June 29, 2026 Managing PFAS Risk: A Path to Permanent Exit

Manufacturers facing rising PFAS risk can now transfer legacy liabilities to specialized firms and remove them from their balance sheets.

By Greg Van Houten, Andrew Van Osselaer, Deborah Slattery-Pereira

A transactional mechanism now exists for manufacturing and industrial companies to permanently resolve PFAS-related liabilities. Through a structured liability divestiture, a company transfers its PFAS obligations (including prospective obligations) to a specialized liability management firm that assumes full responsibility for the defense, settlement, and remediation of those claims.¹ The result is a clean separation: the divesting company is then free to allocate capital and management attention to its core operations, unburdened by legacy environmental and products liability risk.

Municipal Intermediate, Inc., a trusted supplier of critical safety equipment, executed the first publicly reported PFAS liability divestiture in January 2026.² Many liability divestures had closed previously, but they had involved asbestos, talc, and environmental liabilities.³ Municipal’s divestiture, however, marks the first in the PFAS space. The emergence of this market represents a potentially transformative development for an industry grappling with one of the most significant and rapidly evolving categories of contingent liability in modern corporate history.

To appreciate why liability divestitures have attracted such intense interest, one must first understand the magnitude of the problem they are designed to solve. PFAS have been used across a vast array of industrial applications since the 1940s, from non-stick coatings and waterproofing treatments to firefighting foams and semiconductor manufacturing.⁴ Often referred to as “forever chemicals” due to their extraordinary resistance to environmental degradation, PFAS are now the subject of a tidal wave of litigation that threatens to rival the asbestos crisis in scope and cost.⁵ As scientific understanding of their health and environmental effects has deepened, and as regulatory frameworks have tightened, companies with any historical (or current) connection to PFAS find themselves exposed on multiple fronts.⁶ And companies are exposed regardless of whether they have already been sued; if they have not t been, they will be, just as many smaller users of asbestos were sued in the 2000s and 2010s despite not being targeted in the 1980s and 1990s alongside asbestos manufacturers.⁷

The liability landscape for PFAS is bifurcated but equally perilous on both sides. Companies that incorporated PFAS into their products face products liability claims from consumers, downstream users, and governmental entities.⁸ Companies that used or disposed of PFAS as part of their manufacturing processes face environmental claims under federal and state statutes, including the Comprehensive Environmental Response, Compensation, and Liability Act and analogous state superfund laws, as well as tort claims from neighboring communities and water utilities.⁹ In either case, the financial exposure is staggering, the litigation is protracted, and the reputational damage can be severe. The examples that follow illustrate just how devastating these liabilities can be, and why the prospect of permanent liability divestiture has become so compelling.

The Products Liability Front

For companies that manufactured or sold products containing PFAS, the litigation environment has become extraordinarily hostile.¹⁰ Plaintiffs’ attorneys have organized multidistrict litigation, state attorneys general have filed enforcement actions, and municipal water authorities have brought claims seeking the cost of filtering PFAS from public water supplies.¹¹ The theories of liability are broad, encompassing strict liability, negligence, failure to warn, fraud, and consumer protection violations.

3M provides perhaps the most prominent example of the financial devastation that PFAS products liability can inflict.¹² 3M manufactured PFAS-containing products for decades, including Scotchgard fabric protectors and aqueous film-forming foam used in firefighting. By the early 2020s, the company faced thousands of lawsuits from public water systems, state attorneys general, and individual plaintiffs alleging contamination and personal injury. In June 2023, 3M agreed to pay between $10.3 billion and $12.5 billion over thirteen years to settle claims brought by public water suppliers across the United States. That settlement, while historic in its magnitude, did not resolve the company’s exposure to personal injury claims, which continued to mount. Beyond the direct financial cost, 3M has endured years of negative press coverage, sustained reputational harm, diversion of management attention, and ultimately announced its decision to exit PFAS manufacturing entirely by the end of 2025. The total cost to the company, measured not merely in settlement dollars but in lost strategic focus, diminished brand value, and the operational disruption of unwinding an entire product line, is incalculable.

The Environmental Liability Front

For companies that disposed of PFAS-containing waste or used PFAS in their manufacturing processes, the environmental liability risk is equally severe. ¹³ Under CERCLA and state equivalents, liability for contamination is strict, joint and several, and retroactive, meaning that companies can be held responsible for disposal practices that were entirely lawful at the time they occurred.¹⁴ The Environmental Protection Agency’s 2024 designation of certain PFAS compounds as hazardous substances under CERCLA dramatically expanded the universe of potentially responsible parties and the scope of potential cleanup obligations.¹⁵

Wolverine Worldwide, the footwear manufacturer behind brands such as Hush Puppies and Merrell, illustrates the environmental dimension of PFAS liability with clarity.¹⁶ For decades, Wolverine used 3M’s Scotchgard to waterproof its shoes at its tannery operations in Rockford, Michigan, and disposed of PFAS-containing waste at multiple sites in the surrounding area. When PFAS contamination was discovered in local groundwater and drinking water wells in 2017, the company became the target of regulatory enforcement actions, class action lawsuits from affected residents, and natural resource damage claims. The litigation consumed years of management attention, generated sustained negative media coverage in Michigan and nationally, and imposed enormous defense costs. Wolverine ultimately agreed to settlements exceeding $100 million with the State of Michigan and affected residents, in addition to ongoing remediation obligations whose ultimate cost remains uncertain.¹⁷ For a company of Wolverine’s size, the financial burden was material, but the reputational and operational toll was equally damaging, as the company found itself publicly associated with the contamination of a community’s drinking water supply.

An Emerging Solution: Liability Divestitures

Against this backdrop of escalating and unpredictable liability, a transactional solution has emerged that offers manufacturing and industrial companies something that traditional insurance and litigation management often cannot: permanence. Liability divestitures allow companies to transfer (i.e., sell) their PFAS-related liabilities to a specialized entity that assumes full responsibility for managing and resolving those obligations.¹⁸ Unlike settlement, which resolves only the claims covered by its terms, and unlike insurance, which is subject to coverage disputes, policy limits, and insurer solvency risk, a liability divestiture removes the obligation from the transferring company’s balance sheet entirely and permanently.¹⁹

The mechanics of a liability divestiture are conceptually straightforward, though the execution requires sophisticated legal, financial, and operational expertise. The company seeking to divest identifies the universe of liabilities to be transferred, which may include pending litigation, potential future claims, regulatory obligations, and remediation responsibilities. A specialized acquirer, typically a firm with expertise in managing and resolving complex liabilities (such as asbestos, talc, and other environmental risks), conducts due diligence to assess the scope and magnitude of the obligations. The parties negotiate a purchase price that reflects the acquirer’s assessment of the liability’s net present value, including the costs of defense, settlement, remediation, and administration, discounted for risk and time value. Upon closing, the liabilities are transferred to the acquirer, and the divesting company is released from further obligation.

Critically, a liability divestiture must be properly structured to withstand potential legal challenge. Lessons from the so-called “Texas two-step”—which has faced intense judicial scrutiny—underscore the importance of ensuring that the entity to be divested is adequately capitalized. Stakeholders often obtain a solvency opinion at the time of the transaction confirming that the entity’s assets (usually cash and insurance) are sufficient to meet their projected liabilities, thereby mitigating fraudulent transfer risk. A key role for experienced counsel in these transactions is evaluating and maximizing available insurance assets—including legacy and occurrence-based policies—so as to offset the required cash contribution and to ensure the transaction’s defensibility.

The landmark transaction that established this market in the PFAS space was the divestiture by MES Intermediate, Inc. of its PFAS-related liabilities.²⁰ This transaction represented the first liability divestiture of its kind in the PFAS context, and it demonstrated that even complex, long-tail environmental and products liabilities could be permanently removed from a company’s balance sheet through a structured transaction. The MES divestiture established a proof of concept that has since attracted significant interest from other manufacturing and industrial companies burdened by PFAS exposure.

The Value Proposition of Permanent Resolution

For companies evaluating whether a liability divestiture is appropriate, the value proposition extends well beyond the immediate financial terms of the transaction. First, a divestiture eliminates the uncertainty that PFAS liabilities impose on corporate valuations. Investors and analysts struggle to model contingent liabilities whose ultimate magnitude depends on future regulatory action, scientific developments, and litigation outcomes. Removing those liabilities from the balance sheet allows the market to value the company based on its operating performance rather than its litigation exposure.

Second, a divestiture frees management to focus on core business operations rather than the administration of legacy liabilities. The senior leadership hours, legal department resources, and board-level attention consumed by PFAS litigation management represent a significant opportunity cost that is rarely captured in financial statements but is acutely felt within the organization.

Third, a divestiture provides reputational relief. Companies that have divested their PFAS liabilities can credibly communicate to customers, investors, employees, and regulators that they have addressed their legacy obligations and are focused on their future. This narrative is far more compelling than the alternative: years or decades of incremental settlements, adverse verdicts, and negative press coverage.

Finally, and perhaps most importantly, a liability divestiture is permanent. Unlike a settlement that resolves only identified claims, or a reserve that must be adjusted as new information emerges, a completed divestiture transfers the obligation irrevocably. The divesting company does not face the risk of future claims, regulatory developments, or scientific findings reopening its exposure.

Conclusion

PFAS liability represents a generational challenge for manufacturing and industrial companies. The scope of potential exposure is vast, the litigation environment is hostile, and the regulatory landscape continues to tighten. Companies that ignore this risk or attempt to manage it incrementally face the prospect of decades of uncertainty, expense, and reputational erosion. The emergence of liability divestitures as a transactional solution offers a fundamentally different path, one that provides permanence, certainty, and the freedom to focus on the future rather than the past. As the market for these transactions matures, companies with PFAS exposure would be well served to evaluate whether a divestiture represents the optimal resolution of their legacy obligations.

About the Authors:

Greg Van Houten is a high-stakes commercial litigator who focuses on representing corporate plaintiffs in insurance-related matters. He only represents policyholders—not insurance companies. In addition to his litigation work, he advises clients during insurance renewals on optimal insurance policy wording and during M&A transactions that involve complex insurance issues.

Andrew Van Osselaer is an associate in the Insurance Recovery and Environmental Practice Groups at Haynes Boone’s Austin and Denver offices. Andrew represents commercial policyholders in disputes with their insurance companies and advises on insurance solutions to complex risks, including those identified in business transactions.

Deborah Slattery‑Pereira is an associate in the Litigation and Insurance Recovery Practice Groups at Haynes Boone’s Washington, D.C. office. Her practice focuses on complex commercial litigation, with experience spanning contract disputes, government‑related matters, and regulatory issues.

www.haynesboone.com

¹ https://www.bloomberglaw.com/external/document/X7GTQ724000000/m-a-drafting-guide-divestiture-agreements-business

² https://www.prnewswire.com/news-releases/mes-completes-transaction-to-permanently-divest-alleged-pfas-related-liabilities-302657675.html

³ See, e.g., https://investor.honeywell.com/news-releases/news-release-details/honeywell-announces-transaction-divest-legacy-asbestos

⁴ https://www.epa.gov/pfas/our-current-understanding-human-health-and-environmental-risks-pfas

⁵ https://www.nytimes.com/2024/05/28/climate/pfas-forever-chemicals-industry-lawsuits.html

⁶ https://annalsofglobalhealth.org/articles/10.5334/aogh.4013

⁷ https://www.congress.gov/committee-report/109th-congress/senate-report/97/1

⁸ chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://assets.aon.com/-/media/files/aon/capabilities/risk-transfer/pfas—navigating-forever-risk.pdf

⁹ https://eelp.law.harvard.edu/tracker/pfas-and-the-comprehensive-environmental-response-compensation-and-liability-act-cercla/

¹⁰ https://www.iadclaw.org/defensecounseljournal/pfas-exposure-a-comprehensive-look-at-emerging-facts-and-studies-risk-and-liability-assessment-litigation-history-evolving-regulations-and-future-predictions/

¹¹ https://www.americanbar.org/groups/environment_energy_resources/resources/natural-resources-environment/2014-2022/pfas-litigation/

¹² https://news.3m.com/2023-06-22-3M-Resolves-Claims-by-Public-Water-Suppliers,-Supports-Drinking-Water-Solutions-for-Vast-Majority-of-Americans

¹³ https://eelp.law.harvard.edu/tracker/pfas-and-the-comprehensive-environmental-response-compensation-and-liability-act-cercla/

¹⁴ https://www.epa.gov/enforcement/superfund-liability

¹⁵ https://www.epa.gov/superfund/designation-perfluorooctanoic-acid-pfoa-and-perfluorooctanesulfonic-acid-pfos-cercla

¹⁶ https://www.cnbc.com/2019/08/07/wolverine-worldwide-pfas-drinking-water-contamination-michigan.html

¹⁷ https://www.michigan.gov/pfasresponse/about/news/2020/02/03/mi-ag-nessel-announces-pfas-settlement

¹⁸ https://www.bloomberglaw.com/external/document/X7GTQ724000000/m-a-drafting-guide-divestiture-agreements-business

¹⁹ https://www.investopedia.com/terms/d/divestiture.asp

²⁰ https://www.prnewswire.com/news-releases/mes-completes-transaction-to-permanently-divest-alleged-pfas-related-liabilities-302657675.html

Subscribe to Industry Today