must include the three elements listed below.

First, ascertain where in the supply chain of a product line there might be PFAS. Eliminate the source of the PFAS if possible, or reformulate the product. If it is not possible, for whatever reason, to reformulate, it is essential to ensure continued market access. Clarify as much as possible what is known about each PFAS species – composition, performance, properties, uses, safety data, applicable bans, restrictions or reporting requirements – and develop a plan to protect market access.

Second. ensure your operations are fully informed about PFAS regulations, pending trends and proposed regulations. Bans in various countries and restrictions could affect companies, even if they do not have an active presence in the markets in question. Develop detailed justifications for PFAS that are essential and seek protections under domestic and international regulatory frameworks for exemptions and derogations that reflect the essential nature and functionality of PFAS that can and should enjoy extended market-life protections.

Third, assess business options, including insurance policies, contractual indemnifications and related private-party risk mitigation measures. Conduct an insurance audit and shore ups deficits as much as possible. Review supply agreements and related commercial agreements with a view toward seeking indemnifications from suppliers to provide as much contractual protection as possible. Revisit the company’s product component certification programme to ensure the protections the company seeks and the assurances it is providing are state of the art. Assess if the company’s procurement policies are ‘PFAS sensitive’. In other words, confirm the supply chain, research and development (R&D) activities, and product development policies disallow PFAS at every step of the process.

Conclusion

There are measures to take now to minimise PFAS liability. Those listed above will go a long way toward protecting companies against this growing global problem.

Lynn L. Bergeson is managing partner of Bergeson & Campbell, P.C. She can be contacted on +1 (202) 557 3801 or by email: lbergeson@lawbc.com.

Lynn L. Bergeson

Bergeson & Campbell, P.C.