In my May 30, 2024, blog post, “Setting the Stage for PFAS Coverage Litigation,” I discussed some classic issues that arise in most, if not all, insurance coverage battles around environmental issues. I also raised some new issues stemming from per- and polyfluoroalkyl substances (PFAS) claims in particular, and I questioned what might be the next PFAS coverage issue. One area that I touched on but did not address in detail was allocation and trigger.

After discussing what coverage could potentially respond to PFAS claims and how an in-depth review of the policies for specific and appliable language is a key step, the next question posed was around the policies that would respond and how investigation and cleanup costs would be shared among them.

For a traditional toxic tort, there are well-established steps to follow when assessing allocation and trigger. Some of these are:

Step 1: Figure out when bodily injury or property damage occurred and, therefore, triggers a policy.

In order to trigger coverage, one must have an event that occurs during the policy period.  This sounds easy but there are many questions that arise. For example, is the injury or damage continuous from one date (first exposure) to another, thus triggering all policies in between? Or is the injury or damage limited to the dates (and policies) of specific exposure? If so, what defines exposure?

Step 2: Determine the methodology for allocation — i.e., sharing costs between policies. This can get complex, quickly.

• A policyholder needs to understand the full history. Are there predecessor companies that may have coverage that is accessible?
• Which policies have a duty to defend and can start covering defense costs immediately?
• Is there coverage for both products and non-products losses? Do any aggregate limits apply?
• Are any limits impacted by prior exhaustion or settlements?
• What methodology will be used to share costs among policies? Are there previous rulings that impact coverage?

Step 3: Determine costs that need to be allocated to the applicable coverage.

• What costs are covered?
• What is the definition of an occurrence?
• How will costs be separated to fit with the definition of occurrence and how will coverage respond?

While these steps can be difficult to answer for a tort that has been around for decades, there are many lawyers and their trusted consultants who are very familiar with the current playing field and have much experience trying to solve these questions.

Things are much more difficult for PFAS. Determining the method for PFAS allocation modeling is basically starting with a blank slate. As time passes, there will be more case law that evolves, but for now, both policyholders and insurers are testing the waters. 

So, what new twists might we see? As discussed in my last post, PFAS is pervasive. How does one attribute liability to one policyholder versus another when PFAS is in everything, everywhere, all at once?

Some of the bigger questions to answer are:

• Whose PFAS is responsible for the injury or damage?
• What is a PFAS injury?
• How can liabilities be attributed to different predecessors or companies of a single defendant when the liabilities may trigger different insurance programs?
• What is the trigger when the chemicals are everywhere, and exposure occurred over many years (or even perhaps continues to occur)?
  • What costs will be considered covered vs. not-covered? Consider things like regulatory compliance, medical monitoring and property value diminution.
  • Where is the contamination actually occurring? Is it during the manufacturing process or could it come later? (e.g. is the PFAS from the food packaging or maybe the crop itself?)

Preparing to answer these questions requires developing an extremely nuanced strategy for collecting all necessary datapoints and anyone involved should start now rather than later. The strategy should involve using data collection methods that are designed to avoid data errors (typos, missing elements, etc.), duplication, and chaos. Using a relational database that can be customized to meet the specific needs of an individual policyholder is highly recommended. The science and regulatory landscapes surrounding PFAS are still a work in progress which makes reaching an early settlement difficult. Consequently, litigation will likely go on for many years, so the data collection and reporting infrastructure should be built with a long-term view in mind. 

I don’t pretend to have all of the answers to the bigger questions listed above, or the smaller ones that didn’t make the cut, but I do know that we’ll be modeling many different scenarios for defendants in the PFAS litigation for years to come.