Green Insurance for Global Warming?
We recently posted a piece about mediators going "green." Now that I've cruised my husband's law firm web site in connection with our last post on D&O coverage, I find that insurance coverage might go "green."
At least that's what policy holder counsel are saying about coverage for losses arising from global warming under CGL and other standard commercial policies. As Heller's January, 2007 article Insurance Coverage for Global Warming notes:
Insurance may be available to cover losses faced by companies as a result of global warming issues. For example:
A company’s existing portfolio of comprehensive general liability (CGL) policies may provide coverage for defending against and paying settlements or judgments in lawsuits brought against a company for causing property damage as a result of alleged contributions to global warming.
Errors and Omissions (E&O) insurance may provide coverage for claims by governmental entities or individuals that a company or its management engaged in wrongful acts by allowing global warming emissions.
Business interruption insurance may provide coverage for a company’s loss of profits stemming from an event linked to global warming.
This is the first I've seen about potential coverage for global warming losses.
Already, however, I can see the coverage complaint and envision the answer to it, followed by discovery, motion practice and decades of litigation.
Maybe this time we'll find a way for the lawyers to commence a collaborative process to resolve these claims early enough to avoid the hundreds of millions of dollars that get eaten up by attorneys, arbitrators, mediators, experts, accountants, engineers and the like.
We're all ready and eager to serve if needed. But if there is a colorable argument for coverage, wouldn't it be better for all of us who understand coverage to sit down and try to knock out agreements that will satisfy party interests better than the adversarial system is capable of providing.
If you want a referral to a member of the "global warming insurance recovery" team here in Los Angeles, you couldn't do any better than to contact the dynamic and brilliant Nancy Sher Cohen.
The Cost of Prevention and Cure
Since posting this brief note on global warming insurance, a reader called my attention to the following post on recent carrier research concerning potential losses from global warming. See Josh Rosenau's Thoughts from Kansas post Global Warming Insurance from May of this year and the following excerpt below. (Mr. Rosenau is graduate student at the University of Kansas, in the department of Ecology and Evolutionary Biology).
Last year, Allianz Group partnered with WWF to produce a report on risks to insurers from global warming, and Allianz is cautiously optimistic. Board member Clement Booth explained "if we can find a way to provide insurance in the face of major changes, from the first transatlantic voyages to global terrorism, then we can also find new ways to both incentivize emission reductions and provide coverage." Traveler's offers premium deductions for hybrid vehicles, and AIG. A subsidiary of Allianz is offering reduced rates to energy efficient commercial buildings that meet the LEED standards, and benefits for customers who upgrade to more energy efficient heating and cooling.
I was also alerted to an article on the potential losses caused by global warming compared to the cost of averting its most disastrous consequences by economist Andrew Brod. Excerpt and link to Professor Brod's on-line articles below.
[A]ccording to a recent study by the British government, which recommended an array of taxes and emission controls, the costs [of combatting global warming] may be moderate, on the order of 1 percent of global income per year. For the median U.S. household, this would currently imply a reduction in income of a few hundred dollars per year.
In contrast, the study found that by 2050, the economic costs of unimpeded climate change will be between five and 20 percent of the world’s income. In spite of the uncertainty inherent in these projections, this is a striking result. The study factored in the likelihood that some people, such as wheat farmers in Manitoba, will benefit from climate change. It also addressed the potentially dire effects on poorer countries.
Not all economists have embraced the British study. Some argue that for rich countries, the costs of trying to stop global warming are as great as the costs of letting it run its course. But at least the debate is moving in the right direction. Instead of pointless arguments about whether we have proof of global warming, we’ve started arguing about the costs and benefits of particular policies. Should we impose a carbon tax? Will moderate cuts in emissions suffice? How do we balance the welfare of current and future generations?
I concluded [in] 1995 . . . that it wasn’t too late to “buy insurance” against the future costs of global warming. It’s still not too late. But it will be soon.
Andrew Brod is the Director of UNCG’s Office of Business and Economic Research. You can reach him at 336-334-4867 or AndrewBrod@uncg.edu. An archive of Dr. Brod’s columns is available at http://www.uncg.edu/bae/ober
And Finally, from the Wall Street Journal Law Blog
Plaintiffs lawyers . . . are bringing all sorts of greenhouse-effect litigation against energy companies (e.g., tying hurricane damage to global warming). “You’re going to see some really serious exposure on the part of companies that are emitting CO2,” Texas plaintiffs lawyers Steve Susman (pictured) told the paper. “I can’t say for sure it’s going to be as big as the tobacco settlements, but then again it may even be bigger.”
“Melting glaciers isn’t going to get that much going, but wait until the first big ski area closes because it has no snow,” said Susman, who teaches a climate-change litigation course at Houston Law. “Or wait until portions of lower Manhattan and San Francisco are under water.”