Background – The Evolution of PFAS Liability in Australia

Per- and polyfluoroalkyl substances (PFAS) have emerged over recent years as one of the most significant environmental liability issues confronting governments, corporations, insurers, and reinsurers globally.

In Australia, concerns initially centred on contamination associated with Defence facilities, airports, industrial operations, and historic use of aqueous film-forming foams (AFFF). However, developments during 2024, 2025, and 2026 have demonstrated that PFAS exposure is no longer merely a localised environmental issue, but rather a potentially systemic liability risk capable of generating substantial long-tail losses across multiple sectors.

Historically, PFAS claims in Australia largely focused on environmental contamination, property impacts, and remediation costs. While significant, these exposures were generally viewed as site-specific issues affecting particular communities or industrial locations. That perception began to change dramatically during 2024.

A watershed moment occurred in August 2024 when authorities closed Medlow Dam in the Blue Mountains after the discovery of PFAS contamination at levels reportedly up to 300 times higher than those found in Sydney’s primary drinking water source. Approximately 41,000 residents relied upon the affected water catchment within the World Heritage-listed region. The closure followed significant media scrutiny and public concern regarding the adequacy of historic testing and monitoring practices.¹

The incident highlighted several characteristics that are now central to PFAS-related liability exposures including

• the persistence and mobility of PFAS chemicals in the environment,
• the potential for contamination to remain undetected for decades,
• the increasing divergence between historic regulatory standards and evolving scientific knowledge, and
• the substantial costs associated with investigation, treatment, and remediation once contamination is discovered.

Subsequent investigations transformed the Blue Mountains incident from an isolated contamination event into a striking illustration of long-tail environmental liability.

Evidence emerged that the contamination likely originated from firefighting foam used during a petrol tanker accident near Medlow Bath in 1992, with potential contributions from subsequent incidents and local firefighting activities.² If confirmed, the contamination would demonstrate that PFAS released more than three decades earlier remained present within the drinking water catchment and continued to generate liabilities today and beyond.

As public concern intensified, a Parliamentary Select Committee was established in late August 2024 to investigate the environmental and health impacts of PFAS in Australia.³ The committee’s scope included examination of PFAS exposure through drinking water systems, food chains, consumer products, and the broader environment. Its establishment reflected growing recognition that PFAS contamination posed a national public policy challenge extending well beyond individual contaminated sites.

Government authorities also began implementing practical mitigation measures. In December 2024, the NSW Government announced the installation of an advanced PFAS treatment system at the Cascade Water Filtration Plant servicing the Blue Mountains region.⁴ This represented a significant expenditure aimed at reducing exposure risks and maintaining public confidence in water safety.

Throughout 2025, further developments reinforced concerns regarding both historical contamination and emerging health impacts.

In May 2025, WaterNSW acknowledged that contamination of Medlow Dam and Greaves Creek Dam was linked to aqueous firefighting foam and could date back as early as 1992.⁵ Both reservoirs remained disconnected from the Blue Mountains water supply system following their removal from service in 2024.

Additional reservoir contamination was subsequently identified. Sydney Water reportedly drained reservoirs at Leura and Blackheath after testing identified PFAS concentrations exceeding proposed revised safety guidelines,⁶ demonstrating the practical consequences of tightening regulatory thresholds and evolving scientific understanding.

Of perhaps greater significance for insurers, reports emerged of Blue Mountains residents recording elevated PFAS blood concentrations.⁷ While scientific understanding regarding causal links between PFAS exposure and specific health outcomes continues to evolve, affected residents pointed to concerns involving thyroid disorders, elevated cholesterol, and various cancers. Blood test results reported in the media showed PFAS concentrations substantially exceeding Australian averages and, in some cases, international health advisory thresholds.

These developments highlighted a recurring feature of PFAS-related liabilities: a potentially significant temporal disconnect between exposure, scientific certainty, and claims emergence.

By mid‑2025, three themes had become increasingly evident:

• historic PFAS contamination was continuing to generate present-day liabilities
• remediation obligations were expanding as regulatory standards tightened
• claimant groups were broadening from property owners and affected businesses to include individuals alleging health impacts

Taken together, these developments signalled a shift from isolated contamination incidents toward the prospect of broader systemic liability exposure affecting manufacturers, governments, utilities, site operators, insurers, and reinsurers alike.

Developments Since mid‑2025 – PFAS Becomes a Systemic Liability Issue

Since mid‑2025, PFAS risk in Australia has shifted decisively from a series of localised contamination events to a national liability issue with potentially significant implications for insurers and reinsurers.

1. The Commonwealth v. 3M Proceedings – A Watershed Moment

The most significant development in Australia occurred in May 2026 when the Commonwealth Government commenced proceedings in the Federal Court against 3M Company and 3M Australia, seeking more than AUD 2 billion in damages associated with PFAS contamination across 28 Defence sites.⁸

This claim represents

• the largest environmental damages claim ever brought by the Commonwealth,
• a decisive shift toward pursuing upstream manufacturers rather than solely site operators, and
• reliance on allegations concerning knowledge, disclosure and misrepresentation of PFAS-related environmental risks.⁹ Importantly, the proceedings focus primarily on economic loss and remediation costs rather than personal injury claims. This approach likely reflects both the significant remediation expenditure already incurred by government and the comparatively greater evidentiary challenges involved in establishing personal injury causation.

The outcome of these proceedings is likely to have material implications for insurers, particularly regarding

• allocation of liability across policy periods,
• application of pollution exclusions,
• trigger-of-cover questions, and
• aggregation of losses across portfolios.

2. Expansion of Large-Scale Class Actions

Alongside government action, private PFAS litigation has expanded significantly in both scale and sophistication. A major class action commenced in the Victorian Supreme Court involving hundreds of businesses and led by Qenos Group is reportedly seeking compensation potentially amounting to billions of dollars against chemical manufacturer 3M.¹⁰ Commentary has suggested that the overall value of claims pursued could ultimately exceed the Commonwealth’s separate AUD 2 billion proceedings.

The litigation includes allegations relating to

• misleading or deceptive conduct,
• product liability. and
• health-related impacts, notwithstanding continuing scientific debate concerning causation.⁷

This represents a notable evolution from earlier PFAS claims that primarily focused upon property value diminution and economic loss.

The current trend suggests potential expansion into

• public nuisance claims,
• supply-chain liability allegations. and
• personal injury damages.¹¹

3. Increasing Regulatory Intervention and Enforcement

Regulators have simultaneously adopted a more assertive enforcement approach.

Notable developments include

• the NSW EPA’s May 2025 clean‑up notice issued against 3M Australia relating to PFAS contamination of a former testing site,¹²
• national bans on key PFAS chemicals, including PFOS, PFOA and PFHxS, effective July 2025,¹³
• release of National Environmental Management Plan (NEMP) 3.0 during March 2025 and NEMP 3.1 during May 2026,¹⁴ and
• increasingly stringent drinking water and environmental guideline values.¹⁵

Critically, these developments effectively expand the number of historical contamination sites that may require investigation, monitoring, and remediation.

The Blue Mountains Case Study – Implications in 2026

Viewed in light of developments throughout 2026, the Blue Mountains contamination remains highly instructive.

What initially appeared to be a localised contamination issue has evolved into a compelling example of

• long-tail liability exposure dating back decades,
• latent health concerns emerging years after exposure,
• complex causation and attribution issues, and
• potentially substantial remediation obligations.

These developments underscore a critical issue for insurers and reinsurers: there may be a substantial gap between the original release of contaminants, the emergence of scientific evidence, regulatory intervention, and eventual claim crystallisation.

Implications for Insurers and Reinsurers

1. Classic Long-Tail Liability

PFAS liability increasingly resembles the early development of asbestos-related claims, notably

• decades may pass between exposure and claim emergence,
• scientific evidence continues to evolve,
• classes of defendants continue to expand, and
• aggregation issues may arise across numerous policy years.

Industry commentary has already drawn explicit comparisons, describing PFAS as “the new asbestos”.¹⁶

2. Underwriting Responses?

The insurance market appears to have responded rapidly to emerging risks.

Current trends include¹⁷

• increasing adoption of PFAS-specific exclusions,
• heightened underwriting scrutiny regarding PFAS exposures,
• more detailed disclosure requirements, and
• greater use of sub-limits and bespoke environmental underwriting approaches.

3. Aggregation and Systemic Risk

Global estimates suggest PFAS remediation costs may ultimately reach hundreds of billions of dollars, although significant uncertainty remains regarding the proportion ultimately borne by insurers.¹⁸

Within Australia, aggregation risk is increased by

• concentrations of contamination around Defence facilities and water infrastructure,
• progressively tightening regulatory standards, and
• the potential for coordinated litigation strategies by claimants.

4. Warning for Underwriters

The warning signs are becoming increasingly difficult to ignore.

Although definitive scientific links between PFAS exposure and particular health outcomes remain the subject of ongoing research, current developments suggest

• personal injury allegations will continue to increase,
• claimants may pursue recovery based on contamination, increased risk of future harm, or economic loss even absent proven injury,
• liability theories will continue to expand, and
• policies written years or decades earlier may ultimately be called upon to respond.

Accordingly, underwriters should

• actively identify and minimise PFAS-related exposures,
• carefully review policy wording, exclusions, and aggregation provisions,
• monitor developments in the Commonwealth v. 3M proceedings,
• follow emerging class action trends, and
• remain alert to evolving scientific and regulatory developments.

Conclusion

In the relatively short period between the Blue Mountains contamination becoming a national issue in 2024 and the major litigation developments of 2026, PFAS has evolved from a localised environmental concern into one of the most significant emerging liability exposures confronting the Australian insurance market.

A highly uncertain, but clearly escalating, risk environment is the result of

• large-scale litigation by both government and private claimants,
• increasingly aggressive regulatory intervention,
• tightening environmental standards,
• potentially significant remediation obligations, and
• continuing scientific investigation into human health effects.

For insurers and reinsurers, PFAS is no longer an emerging issue. It is now a developing systemic exposure with the potential to affect liability portfolios for decades to come, and one that may ultimately prove comparable to other major long-tail liability events such as asbestos.