Drinking water: a commodity so abundant in modern society that we rarely give it much thought. At least until recently with two dramatic discoveries. First, the discovery of lead-contaminated water in Flint, Mich., and second, the rising awareness that persistent pollutants, called PFAS, are also present in municipal water systems around the United States.
Executive SummaryFOURTH OF A SERIES. It’s not only the metals, PFAS pollutants and pharmaceuticals found in municipal water systems around the country that have health experts worried, it’s also the very byproducts used to disinfect water that are raising concerns. These byproducts may actually be obesogens, which are chemicals that disrupt normal metabolic processes. Here, Praedicat’s Adam Grossman and Sheryll Mangahas explores if the new water contaminations are the source of the next insurance crisis.
The latter issue is widespread and might pale by comparison to the Flint exposures. And what else is waiting in the wings? We sometimes talk about the “next asbestos,” and we think about product exposures, but newly emerging environmental exposures raise the specter of the next environmental cleanup crisis. Could the new water contaminations be the cause?
Unsafe drinking water was historically a major cause of illness and death, but the advent of modern drinking water standards and purification techniques has all but alleviated these problems and is one of public health’s great achievements. In the United States, the Environmental Protection Agency regulates approximately 90 drinking water contaminants and, notably, municipal water systems can have non-zero levels of nearly all of them. But even this level of regulation appears to be getting more out of date with each passing year, as thousands of new chemicals enter the market without any assessment of safe drinking water levels.
While the Flint water crisis has reminded us all about the importance of removing heavy metals from water, what about the other contaminants? Perfluorinated compounds have been found in drinking water nearly everywhere scientists have checked. Pharmaceuticals are routinely found in both drinking and natural bodies of water. Federal regulations, strict as they are in places, can’t seem to keep up. The EPA is required to review its regulations every six years, but that only applies to already-regulated contaminants—not any of these other ubiquitous contaminants. To establish regulation of a new contaminant is an even longer process that appears incapable of keeping up with the ever-changing roster of chemicals used in commerce.
Recent science has uncovered a risk in the most unlikely and worrisome of places: water disinfection byproducts themselves. Drinking water is disinfected to remove micro-organisms that can cause illness, usually using ozone or a source of chlorine. As anybody who’s ever been in a public swimming pool knows, chlorine-based disinfection can create smelly and irritating byproducts that are known, in high concentrations, to have detrimental health effects. What’s recently come to light is that some of these disinfection byproducts may actually be obesogens.
Obesogens are chemicals that make us fat, often due to their ability to disrupt normal metabolic processes. In our first column we discussed some of the building material-related sources of obesogens, including plasticizers, metals, pesticides and flame retardants. To this growing list we now add the major class of water disinfection byproducts: trihalomethanes.
It’s a daunting task to comb through scientific and medical literature to identify emerging potential risks that could ultimately drive up liability insurance claims while separating out the risk myths.
Praedicat, a Los Angeles-based InsurTech analytics firm, takes on the challenge, using algorithms that scan more than 30 million scientific journal articles—a number that grows every day.
The accompanying article is the fourth in a series of regular articles that Praedicat’s people will author expressly for Carrier Management, alerting the casualty insurance community to areas of concern and areas where potentially insurable risks lie beneath hyped theories linking products to human harm.
Other articles in the series:
Microplastics have also been discovered in waterways (and aquatic animals) around the world. Although the scientific literature about their potential to cause bodily injury is in its infancy, it’s possible that the extensive cleanup required will lead to litigation.
The next question you may have is, “Isn’t this pollution, and therefore excluded from general liability forms?” Perhaps unsurprisingly, the answer is that “it’s complicated.” The post-2003 version of the CGL form usually includes a broad exclusion related to premises- and operations-related pollution but does include bodily injury and property damage for so-called product pollution. Adding to this complexity, insurers commonly modify the wording of this section of the form and give back coverage for certain things.
Adding even more complexity, if state attorneys general succeed in the opioid litigation and the water contamination discussed above turns into the next public health crisis, then it is possible we might see fourth-party litigation emerge, with states seeking to recover their costs for cleaning up water supplies.
Getting outside of the admitted market, some insurers offer surplus coverage for some of the holes in the CGL form, like remediation costs for product pollution. The environmental impairment liability market, of course, provides its own branch of coverage for pollution-related costs. Given the exclusions often in place, we also see a significant opportunity for well-informed carriers to cover these risks—potentially on a named-peril basis—once they are properly understood and quantified.