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< PreviousA Brief History of PFAS PFAS—formerly known as perfluorochemicals, or PFCs—are a group of more than 8,000 laboratory-made chemicals that includes perfluorooctanoic acid (PFOA), perfluorooctane sulfonic acid (PFOS), GenX, and many other chemicals. (For simplicity, “PFAS” will be used as the umbrella term for all of these chemicals.) PFAS were accidently discovered in 1938, when DuPont was conducting research to find new chemicals that could be used as refrigerants. Its chemists found an unusual coating that was chemically very stable and could efficiently and effectively repel water and oil. This new substance, PTFE (polytetrafluoroethylene), was the first PFAS ever invented. PFAS have been manufactured commercially since the 1940s, when they were considered inert. In the 1950s, 3M began manufacturing various PFAS for product applications, including Scotchgard, and in the 1960s, the United States Navy used certain PFAS to develop life-saving firefighting foams, with support from 3M. In 1961, DuPont became aware of hepatomegaly, an enlarged liver, in mice fed with PFOA. 2 Starting in the 1970s, 3M scientists learned that PFOS and PFOA were toxic to humans, documenting damage to the immune system as they accumulated over time in the body. In the 1980s and 1990s, researchers investigated the toxicity of PFOA, and in the 1990s and 2000s, class action and individual lawsuits centered around PFAS were battled in court. PFAS have been the focus of much news coverage. The Philadelphia Inquirer, for example, covered lawsuits brought by environmental attorney Robert Bilott against DuPont into the 2000s. Bilott brought suits against DuPont on behalf of plaintiffs from West Virginia and spent more than 20 years litigating hazardous dumping of PFOA and PFOS. This battle with DuPont was featured in a 2016 New York Times Magazine article, “The Lawyer Who Became DuPont’s Worst Nightmare,” and in the films The Devil We Know and Dark Waters. Where Are PFAS Found Today? PFAS are used to make coatings and products that resist heat, oil, stains, grease, and water. They can be found in: •Food packaged in materials that contain PFAS, processed with equipment that used PFAS, or grown in PFAS-contaminated soil or water. •Commercial household products, including stain- and water-repellent fabrics, nonstick products (such as Teflon), polishes, waxes, paints, and cleaning products. •Fire-fighting foams, which are a major source of groundwater contamination at airports and military bases where firefighting training occurs. •Workplaces, including production facilities or industries that use PFAS (for instance, chrome plating, electronics manufacturing, and oil recovery). •Drinking water, typically localized and associated with a specific facility (a manufacturer, landfill, wastewater treatment plant, or firefighter training facility, for example). •Living organisms, including fish, other animals, and humans, in which PFAS can build up and persist over time. Certain PFAS chemicals are no longer manufactured in the U.S. However, they’re still produced internationally and can be imported into the U.S. in consumer goods, such as carpet, leather and apparel, textiles, paper and packaging, coatings, rubber, and plastics. 3GenX: DuPont/Chemours introduced GenX in 2009 as a sustainable replacement for PFOA. PFAS: Per- and polyfluoroalkyl substances are a group of chemicals that includes PFOA, PFOS, perfluorobutane sulfonic acid (PFBS), and chemicals trademarked GenX. These chemicals are environmentally persistent and bioaccumulate in humans. PFBS: Perfluorobutane sulfonic acid is a stable fluorosurfactant that 3M introduced in 2003 as a replacement for PFOS in Scotchgard, a fabric protector made by 3M. PFHpA: Perfluoroheptanoic acid. PFHxS: Perfluorohexane sulfonic acid, a synthetic chemical compound, is an anionic fluorosurfactant and a persistent organic pollutant with bioaccumulative properties. PFNA: Perfluorononanoic acid is a fluorosurfactant and an environmental contaminant found in humans and wildlife. PFOA: Perfluorooctanoic acid, sometimes referred to as “C8,” is produced and used worldwide as an industrial surfactant in chemical processes and as a material feedstock. 1 PFOS: Perfluorooctane sulfonic acid is a fluorosurfactant and global pollutant originating in human activities. PFOS was the key ingredient in Scotchgard and numerous stain repellents. 1.C. Lau, K. Anitole, C. Hodes, D. Lai, A. Pfahles-Hutchens, and J. Seed, “Perfluoroalkyl Acids: A Review of Monitoring and Toxicological Findings,” Toxicological Sciences, vol. 99, no. 2, October 2007, pp. 366–94. What Do All These PFAS Acronyms Mean? INSIGHTS | Winter 2022 | 9 The Legal Landscape If exposure to PFAS ultimately leads to adverse health outcomes in humans, these chemicals have the potential to be the next asbestos, in terms of lawsuits and claims for the insurance industry. 4 PFAS are ubiquitous; they’re found in a wide range of consumer products that people use frequently, such as cookware, carpet, upholstered furniture, microwave popcorn bags, pizza boxes, and stain repellants. Studies have found that 97 percent of people have PFAS in their blood. 5 DuPont and Chemours agreed in 2017 to pay $671 million to settle lawsuits arising from 3,550 personal injury claims related to the release of PFAS from their Parkersburg, West Virginia, manufacturing plant into the drinking water of thousands of West Virginians. 6 The settlement occurred after the C8 Science Panel, a court-created independent scientific panel, found a probable link between C8 (PFOA) exposure and six illnesses: kidney and testicular cancer, ulcerative colitis, thyroid disease, pregnancy-induced hypertension, and high cholesterol. A class action suit was filed in 2018 by an Ohio firefighter against several producers of fluorosurfactants, including DuPont and 3M, on behalf of all U.S. residents who may have adverse health effects from exposure to PFAS. 7 And in 2019, five New Jersey companies were declared to be financially responsible for statewide remediation of the chemicals in a directive from the New Jersey Department of Environmental Protection. 8 Cleanup can be challenging, as PFAS can travel long distances and are highly stable and mobile in the environment. Studies are underway to determine the best cleanup and remediation methods for PFAS- contaminated waste, such as firefighting foam, fire-related debris, contaminated or impacted soil, sludge, biosolids, wastewater, and leachate. The EPA is currently considering multiple disposal techniques, including incineration, to effectively treat and dispose of PFAS waste and to remediate PFAS in liquids. Insurance Concerns Maximum contaminant levels (MCLs) are standards, normally set by the EPA, that establish the highest level of a contaminant allowed in drinking water. At this time, no data exists to define a safe level of PFAS exposure from all potentially cumulative lifetime sources. Studies have found that 97 percent of people have PFAS in their blood ” “PFAS have become an increasingly significant concern for many in the insurance industry and for the risks they insure ” “ Through agency rulemaking or legislation, several states have recently established or proposed health guidelines, notification levels, or MCLs for PFAS in water. According to the National Conference of State Legislatures, states that have proposed or adopted limits for PFAS in drinking water include Alaska, Arizona, California, Colorado, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Rhode Island, and Vermont. States have also passed legislation to require monitoring for PFAS in public drinking-water systems. On June 15, 2022, the EPA released four drinking-water health advisories about PFAS under President Joe Biden’s action plan to deliver clean water and EPA Administrator Michael Regan’s PFAS Strategic Roadmap. In addition, the EPA is expected to release a proposed National Primary Drinking Water Regulation for PFOA and PFOS by the end of this year. Based on the preceding information and developing PFAS regulations in the U.S. and globally, insurers need to be aware of potential claims from PFAS cleanup costs, bodily injury, business interruption, and property damage from policies written in lines of business such as products liability, general liability, excess and umbrella, pollution legal liability, site pollution, products pollution, transportation pollution, and property. Because the handling of PFAS exposures is a developing story in the insurance industry, insurers, agents, brokers, and businesses will need to review their current and past PFAS exposures and controls. Businesses can examine their former and current operations and the products they manufacture, distribute, or handle in other ways. To determine its past and present PFAS chemical exposures, a business can inventory any PFAS chemicals and products it’s associated with and compare them to PFAS lists maintained by regulatory agencies such as the EPA.1.United States Environmental Protection Agency, “Our Current Understanding of the Human Health and Environmental Risks of PFAS,” March 16, 2022. 2.Gerald J. Arenson, “Toxicity of Teflon Dispersing Agents,” DuPont Polychemicals Department, Research & Development Division, Experimental Station, November 9, 1961. 3.United States Environmental Protection Agency, PFOA Stewardship Program Baseline Year Summary Report, March 30, 2022. 4.John Heft and Brittany Negron, “PFAS ‘forever chemicals’: The next asbestos for insurers?” PropertyCasualty360, March 9, 2020. 5.Antonia M. Calafat, Lee-Yang Wong, Zsuzsanna Kuklenyik, John A. Reidy, and Larry L. Needham, Action Items The following actions may help better prepare insurers, agents, and brokers to contend with PFAS-related issues: •Contemplate risks involving suppliers and manufacturers of PFAS, upcoming federal legislation, and state and federal MCLs •Consider which coverages may be most affected, such as property, general liability, products liability, products pollution, pollution legal liability, and site pollution •Discuss use of a PFAS exclusion and the Absolute Pollution exclusion •Discuss classes of risk for each line of business written with which a PFAS exclusion may need to be used •Solicit input internally from legal, claims, and other divisions •Consult with insurer and agent/broker loss control for information on the state of the PFAS landscape, including how the EPA and state and local environmental regulatory agencies are addressing PFAS •Organize PFAS educational sessions for underwriters and other insurer and agent/broker staff Cause for Continued Awareness Because they bioaccumulate, are stable, and can travel far, PFAS have become an increasingly significant concern for many in the insurance industry and for the risks they insure . Understanding PFAS’s history, sources, and methods of cleanup, as well as risk transfer and underwriting approaches, can assist in mitigating risk related to these chemicals. Plus, there are several ways to avoid, replace, and remediate or clean up PFAS, including a recently reported technique involving the breaking of chemical bonds. However, PFAS remain at the center of significant litigation alleging bodily injury or property damage, prompted in part by increasing government-proposed regulations. With such litigation expected to continue, and even expand, the insurance industry will need to diligently monitor several fronts: global regulations, the effectiveness of new cleanup techniques, the results of litigation, the development of claims, and the effectiveness of insurance policy exclusions. Special thanks to the Risk Management & Loss Control Interest Group for its contributions to this article. Need More Information? Check out these additional sources for more on PFAS: •European Environment Agency, “What are PFAS and how are they dangerous for my health?,” September 21, 2020. •European Environment Agency, “Emerging chemical risks in Europe—‘PFAS,’” March 2, 2022. •National Conference of State Legislatures, “Per- and Polyfluoroalkyl Substances (PFAS)— State Legislation and Federal Action,” July 25, 2022. •New York State Department of Health, “Frequently Asked Questions: Newburgh Area PFOS Contamination,” February 2017. •VelocityEHS, “PFAS: Here’s What You Need to Know,” July 25, 2019. 12 | INSIGHTS | Winter 2022“Polyfluoroalkyl Chemicals in the U.S. Population: Data From the National Health and Nutrition Examination Survey (NHANES) 2003-2004 and Comparisons With NHANES 1999-2000,” Environmental Health Perspectives, vol. 115, no. 11, November 2007, pp. 1596-1602. 6.Arathy S. Nair, “DuPont settles lawsuits over leak of chemical used to make Teflon,” Reuters, February 13, 2017. 7.Sharon Lerner, “Nationwide Class Action Lawsuit Targets DuPont, Chemours, 3M, and Other Makers of PFAS Chemicals,” The Intercept, October 6, 2018. 8.Michael Sol Warren, “State ordered chemical companies to pay for pollution clean-up. They say, no way!” NJ.com, May 13, 2019. PFAS remain at the center of significant litigation alleging bodily injury or property damage ” “ INSIGHTS | Winter 2022 | 13 Aerial Imagery in the Insurance Industry by Michael Koscielny 14 | INSIGHTS | Winter 2022More recent advances in technologies such as gyrostabilizers, digital images, autonomous drones, and high-resolution cameras have led to the aerial images we are familiar with, such as those provided by Google Maps. These innovations, combined with ideas from skilled professionals, have created new opportunities for the insurance industry. For example, advancements in camera technology and systems such as LiDAR (light detection and ranging) and 3D capture provide insurance professionals with more comprehensive views of property risks. Satellites, fixed-wing planes, and drones are now used to capture aerial images. Because these vehicles can get closer to their subjects, they provide imagery with more refined resolutions. Satellite imagery provides the lowest resolution, so it may not be useful for underwriting and capturing property features that can be predictive of potential future losses. But fixed-wing plane imagery can capture missing shingles, vegetation, debris, tarps, and water pooling. Drone imagery offers the highest resolution and is capable of capturing subtle water damage on roofs and damage caused by hail. Industry Uses In the early days, use of aerial imagery gained little support from the insurance industry. It was primarily used to assess storm damage from hurricanes and/or tornadoes so that insurers could deploy their adjusting resources. Technological advances and the integration of AI and machine learning led to aerial imagery being used as it is today: to capture images using a variety of vehicles and couple them with scalable AI to create relevant risk data. The breakthrough came from being able to compare machine learning results with real-world results, an outcome known as ground truth. Ground truth is the reality insurers want to model with their supervised machine learning algorithm—the target for training or validating the model with a labeled dataset. This led to the development of applications for quoting and pricing, underwriting eligibility, renewal monitoring, and targeted marketing. For example, personal residential property data provided by aerial imagery can be categorized by roof attributes, vegetation, parcel views, and neighborhood views. (See Figure 1.) Abstract As artificial intelligence (AI) and machine learning have become much more sophisticated, so, in turn, has aerial imagery—allowing it to become increasingly useful in the property-casualty industry even as it continues to evolve. This article discusses the history of and methods for capturing aerial imagery, principles for using geospatial AI, and industry use cases. Picture a time when aerial imagery supports insurers’ efficiencies, optimizes potential inspection costs, and provides significant insights into insured risks early in the discovery process. Hold that vision, because the time is now. Further, the increased use and effectiveness of aerial imagery within the risk and insurance industry, in tandem with advances in artificial intelligence (AI) and machine learning, is wholly appropriate and fully expected. But how, exactly, does aerial imagery work, what principles surround it, and how has it been used successfully? Before examining these important questions, let’s discuss the technology’s journey thus far. History of Aerial Imagery The first aerial image was taken in 1858 over France with very simple cameras and a hot air balloon. In the early 1900s, advancements included using carrier pigeons with small cameras attached to them. The Wright Brothers soon entered the picture and used airplanes to capture photos of cities in Italy. During both world wars, planes and balloons were used to create battle maps, which helped military leaders plan their advancements. One of the most famous aerial images was created in 1921 by Sherman Fairchild, an American businessman and inventor who took great interest in airplanes and photography. 1 He took multiple images of Manhattan and then digitally stitched them together—a process still used today. Even NASA entered the aerial imagery space—quite literally!—by mapping the entire moon, starting with the spacecraft and crew of Apollo 15. Figure 1: Personal Residential Property Data Provided by Aerial Imagery Roof AttributesVegetationParcel ViewsNeighborhood Views Condition ratingTree overhangParcel sizeBuilding density GeometryDistance to neighborYard debrisBuilding count Covering materialDistance to vegetationPool detection FootprintVegetation coveragePool enclosure Wildfire hazardTrampolines Solar panels INSIGHTS | Winter 2022 | 15 Principles for Using Geospatial AI and Machine Learning When included in the risk-evaluation process with other data sources, four principles can help underwriters make more informed decisions: 1.Optimized outcomes at scale—Understanding risks at scale can augment decision making and tailor workflows. The use of AI and machine learning can efficiently provide granular data at scale. 2.Property condition as an indicator of loss—Insurers can use advanced AI to understand condition at scale. AI can not only determine the items an image contains (for example, a pool or solar panel) but also an item’s condition (for example, the quality of a roof or significant debris in a yard). Condition is a leading indicator of loss that can be used to augment and support underwriting decision making. 3.Evolution of risk—AI can be trained to recognize the state or condition of something, thereby helping underwriters understand how risks change over time. 4.AI cannot replace people—AI complements efforts by human underwriters, improving their efficiency. It cannot necessarily make a better judgment on the condition of a roof than a person, but it can review roof conditions rapidly and at scale, allowing underwriters to winnow down data. So while accuracy is important, the quality of AI data should be judged based on whether it is actionable. Property risk AI helps underwriters identify risks that could lead to losses, enabling them to make informed decisions that can improve both loss frequency and profitability. Aerial imagery of commercial property also helps insurers because it can address construction, occupancy, protection, and exposure, or COPE, elements. For example, it can provide valuable insights into these underwriting considerations: •Roof cover systems, including condition and type of cover •Roof-mounted HVAC •Outdoor inventory •Other rooftop risks, such as solar panels and skylights •Parking lots and lighting Methods for Capturing Aerial Imagery Today, images can be captured using these methods: •Ortho imagery—technology that corrects distortions in images that are captured while looking straight down •Oblique imagery—aerial photography that is captured at an angle, usually 40 to 50 degrees, downward to the ground •Drone imagery—aerial imagery that is captured using either manned or autonomous aircraft on-site •On-site inspectors—imagery captured during physical inspections See Figure 2 for a partial list of companies that produce aerial imagery. As aerial imagery, AI, and machine learning continue to evolve, this list will likely continue to grow. 16 | INSIGHTS | Winter 2022 Figure 2: Companies That Produce Aerial Imagery* Arturo Athenium Analytics Cape Analytics Eagleview Geospatial Insurance Consortium Lexis Nexis NearMap Verisk Geomni Zesty.ai *This list is not all-inclusive.•Monitor changing conditions—Property risks change over time. For example, roofs deteriorate from exposure to weather conditions and natural aging. Aerial imagery is an economical way for insurers to monitor the condition of risks in their portfolio. This, in turn, allows them to focus their resources on risks most likely to result in loss. Industry Use Cases Every new data source or AI and machine learning offering should have a defined use case to validate its worth. Use cases should not only provide a clear objective for implementation but also trigger other use cases not previously considered. These potential use cases support adoption of aerial imagery, AI, and machine learning: •Determine risk eligibility—If imagery suggests a risk has a hazardous condition, the underwriter can decline the risk. On the other hand, risks with favorable conditions could be fast- tracked through the underwriting process. Using imagery to determine risk conditions can minimize reliance on input from agents and/or insureds, improving the experience for both. •Improve the accuracy of ratemaking—Imagery can validate characteristics that may not be available from other sources, helping underwriters provide the most accurate rate. It also may allow further rate segmentation because more granular data is available when property characteristics are a rating element. The other benefit is the ability to develop new rating elements based on verifiable data, such as roof conditions. •Optimize the inspection process—Imagery can indicate the specific risks or locations that should undergo a physical inspection to verify condition, thereby optimizing underwriters’ valuable time. This can reduce time spent on physical inspections and focus limited resources on risks that deserve the most attention. Imagery can indicate the specific risks or locations that should undergo a physical inspection to verify condition, thereby optimizing underwriters’ valuable timeNext >