Insurers Rein in Coverage as ‘Forever Chemical’ Risks Surge in Construction Projects
Insurers operating in the environmental liability space are growing increasingly cautious and restrictive in their coverage of per- and polyfluoroalkyl substance (PFAS) risks in construction and redevelopment projects. This heightened vigilance is driven by rising public awareness of the health and environmental impacts associated with these persistent compounds, commonly referred to as “forever chemicals” due to their resistance to natural degradation in the environment.
The presence of PFAS at construction sites can lead to increased costs, health hazards, and project timeline complications. Dennis Willette, head of environmental at Westfield Specialty, noted a clear tightening of coverage terms and policy exclusions across the industry as awareness of remediation costs, health impacts, and evolving regulations grows. “There’s no one way that people are approaching it, but I would say the general theme is that coverage is tightening,” Willette stated.
PFAS compounds have been used in various building materials, including fire-resistant products, roofing, coatings, and paints. Consequently, many construction sites may unknowingly harbor legacy PFAS, adding complexity to ongoing operations and future redevelopment. Long-term exposure to PFAS has been linked to serious health issues, including certain cancers, developmental disorders, and immune system problems.
There are two primary high-risk scenarios in the construction sector, according to Willette: sites where firefighting foams are used and wastewater treatment facilities that enable the accumulation of these compounds. Disposal sites for soil and other materials can also pose complications if regulators later identify previously unknown PFAS contamination. “If that soil is disposed of off-site, what are the long-term implications? What are the implications of sending that waste to a facility that may not be checking for PFAS now but may be checking for it later?” Willette questioned.
Regulators are increasingly focused on understanding and mitigating the effects of PFAS. The US Environmental Protection Agency (EPA) recently set health advisories for PFAS in drinking water, reflecting growing awareness of their persistence in the environment and potential health impacts. For insurers, this growing knowledge introduces new underwriting and coverage questions, particularly regarding the potential for future liability stemming from historical use or disposal of PFAS.
In response, carriers are adapting their coverage to account for PFAS risks by adding specialized endorsements or developing policy wording that expressly covers certain PFAS-related scenarios while maintaining strong controls through policy exclusions, sub-limits, or other mechanisms. Insurers are also employing sophisticated data and underwriting strategies to aid policyholders in assessing and mitigating PFAS-related risks.
Westfield Specialty offers non-owned disposal site coverage on an occurrence basis, with Willette explaining that their tailored approach allows for a policy structure that can account for various eventualities related to PFAS. “We’re evaluating the risk and applying coverage based on what we see and what we know, not general rules or blanket statements,” he said.
To help construction clients address PFAS risks, brokers are advised to adopt a proactive approach by asking detailed questions about specific project sites and potential PFAS exposures, particularly in high-risk sectors. Staying informed about evolving regulations, technical developments in PFAS risk assessment, and changes in the insurance market’s approach to these compounds is also crucial.
Willette emphasized the importance of a strong consultative approach between carriers, brokers, and insureds to help contractors mitigate risks more effectively. “We’re really looking to develop partnerships with our insureds, not just provide a policy,” he said.
The evolving landscape of PFAS risks is expected to continue influencing liability policy structures, with a shift towards more traditional, shorter-term policy deals. Willette believes that the market is moving away from 10-, 20-, or 30-year policy terms towards annual, renewable, or two- or three-year term deals due to the rapidly changing regulatory environment and potential for significant changes in account risks over short periods.
