This is not a story about regulatory tightening in the conventional sense. It is a story about velocity. The pace at which environmental exposure is converting into financial liability, litigation, insurance exclusions, and balance sheet consequences has accelerated significantly in the last 18 months, and most corporate risk models have not kept up.
In March 2026, the Department of Justice and the EPA announced a $668 million settlement tied to contamination at the Lower Duwamish Waterway Superfund site, spread across more than 100 companies and public entities. CERCLA liability extends to current owners of contaminated property, even if the contamination occurred decades earlier, meaning companies acquiring industrial facilities or redevelopment sites can unknowingly inherit significant cleanup liability with no connection to the original source of contamination.
That structural feature of Superfund law is not new. What is new is the rate at which PFAS contamination is expanding the universe of potentially responsible parties. PFOA and PFOS, the two most studied PFAS compounds, were designated hazardous substances under CERCLA in 2024. The EPA confirmed it is retaining that designation after reviewing the rule. CERCLA's Superfund law imposes broad, retroactive, and potentially costly strict liability on past and present owners and operators of properties where these PFAS have been released, as well as transporters and arrangers that made arrangements for their disposal.
For companies with historical manufacturing operations, supply chain relationships that involved PFAS-containing materials, or real estate portfolios that include industrial properties, this creates a category of contingent liability that may not yet appear in risk assessments with appropriate weight. The question is not only whether your current operations are compliant. It is whether your historical footprint carries CERCLA exposure that hasn't been formally evaluated.
In New Jersey, Chemours, DuPont, and Corteva agreed to $875 million payable over 25 years to settle PFAS contamination claims across the state. That settlement structure, spread across a quarter century, reflects the scale at which PFAS environmental liability is being priced.
For most of the last decade, climate litigation was primarily targeted at oil majors and large utilities. That geography has changed. As of mid-2025, over 250 climate-related lawsuits had been filed against companies in the last decade, with 20% of all new cases filed in 2024 targeting companies or their directors and officers directly, and roughly 80% of those cases classified as strategic.
The categories of litigation have also expanded. Where early cases focused almost exclusively on emissions from large energy producers, the Grantham Research Institute's 2025 report identifies distinct and growing categories: polluter-pays litigation seeking damages for climate harm, corporate framework cases targeting governance structures, transition risk litigation alleging mismanagement of climate-related business risk by directors and officers, and greenwashing cases challenging the accuracy of environmental claims. Firms involved in climate litigation face significantly higher loan spreads or stricter covenants, especially where they have weak environmental performance or prior ESG-related controversies. Insurers are incorporating climate litigation exposure into liability risk assessments, which could reduce availability of coverage or raise premiums.
The July 2025 advisory opinion from the International Court of Justice added a dimension that should register at the executive level. The court stated that it views 1.5 degrees Celsius, and not 2 degrees, as the legally binding target of the climate regime, and ruled that the continuous use of fossil fuel by states could amount to an internationally wrongful act. While advisory opinions are not directly binding on corporations, they shape the legal theories that plaintiffs bring in domestic courts globally, and they establish the standard against which corporate environmental claims are increasingly evaluated.
If litigation risk were contained to courtrooms, executive teams could defer the problem to legal departments. What makes 2026 different is that insurers have moved first, in ways that affect the balance sheet directly.
Heightened regulatory, legal, and social media attention have made industries associated with PFAS a difficult, if not impossible, class to insure. Aon reports increasingly seeing limited coverage for PFAS-related claims, and more recently total exclusions. Standard ISO PFAS exclusion endorsements now appear on commercial general liability, business owners policies, and umbrella and excess forms across the market.
That means companies in sectors with PFAS exposure, including manufacturing, food processing, textiles, firefighting services, and others, are discovering that the coverage they assumed would respond to an environmental claim may contain exclusions that were added without prominent notification. Federal actions in 2024 and 2025 intensified insurance exposure: enforceable EPA maximum contaminant levels for PFOA and PFOS, CERCLA hazardous substance designations, and expanded state-level bans on PFAS in textiles and packaging have led insurers to narrow liability terms significantly.
For CFOs and risk officers, the implication is concrete. Environmental insurance coverage that appeared adequate during the last policy review may no longer function as expected when a claim is made. Reviewing policy language specifically for PFAS exclusions and understanding where coverage gaps now exist is a current-year task, not a future one.
Perhaps the most significant structural shift in environmental liability in recent years is the extension of exposure to individual directors and officers. Climate transition risk litigation specifically alleges that executives and board members mismanaged climate-related financial risk. From January 2026, the European Banking Authority requires EU banks to identify, assess, and monitor environment-related litigation risks, including those involving their clients and counterparties, as part of supervisory expectations on climate-related financial risk.
That regulatory pressure on lenders flows through to borrowers. Companies with operations subject to EU bank financing, or with supply chain relationships that touch European entities, will increasingly find that their environmental liability posture affects the terms of their financial relationships.
Environmental liability is not a compliance function that operates independently of the executive team. The categories of exposure that are accelerating in 2026 — PFAS contamination reaching back through historical property ownership and supply chains, climate litigation expanding to directors and officers, insurance exclusions narrowing coverage across standard policy forms, and Superfund settlements running into the hundreds of millions — require decisions that only executive leadership can make.
Companies that model environmental exposure as static risk may find mid-year guidance overtaken by legal developments. Those that treat litigation trends as a dynamic forecasting input, revisited alongside commodity, regulatory, and macroeconomic assumptions, will be better positioned to preserve earnings credibility.
The liability is moving. The question for most executive teams is whether their model of it is moving at the same speed.
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