PFAS 'Forever Chemicals' and Property Insurance: An Emerging Coverage Crisis

Per- and polyfluoroalkyl substances — commonly known as PFAS or “forever chemicals” — are quietly becoming one of the most significant property insurance issues in the country. These manufactured chemicals, used for decades in products ranging from firefighting foam to nonstick cookware to waterproof clothing, do not break down in the environment. They persist in soil, accumulate in groundwater, and contaminate drinking water systems serving millions of people. For property owners, the implications are enormous: diminished property values, potential cleanup liability, and an insurance industry that is moving rapidly to exclude PFAS-related claims from coverage.

The collision between PFAS contamination and property insurance is still in its early stages, but the trajectory is clear. Insurers are adding PFAS-specific exclusions to policies at an accelerating pace. Property owners who do not understand these exclusions risk discovering — after contamination is found — that their insurance provides no protection at all.

What PFAS Are and Why They Matter for Property Owners

PFAS are a class of thousands of synthetic chemicals characterized by strong carbon-fluorine bonds that make them extraordinarily resistant to degradation. This chemical stability is what made them useful in manufacturing — and what makes them an environmental disaster. PFAS do not break down through natural processes. They accumulate in water, soil, and living organisms over time, earning the “forever chemical” designation.

The primary pathways of PFAS contamination for property owners include:

• Contaminated water supplies: PFAS have been detected in public and private water systems across the country. The contamination often originates from manufacturing facilities, military installations, airports, and fire training sites where aqueous film-forming foam (AFFF) was used extensively. Water systems serving communities near these sites have recorded PFAS concentrations far exceeding safe levels.
• Soil contamination: Properties located near PFAS sources can have contaminated soil, which creates both health risks and cleanup obligations. Agricultural land irrigated with contaminated water can accumulate PFAS in the soil, affecting land use and property value.
• Firefighting foam residue: AFFF, the firefighting foam used at airports, military bases, and industrial facilities for decades, is one of the most significant sources of PFAS contamination. Properties downwind or downstream of areas where AFFF was used may have PFAS in their soil and groundwater.
• Biosolids application: Municipal sewage sludge (biosolids) applied to agricultural land as fertilizer has been found to contain PFAS, contaminating farmland and leaching into groundwater.

The Scope of the Problem

The scale of PFAS contamination is staggering. More than $11 billion in settlements have been reached with public water systems alone, and additional litigation involving private property owners, agricultural operations, and other affected parties continues to grow. The EPA has been expanding its PFAS regulatory framework, adding 205 PFAS chemicals to reporting requirements as of 2025. This regulatory expansion signals that the government recognizes the scope of the problem — but it also means that more properties will be identified as contaminated, more cleanup obligations will be imposed, and more property owners will turn to their insurance policies for help.

Property value diminution is one of the most immediate and tangible consequences of PFAS contamination for homeowners and commercial property owners. Properties located near known PFAS contamination sites have experienced measurable declines in market value. Buyers are increasingly aware of PFAS risks, and disclosure requirements in many states mean that known contamination must be disclosed at the time of sale. A property that tests positive for PFAS in its well water or that sits within a contamination plume may be significantly harder to sell — and worth significantly less when it does sell.

The Insurance Coverage Questions

PFAS contamination raises several difficult insurance coverage questions. The answers depend on the specific policy language, the type of contamination, and the jurisdiction — but the key issues are consistent across most cases.

Is PFAS a “Pollutant” Under the Pollution Exclusion?

Most property insurance policies contain a pollution exclusion that bars coverage for losses caused by the discharge, dispersal, release, or escape of pollutants. The typical pollution exclusion defines “pollutant” broadly to include any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. PFAS would almost certainly fall within this broad definition, and insurers are expected to invoke the pollution exclusion as a primary defense against PFAS-related claims.

However, the pollution exclusion has been the subject of extensive litigation, and courts in many states have limited its application. Some jurisdictions have held that the pollution exclusion was designed to address traditional industrial pollution events — not the gradual accumulation of chemicals that a property owner did not release. The argument that a homeowner whose drinking water was contaminated by a distant manufacturing facility should be barred from coverage under a “pollution exclusion” is one that some courts have found unpersuasive. But the outcome varies significantly by state and by the specific policy language.

Is Cleanup a “Covered Loss”?

Even if the pollution exclusion does not apply, a property owner must still demonstrate that the PFAS contamination constitutes a covered loss under the policy. Standard homeowners and commercial property policies cover “direct physical loss” to covered property. Whether chemical contamination that does not cause visible physical damage qualifies as “direct physical loss” is a question that courts have answered differently in different contexts. The argument for coverage is that contamination renders the property unsafe for its intended use and diminishes its value — which is a tangible, measurable loss. The argument against is that the property has not been physically altered in a way that the policy contemplates.

Does the Policy Cover Property Value Diminution?

Proximity to PFAS contamination can reduce property values even if the property itself is not directly contaminated. Whether insurance covers this type of diminished value depends on the policy language and the jurisdiction. Most standard property policies do not explicitly cover market-based value diminution unrelated to physical damage to the insured property. This is a gap that leaves many property owners without recourse through their insurance.

ISO PFAS Exclusions: The Industry Response

Rather than litigate the application of existing policy exclusions to PFAS claims, the insurance industry is taking a more direct approach: writing PFAS-specific exclusions into policies. The Insurance Services Office (ISO) has developed PFAS exclusion endorsements that are now appearing on commercial general liability (CGL), business owners policies (BOP), and umbrella/excess policies. These endorsements specifically exclude coverage for bodily injury, property damage, or cleanup costs arising out of or related to PFAS.

The significance of these endorsements cannot be overstated. While the application of the general pollution exclusion to PFAS claims is debatable and varies by jurisdiction, a PFAS-specific exclusion leaves little room for argument. If a policy contains an endorsement that explicitly excludes losses “arising out of, resulting from, caused by, or contributed to by per- and polyfluoroalkyl substances,” the insurer’s denial will be on much stronger footing.

California-Specific PFAS Regulations

California has been among the most aggressive states in regulating PFAS. The state has established notification levels and response levels for PFAS in drinking water that are among the lowest (most protective) in the nation. California has banned PFAS in certain consumer products, including food packaging and cosmetics, and has imposed disclosure requirements on manufacturers. The state has also invested in monitoring and cleanup of contaminated water systems.

For California property owners, this regulatory framework has practical implications. Properties served by water systems that exceed California’s PFAS notification levels may face disclosure obligations, potential cleanup orders, and diminished market values. At the same time, California’s generally policyholder-friendly insurance jurisprudence may provide a more favorable environment for coverage claims than other states — particularly with respect to the interpretation of the pollution exclusion and the definition of “direct physical loss.”

Environmental Sampling and Documentation

For property owners concerned about PFAS contamination, proactive environmental sampling and documentation is critical. Testing should be conducted by qualified environmental professionals using EPA-approved methods. Key steps include:

• Test drinking water:If the property is served by a private well, testing for PFAS should be a priority — especially if the property is located within several miles of a known contamination source. Public water systems are increasingly required to test and report PFAS levels, but private wells are typically the owner’s responsibility.
• Test soil if indicated: If the property is near a known source of PFAS contamination (manufacturing site, military base, fire training area), soil testing may be warranted to determine whether contamination has migrated to the property.
• Document everything: Keep copies of all test results, government notices, correspondence with the water system, and any communications with the insurance company. If a coverage dispute arises, this documentation will be essential.
• Monitor regulatory developments: PFAS regulations are evolving rapidly. What is not a reportable contamination level today may become one tomorrow as the EPA and state agencies tighten standards.

What Property Owners Should Do Now

PFAS contamination is not a problem that is going away. The chemicals are persistent, the sources are widespread, and the regulatory framework is expanding. Property owners should take the following steps to protect themselves:

• Review insurance policies for PFAS and pollution exclusions: Understand what the current policy covers and does not cover. Look specifically for pollution exclusions and any PFAS-specific endorsements. If the policy has been renewed recently, review the renewal endorsements carefully — new exclusions may have been added.
• Test water and soil: Proactive testing provides a baseline. If contamination is found later, having pre-existing test results can help establish when the contamination occurred and whether it was present when the policy was in effect.
• Understand the local contamination landscape: Research whether the property is located near known PFAS sources. The EPA, state environmental agencies, and local health departments maintain databases of contamination sites.
• Consider environmental insurance: Specialized environmental insurance products are available that specifically cover pollution-related losses, including PFAS contamination. These policies are separate from standard property insurance and may be worth investigating for properties in high-risk areas.
• Preserve rights against responsible parties:If PFAS contamination is traced to a specific source — a manufacturer, a military installation, an airport authority — the property owner may have claims against the responsible party. These claims are separate from insurance coverage and should be evaluated by an attorney experienced in environmental litigation.

The Path Forward

PFAS contamination represents a slow-moving crisis for property insurance. The contamination already exists — it has been accumulating for decades. What is changing is the awareness, the regulation, and the insurance industry’s response. Insurers are racing to exclude PFAS from coverage before the wave of claims arrives. Property owners who wait until contamination is discovered on their property to check their insurance coverage may find that the exclusion was added at the last renewal and the door to coverage is already closed.

The time to review policies, test water and soil, and understand PFAS exposure is now — before a loss occurs and before the insurer has the opportunity to point to an exclusion that the policyholder never noticed.