Archive for the ‘Insurance’ Category

Insuring Against Climate Change

A recent Alert from Perkins Coie underscores the risks corporations face from climate change fallout, and how insurance policies may – and may not – be able to protect you.

Photo by kevindooley. Some rights reserved.

Disasters associated with climate change have the potential to hurt you in more than one way. After the debris has been cleared from increasingly intense cyclones, tornados and floods, there’s a chance that someone could find you, well, responsible for the damage.

According to Perkins Coie, “although no one has yet successfully sued a company for climate change damage allegedly caused by greenhouse gas (“GHG”) emissions, lawsuits blaming industrial emitters for global warming, extreme weather events and other natural disasters are pending in Alaska, Washington, D.C., California and Louisiana.”

As a preemptive measure, some corporations are disclosing climate change related risks, as mandated by the SEC or, more recently, by the National Association of Insurance Commissioners (NAIC), which last March adopted a “requirement that insurance companies disclose to regulators the financial risks they face from climate change, as well as actions the companies are taking to respond to those risks.” (You can see a template of the required survey here.)

And if lawsuits do arise? Perkins Coie points out how existing insurance policies may cover your behind if you get into a climate change related pickle:

  • Comprehensive General Liability (“CGL”) Insurance
    “CGL insurance generally protects companies from claims that a policyholder’s activities caused property damage or bodily injury to a third party.”  However, many CGL policies include pollution exclusions that supposedly deny coverage for damage arising from pollutants. GHG emissions are likely to fall within this exception after the Supreme Court included greenhouse gases in the definition of pollutant in Massachusetts v EPA.
  • Directors & Officers Liability Insurance (“D&O”)
    “By requiring disclosure requirements that relate to climate change, the SEC has created a scenario where a corporation could be held liable for failing to make adequate disclosures.” D&O insurance may provide “coverage for a ‘Loss’ that directors and officers become obligated to pay for ‘wrongful acts’ – such as an inadequate climate change disclosure.”
  • First-Party Property Damage and Business Interruption Insurance
    “First-party property damage and business interruption insurance typically protects a policyholder against risks to its property or operations.” However, policyholders should make sure that such policies “provide coverage for all of the perils associated with severe weather events.”

I recommend reading the full Alert for more detail. The overarching lesson to be learned is that you should know your insurance policy inside and out, put in place all reasonable prevention measures, and be willing to increase your coverage where necessary.

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This is another topic on which there’s no dearth of insightful analysis. Again, check out our Law Firm Memos search page. Enter the string climate change and insurance in the Text Search box, and insure yourself against ignorance.

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