Significant decision in PFAS lawsuit could affect insurance coverage | White and Williams LLP and other news

Published by
Peter Kavinsky

Per- and polyfluoroalkyl compounds, commonly known as PFAS, have been a key ingredient in many industrial and consumer products for decades. These “permanent chemicals”, which have been linked to environmental pollution and adverse health effects, have attracted ever-increasing attention from regulators, the plaintiffs’ bar and, by extension, the insurance industry.

The current “case to follow” regarding PFAS is a multi-district litigation (“MDL”) in the United States District Court for the District of South Carolina presided over by Judge Gergel. The MDL consists of more than 2,000 cases brought by individual plaintiffs and state and local governments in connection with the manufacture and/or use of water-based film-forming foam, also known as AFFF. Runway use, which has historically been used in firefighting operations, including those conducted by the United States military, is expected to release two types of PFAS, PFOS and PFOA, into the environment.

On September 16, 2022, Judge Gergel denied a motion for a partial summary judgment filed by the defendant, 3M, and other AFFF manufacturing defendants in respect of the government contractor’s immunity defense. While not a coverage decision, the decision is important in the context of the PFAS litigation and may have implications for coverage.

Protecting the Immunity of a Public Contractor

The government contractor immunity protection was designed to protect the interests of the federal government in obtaining the products it needs at reasonable prices, despite the potential defects in those products. Under the defense, a government contractor may claim immunity in respect of an allegedly defective product if the following three criteria or “prongs” are met: (i) the government has approved sufficiently accurate specifications for the product; (ii) the product complies with those specifications; and (iii) the contractor alerted the government to product hazards that were known to the contractor but not to the government. The doctrine, known as the “continuous use” doctrine, allows the contractor to meet the defense requirements, including the first part, where the government continued to use the product after receiving full knowledge of the risks associated with the product.

In 1969, the Navy released a military specification (“MilSpec”) for the AFFF. Initially, 3M supplied MilSpec compliant EAFs that contained PFOS. In 2000, 3M ceased production of PFOS, and other contractors who used a different process for the production of EAF, known as telomerization, stepped in to fill the void left by 3M’s exit from the market. Although telomer-based EAFs do not contain PFOS, they can degrade to PFOA in the environment. Manufacturers of moving telomer based FRPs included Tyco Fire Products LP, Chemguard Inc., Kidde-Fenwal, Inc., National Foam, Inc. and Buckeye Fire Equipment Company.

Decision to Reject a Partial Summary Judgment

In its ruling dismissing the Partial Summary Judgment on the Protection of Government Contractor Immunities, the MDL Court held that: (i) MilSpec does not provide a sufficiently precise specification on the first aspect of the protection; and (ii) factual questions exist as to whether AFFF manufacturers warned the government in a timely manner about the hazards of their AFFF products, which were known to them but not to the government, and whether the “continued use” doctrine was applied.

The court ruled that MilSpec is not a precise enough specification, as it is merely a “performance specification” that allows “every manufacturer to offer [its] own witch’s magic potion” made from “at least hundreds of different kinds [PFAS]”, rather than a “terms of reference”, which would require the use of certain chemicals.

Regarding the third aspect and the “continued use” doctrine, the court held that all AFFF manufacturers “had significantly more knowledge than the government about the properties and risks associated with their products, and deliberately withheld very important information from the government. The court described a long list of evidence that 3M in particular not only failed to disclose important information to the government in a timely manner, but also “actively sought to discredit” the unfavorable information that was disclosed.

Similarly, the court found evidence that manufacturers of telomer-based EAF, primarily through the Fire Fighting Foam Coalition (“FFFC”), misled the government into believing that their EAF products would not degrade to PFOA. although they found out that their products could or would actually do it. In addition, the court ruled that the government’s hectic regulatory activity in the immediate aftermath of 3M’s allegedly belated disclosure, and the government’s subsequent decision to limit the use of telomere-based MFPs to “critical activities” makes “continued use” applicable. teaching into further doubt.

Potential Impact on Insurance Coverage

A court order and opinion, although not made in the context of insurance coverage, can have serious consequences for insurance coverage. General liability policies generally require that any injury or damage for which the insured claims liability coverage results from an “accident”, which the policies usually define as an “accident”. To the extent that the insured knowingly or intentionally causes harm or damage or should have known that he would cause harm or damage, liability for such harm or damage may be beyond the scope of coverage. Courts generally place the burden on the policyholder to prove that the injury or damage resulted from an accidental “accident”.

In addition, most general liability policies contain an “anticipated or implied” exclusion, which excludes coverage in connection with liability for injury or damage that the insured expects or intends. Accordingly, if the insured expects or intends to suffer injury or damage, coverage may not be available. Courts generally place the onus on the insurer to prove that the “expected or contemplated” exclusion applies.

In the MDL decision, the court cited evidence presented by the plaintiffs that 3M and the manufacturers of telomere-based FFP deliberately withheld information about the known hazards of their products. Depending on how the court interprets the policy definition of “incident” and/or “anticipated/intentional” exclusion, the decision and the evidence it refers to (if warranted) may be the basis for defending insurance coverage on the basis of one or both from these policy provisions.

However, the law of the applicable jurisdiction may provide additional options. For example, whether an “accident” occurred or whether the injury or damage was “expected or intentional” may depend on whether only the act that caused the injury or damage was expected or intentional, or whether the injury or damage itself was expected or intentional. . Similarly, proof of the insured’s actual subjective knowledge or intention may or may not be required, as opposed to what the insured should have known objectively.

In addition, the order and opinion may have implications on what policies, if any, are triggered by allegations of harm associated with PFOS and PFOA. Many general liability policies do not provide coverage for injury or damage that the insured knew about prior to the policy period. Thus, policies issued after the insured becomes aware that PFOS or PFOA are harmful may not provide coverage for such harm. Similarly, insurers may argue that they should not be liable for damages that the insured failed to mitigate by failing to disclose the risks as soon as the risks became known to him (even if the insured discovered the risks after the policy period). Again, the court’s decision discusses in detail what the EAF manufacturers might have known about the hazards of PFOS and PFOA and when they might have known about it.

Of course, the court only rejected a partial summary judgment against 3M and five other AFFF manufacturers. The evidence presented therein may, to varying degrees, apply to other policyholders or not at all. Parties should evaluate whether and to what extent the evidence in the MDL pertains to them and should consider other evidence that may be relevant to the types of coverage issues discussed above.

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Peter Kavinsky

Peter Kavinsky is the Executive Editor at cablefreetv.org

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