Emerging liability risks:
The "Toxic Trio"

Increasing scientific, regulatory, and consumer concerns means increasing risk for manufacturers and suppliers of various personal care products. The potential for synergistic effects of a so-called “toxic trio” of hazardous chemicals used in these products threatens to expose them to latent liabilities. This risk bulletin, prepared by Allianz Global Corporate & Specialty and Praedicat, a leading science-based risk analytics company, reviews possible risk exposures and potential impacts of this trio of chemicals to businesses and the insurance industry.

The cosmetics industry uses hundreds of chemicals in the manufacturing of its products, dozens of which can be present in the final product, leading to potential consumer exposure. Among the widely-used chemicals today, three have gained some notoriety, primarily for their use in nail varnish: dibutyl phthalate (DBP), toluene, and formaldehyde – or the so-called “toxic trio” which are prevalent in the personal care industry.

Despite the fact that the trio has been widely researched, each is known to be hazardous: DBP is likely a reproductive system toxin, toluene a neurotoxin and formaldehyde a known carcinogen.

DBP, for example, has approximately a 1% probability of generating greater than $100bn in mass litigation-related losses to the US economy over multiple years. Toluene is so common that its global market volume was $16.6bn in 2016 and projected to increase in the future. The exposure to excessive amounts of formaldehyde among nail salon employees – one study found that 58% of such workers in Salt Lake City, Utah, were so exposed – presents significant potential workplace liability.

Increased regulatory awareness has shifted from control and monitoring in recent years toward occupational exposures, particularly in nail and hair salons, although consumer advocates are pushing for increased regulatory attention in consumer applications, resulting in many manufacturers to remove some or all of the toxins from their products – a “three-free” approach. Consumer awareness is growing as the use of cosmetics has increased. Global sales for skin care products alone is anticipated to grow by 40% to $180bn by 2024.

Significant latent liability could arise in the future due to the confluence of increasing consumer exposure with the potential discovery of bodily injuries linked to “toxic trio” exposure. Several scenarios could result in increased exposures to manufacturers, for example, product recalls if a product containing one of the “toxic three” chemicals was either hazardous or risky to consumers. Manufacturers would have to recall all the implicated products and then consumers could file lawsuits accordingly, alleging fraudulent marketing and related claims, including medical monitoring.

Manufacturers who market and label their products as being “three-free” or variations on that theme could open themselves up to additional liability if their products, in fact, contain the stated chemicals. This may be true even if the offending chemicals were contaminants in materials purchased from upstream vendors. A testing regime needs to be implemented that ensures the reduction of the risk of mislabeling.

Companies should proactively monitor scientific literature to find leading indicators of risk rather than reacting to public perception or regulatory actions. Furthermore, these scenarios and others can be addressed by insurance solutions such as general liability policies for manufacturers or suppliers.

A significant reason the “toxic trio” has received traction in scientific literature and the media is the fact that nail varnishes and hardeners can expose consumers to all three chemicals at the same time. Not all co-exposures, however, are created equal. Some co-exposures of otherwise non-toxic substances can increase the toxicity of a known toxin. Or a synergistic effect can occur in which the bodily injury exposure for the pair is greater than that for either of the chemicals alone. In other cases, the net effect of co-exposure is no different than the sum of the individual exposures – an additive effect. Finally, some co-exposures result in less toxicity than the individual compounds – a protective effect.

Thus far, scientists have not directly studied the toxic effects of co-exposure to all three members of the “toxic trio”, either theoretically or due to exposure from personal care products. They have only investigated the presence of these three chemicals as allergens, and only in the context of nail products. Studies investigating the potential effects of exposure to any of the pairings of DBP with either toluene or formaldehyde are also sparse and focus primarily on potential exposure routes rather than toxicology. Due to both toluene and formaldehyde being common in industrial processes and consumer products, both chemicals have been widely studied.

The scientific community continues to focus more on co-exposures and potential synergistic effects. One could reasonably expect the first co-exposure studies that can provide information about all three members of the “toxic trio” to focus on reproductive injury – that is the only harm category that is already being actively studied for all three. As data accumulates exploring the underlying mechanisms by which the “toxic trio” cause bodily injury, new insights and methods by which these chemicals can affect each other’s toxicological properties will arise.

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