Pollution Liability Risks in an Era of Nuclear Verdicts

Author: Cameron Douglass

In June 2023, in a landmark ruling, a major chemical manufacturing company agreed to pay up to $12.5 billion to settle lawsuits for per- and polyfluoroalkyl substances (PFAS) contamination in US water systems.¹ Other billion-dollar settlements followed, setting a new benchmark for environmental pollution tort and prompting comparisons with Asbestos litigation and even Big Tobacco.

These nuclear verdicts are reshaping corporate risk profiles, increasing both the frequency of environmental claims and the severity of legal and financial outcomes.

"Right now the focus is on the main manufacturers — the original producers of PFAS — who have already been hit with multi-billion-dollar lawsuits, including nine-figure claims," says Cameron Douglass, West Coast regional director of Environmental at Gallagher.

Moving forward, it's likely that liability will trickle down further to entities such as water treatment facilities, companies that have used PFAS without manufacturing it and property owners who need to remediate their land due to contamination — whether they were at fault or not. We expect to see these issues unfold over the next decade.

In addition to PFAS, among the most consequential environmental liability exposures are microplastics and mold. While each contaminant has different pathways and scientific considerations, they share a common context: greater scrutiny, broader definitions of harm and a litigation environment increasingly characterized by outsized jury awards.

As a result of these trends, the industry sectors exposed to environmental liability claims continue to expand. Far from being just an issue for heavy industry, the types of business finding themselves at the receiving end of a pollution lawsuit include consumer goods, technology, water and waste management, agriculture, construction and real estate.

Why "forever chemicals" sit at the center of environmental liability

PFAS that give ordinary goods resistance to grease, stain, water and heat are found everywhere — in non-stick pans, raincoats and firefighting foams. While these properties have made these substances extremely popular in consumer goods, they don't break down and can easily enter the environment, presenting a contamination concern.

"PFAS have been utilized for many decades but have only recently become a concern for impact they have on human and environmental health," says Douglass. "During the last 10 years, there's been a significant increase in scientific literature and studies that have confirmed the impact of PFAS, and that's led to regulations imposing liability on corporations."

Researchers have detected PFAS in polar bears,² seabirds and even deep ocean fish, as well as in drinking water, soil and air. That ubiquity and association with various types of cancer are why PFAS are the leading focus in today's environmental liability market.

"PFAS are the perfect example of tail liability — decades of use, limited early awareness and now multi-billion-dollar claims emerging from exposure that began in the 1940s," says Shawn Alavi, SVP and Environmental national practice leader at Gallagher, Canada. As a result, many manufacturers are actively searching for alternatives as PFAS are steadily phased out.

Exclusions in insurance policies are increasingly common, with carriers often starting from a full exclusion and only considering limited coverage after reviewing detailed site data and historical use.

Among the industries under heavy scrutiny from insurers are construction companies, manufacturing facilities, airports and water treatment plants. Product and packaging defendants, for whom courts are increasingly accepting economic-injury theories beyond bodily harm, face significant exposure.

Businesses can find themselves on the hook for cleanup costs, even many years after the original contamination has occurred ad regardless of whether they were directly responsible, which has implications for the developers of brownfield sites.

As Anthony Lehnen, managing director of Environmental at Gallagher, explains, the practical challenge is the ultra‑low cleanup thresholds: "PFAS cleanup standards sit at parts per trillion, enabling costly remediation from very small releases." To illustrate how strict these levels are, he uses this comparison: A tablespoon of PFAS in an Olympic-size swimming pool would exceed drinkable thresholds.

PFAS litigation sits squarely in the crosshairs of social inflation, which is driven by shifting societal attitudes toward corporate accountability, heavy attorney advertising and the growing role of third-party litigation funding. Together, these factors are fueling the scale of verdicts and settlements, and experts expect accountability to spread as standards harden and data improves.

Claims have broadened from water-supply contamination to product-related and packaging cases, with courts increasingly allowing economic-injury theories.

"We're seeing multi‑billion‑dollar class actions and settlements," notes Alavi. "Even small releases can trigger costly remediation, regulatory action and long-tail claims. And because traditional property and casualty policies often don't respond, specialized environmental impairment liability coverage — supported by defensible data, inventories and monitoring — is essential."

Moving forward, it's likely that liability will trickle down further to entities such as water treatment facilities, companies that have used but didn't manufacture PFAS and property owners who need to remediate their land due to contamination — whether they were at fault or not. These issues are likely to unfold over the next decade.

Microplastics: From emerging science to emerging claims

Microplastics are becoming more of a feature in corporate risk discussions, scientific publications and policy agendas. Internationally, there's an expectation that laws governing the manufacture and disposal of plastics will continue to tighten. Currently, a consensus has yet to be reached over a proposed United Nations plastics treaty that would see the development of an international legally binding instrument on plastic pollution, including in the marine environment.

Several industry sectors are exposed to liability involving microplastic pollution. Class actions have been filed against drink manufacturers and the makers of BPA-free baby bottles, alleging that these companies failed to warn consumers about the presence of microplastics in their products. Other sectors under scrutiny include the chemicals, water supply, waste management and recycling industries.

According to Swiss Re's 2025 SONAR report, "Insurers may see rising demand for pollution-related coverage amid tightening regulations" regarding microplastics.³

Microplastics have been found in the human placenta and in breast milk, adding to the intensifying pressure across industries that's reshaping litigation. Like PFAS, microplastics are a forever problem: They don't break down in the environment, are difficult to remediate and are increasingly costly to insure.

Although scientific links to specific health outcomes are still developing, microplastics persistence and mobility signal a growing regulatory and litigation risk. Research has found that microplastics can enter the food chain and may cause health issues relating to weight, fertility and digestion.

Two factors elevate corporate liability when it comes to microplastics:

• Their PFAS-like behavior — persistence, mobility and remediation difficulty
• Improving detection methods, enabling plaintiffs and regulators to present clearer evidence

Early lawsuits related to labeling, waste management and product residues have emerged in both the US and Europe. However, from a liability standpoint, two things stand out: exposure is widespread, which makes source control harder; and although science is advancing, the effects of microplastics on human health remain inconclusive.

As with PFAS, microplastics may increasingly become entangled with nuclear-verdict dynamics. Growing scrutiny and heightened public concern create conditions where juries may be inclined to impose punitive damages. Legal and academic experts flag microplastics as the next major wave of environmental liability.

Toxic mold: A high-frequency risk amplified by modern litigation trends

Indoor air quality is a growing risk in many communities, especially in buildings with aging or complex HVAC systems. Mold plays a central role. It can grow rapidly under carpets, inside cabinets, behind drywall and on soft furniture, creating serious health risks.

As buildings are sealed for energy efficiency and HVAC systems become more sophisticated, the likelihood of undetected mold growth increases. "We're seeing an increase in mold and Legionella-type claims stemming from internal plumbing systems or the internal infrastructure of properties," observes Douglass.

"Climate change is becoming a significant driver of mold-related claims," he adds. "For example, an increase in floods and hurricanes often leads to high winds and water intrusion into buildings, which subsequently results in mold growth."

Insurers are taking notice, especially because mold-related injuries can be difficult to remediate and can trigger prolonged litigation.

John Wasilchuk, VP and director, Environmental Casualty practice at Gallagher, notes: "There's an increase in indoor air quality claims across education, healthcare, offices and multifamily buildings with complex HVAC systems, where sensitive populations can drive severity."

From a liability perspective, the issue is a particular concern for the housing, healthcare, education and commercial real estate sectors. These cases often escalate due to remediation challenges and the vulnerability of affected populations.

A recent case in Austin in 2024 highlights how indoor air quality issues can escalate: A family won $1.06 million after toxic mold exposure in a rental home caused serious health issues and revealed major building defects and water intrusion problems.⁴ Similar verdicts have emerged elsewhere, including a $6.6 million award in Nevada in 2025 linked to chronic mold exposure in an apartment with long‑ignored leaks.⁵

For property owners, facility managers and insurers, these cases reinforce the need to understand emerging standards. As regulations for indoor pollutants, building procedures and ventilation performance expand, organizations that lag behind will be more at risk of fines, penalties and lawsuits.

Why environmental liability is now a core business risk

Environmental liability is no longer a niche regulatory challenge — it's a strategic operational and reputational risk shaped by scientific developments, stakeholder scrutiny and a more volatile litigation environment. Understanding the risks and how insurance policies could respond to a claim is key to building resilience.

Emerging contaminants like PFAS and microplastics raise the frequency and complexity of claims. Social inflation raises their severity. Companies that invest in monitoring, documentation, operational discipline and dedicated environmental coverage will be best positioned to manage uncertainty — and defend decisions — when incidents occur.

"Education is at the forefront of why we need to have meaningful conversations about environmental risk," says Alavi. "Most business owners don't realize that their property and casualty policies simply don't cover environmental loss.

"For many clients, it's a light-bulb moment when they realize, 'You've just shown me eight ways I could be sued — and I have no protection.' "

Environmental liability insurance provides the broadest coverage available, filling the gaps left in traditional casualty policies. While not a compulsory class of business, demand is growing in line with evolving exposures.

"Even if a claim is made against you that's totally groundless, you might not end up being responsible for cleanup, but there's going to be defense costs that only an environmental or pollution liability policy would cover," cautions Wasilchuk. "So, for the unknown, for what's on the horizon… that defense coverage is critical to protect your balance sheet and your reputation."