Praedicat’s top emerging risk? PFAS, and with good reason.
Praedicat has recently completed an analysis of potential chemical liabilities in support of the release of the 2023 edition of ChemScore. ChemScore is an annual report produced by ChemSec which ranks the world’s top 50 chemical producers on their work to reduce their chemical footprint. Our analysis of the ChemScore 2023 liability risk considers the 50 ChemScore companies and their potential liabilities resulting from worker and consumer exposures to emerging risks such as PFAS, phthalates, bisphenols, and other potentially harmful substances.
We modelled the loss to ChemScore companies arising from hypothetical mass litigation claiming that various chemicals, products, and substances cause bodily injury. The cumulative liability cost attributable to the 245 hazards in the Nekomodel™, Praedicat’s stochastic loss model, ranged from an average simulated cost of $46B to $99B at 5% probability. The most extreme events, those with probabilities less than 1%, exceed $164B for the ChemScore companies. The hazards modelled include those emerging risks with the greatest liability potential and cover 52 of the SIN list chemicals. The modelled loss numbers include high risk classes such as PFAS, flame retardants, phthalates, and other plasticizers.
Our model extensively considers both scientific and legal factors to estimate potential liabilities. The numbers represent the SIN Producers’ total potential responsibility for harms alleged to be caused by the 245 chemicals within the Nekomodel’s scope. These estimates are for bodily injury only, such as cancers, and do not include other potential liabilities such as water contamination and property damage. These amounts do not reflect any individual company’s ability to pay that loss or an estimate of the amount that would be covered by insurance, but rather the estimates include those sums a court could order these companies to pay, in the aggregate. The estimates also do not reflect the full liability cost of the chemicals produced by the 50 companies, as some of the full cost is borne in litigation by the customers of the companies downstream who incorporate the chemicals into products that expose the public. The estimates will change along with the evolution of the scientific evidence that these chemicals cause harm, as new chemicals are considered, or with other changes in the judicial environment, medical inflation, or regulation.
Per- and polyfluoroalkyl substances (PFAS)
For three years running, PFAS, also referred to as “forever chemicals”, have ranked as Praedicat’s top emerging risk — and with good reason. Our litigation tracker shows that more than 7,500 cases have been filed in US Federal and State courts, as the litigation grows from chemical manufacturers sued for contaminating land and drinking water, primarily through firefighting foam, to a broader array of defendants who have allegedly exposed people to PFAS, including via biosolids, packaged food, apparel, and personal care products. As such, there is considerable (and warranted) concern surrounding PFAS, the companies who manufacture them, and companies who incorporate them into their products.
US PFAS bodily injury estimates for the ChemScore ranked companies covering all human exposure to date range from $10B on an expected loss basis to $41B at 5% probability. These numbers climb to $66B when looking at events less likely than 1% probability. ChemScore company customers, who have incorporated PFAS chemicals into a wide range of products from nonstick pans to stain-resistant carpets and grease-resistant food packaging are expected to bear billions of dollars of additional responsibility from PFAS liabilities.
We also assessed the potential cost to remove PFAS from drinking water across the United States in a detailed ground-up estimate of both PFAS water contamination nationwide and the likely costs to remove the PFAS. We estimate that PFAS producers included in ChemScore could incur costs ranging from $64.5B to $248B, in addition to any potential liabilities for bodily injury. Furthermore, the full cost of cleanup, which could exceed $400B, may also be borne by customers of the ChemScore companies.
Phthalates are a class of chemicals used to soften plastics such as polyvinyl chloride. They are found in a wide range of products such as food packaging, medical devices, personal care products, clothing, and vinyl flooring. Because of their potential to disrupt the human endocrine system and their wide industrial footprint, phthalates pose a serious liability threat for the companies that produce them.
Our estimates of potential bodily injury liabilities for the ChemScore companies range from $7B on an expected loss basis to $22B with 5% probability. The most extreme events that we estimate to occur with less than 1% probability exceed a cost of $48B.
ChemScore companies may have additional phthalates liability should litigation arise due to building contamination, as vinyl flooring and wall coverings are often produced using phthalates.
The customers of Chemscore companies are expected to bear billions of dollars of additional liability costs for the incorporation of phthalates into products.
Praedicat’s modelling approach describes the “traditional toxic tort” mass litigation phenomenon of claims that a chemical, product, substance, or business practice caused bodily injury: claims that are built on top of scientific evidence showing that the hazard can indeed cause the harm. The canonical phenomenon is based upon asbestos litigation, which to this day remains the largest loss in insurance history. As was true for asbestos, the development of the underlying scientific evidence provides an early warning for future litigation as the scientific literatures develop, one paper at a time, over many years. In this sense, the modeling approach is intended to estimate the “next asbestos.”
We use text mining and AI technologies to identify these literatures in the earliest stages of scientific advances that show a commonly used chemical, product, substance, or business practice can cause bodily injury. The resulting model, built to fit the canonical case, tracks closely with many emerging litigation risks, including Roundup and talc. In addition, many recent litigation phenomena with more innovative causes of action, such as the government-driven opioids litigation, or the litigation over water contamination by PFAS, are nonetheless similarly built upon a foundation of science, and the resulting models remain highly predictive.
Our model stochastically simulates the initiation of litigation and its potential cost using projections of the possible future path of scientific literature and granular data describing the potential legal causes of action and the population exposed to the underlying conduct for each one. The modelled loss estimates represent the liability for all exposure commencing from the inception of commercial use of the chemical(s) until the current year that could materialize in litigation commencing in the coming 8 years. The estimates include plaintiffs who join ongoing (simulated) litigations any time in the future so long as they were first exposed to the chemical at issue some time before the present.