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By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®

Essentially, plaintiffs can't just say, "You released CO2, and I don't like that and I want somebody to do something about it," explained John Nevius, a shareholder in the Insurance Recovery Group of Anderson Kill & Olick.

The issue was not untouchable politically and the plaintiffs have standing in court to assert their claims, the court asserted.

THE RELEVANCE: CAUSATION

Another key finding was causation, a link between the defendants' CO2 emissions, global warming and harm to the plaintiffs.

According to the court's opinion, the plaintiffs cited the Intergovernmental Panel on Climate Change and the U.S. National Academy of Sciences to show the link between greenhouse gas emissions and climate change.

"Plaintiffs have sufficiently alleged that their current and future injuries are 'fairly traceable' to defendants' conduct," the two-judge panel wrote in its decision, citing a requirement from case law.

Legalese aside, the key is that the Second Circuit "found the missing causal link," as Nevius put it, an acceptance of climate-change science that can now be leaned on by plaintiffs in future cases.

Nevius can't say for sure what will happen in the Connecticut case now that it's been sent back to District Court. But he has a sense that the plaintiffs are really getting after the utilities to control, reduce or offset their emissions.

"A victory for them would be reduced emissions," the attorney said. "They're looking to send a message through this suit to all kinds of emitters."

Another such case for risk managers at utilities, energy companies and other heavy emitters to take note of is Native Village of Kivalina v. Exxon Mobil, et al. An Inuit village of 400 residents, located near the Arctic Circle, is suing for climate-change-related damage, which is resulting in it needing to relocate due to rising waters.

The case is ongoing in the U.S. District Court for the Northern District of California, but an intriguing twist is occurring in a Virginia state court. There, the liability insurer of one of the defendants filed an action to terminate its duty to defend.

You see, if CO2 is going to be treated as a pollutant, then insurers can and will invoke the pollution exclusion in most general liability policies.

"These suits are out there, and the costs of defending them are certainly an issue," said Nevius, who expects more such fights between insurer and insured.

INSURANCE QUESTION

So what's a defendant in these cases, or a potential defendant, supposed to do? No special "global warming liability" product exists.

"The risk is too astronomical for the premium that they (underwriters) could charge," said Gene Devine, a broker at JCH Environmental Insurance Brokers.

Yet risk managers at CO2-emitting companies can look to a product already on the market: the pollution legal liability environmental cover.

"These policies are written every day" to transfer the risk of airborne emissions, said Devine.

But underwriters in the environmental space--where PLL policies are written for three-, five- and even 10-year terms--are conscious of the emerging climate change risk, especially when dealing with obvious CO2 emitters like energy or auto companies.

Environmental underwriters are managing this risk, according to Devine, with greenhouse gas exclusions of their own, or at least some form of sublimit or deductible.

October 5, 2009

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