Green Christmas, Global Warming, and Insurance Claims

Posted on: December 22, 2014

It appears that globally, 2014 will be the hottest year ever recorded

I thought we would leave you with some thought-provoking and seasonally appropriate reading to ponder over the course of the Christmas holidays, and during the potentially heavy rainfall predicted for the Toronto area over the next several days.

As of this week, according to global data from NOAA, it appears that 2014 will be the hottest year (globally) ever recorded. People have been debating global warming for years, and while it certainly has been a hotly contested topic for some time, the reality is that the statistics point unmistakably toward the fact that global temperatures are on a rising trend. In fact, recently released data shows that the Greenland Ice Cap is melting faster – and the ocean levels are rising faster – than previously anticipated. The consequences of this will impact every country in the world.

Concurrent with these phenomena there have been numerous lawsuits over the course of the past 15 years such as the State of California (with nine additional states and several environmental groups) pursuing a lawsuit against the U.S. Environmental Protection Agency over global warming. The basis of the suit is that not enough has been done to curb the production of “greenhouse gases” that purportedly are one of the causative factors of global warming. Even the government of the tiny island country of Tuvalu has explored its options with respect to suing the developed countries, such as the United States, for their role in global warming:

“We don’t have hills or mountains. All we have is coconut trees,” elder statesman Koloa Talake told the Daily Telegraph in Sydney, Australia. “If the industrial countries don’t consider our crisis, our only alternative is to climb up in the coconut trees when the tide rises,” Talake concluded. While there appears to be some comic relief in the statement, the realties are sobering because the impact is on a global scale. “The potential consequences for climate change impacts would make the tobacco payouts look like peanuts,” a lawyer working for the Climate Justice Program told the Financial Times.

As difficult to prove and as implausible as these types of lawsuits may seem, there has recently been increasing discussion over the potential of mass tort and personal injury claims resulting from the rising world temperatures and the global warming theory. The rumblings of this started back in the early 2000s, when several claims were filed in the United States where the insured parties were attempting to seek coverage for climate-related claims under their general liability policies due to the insurer’s duty to defend and duty to indemnify for all sums they are legally obligated to pay due to bodily injury or property damage caused by an accident or occurrence.

We will not get into the details of the claims, because the results and precedents have been muddy outcomes at best, but the net result is that if climate change accelerates – as is predicted by many – we can anticipate a concomitant rise in attempts to seek coverage and, in particular, personal injury coverage. This type of claim triggers at least a defense obligation on behalf of the insurer under “personal injury” coverage while the burden for the policyholder will be to meet the criteria of coverage by demonstrating that an occurrence took place.

Under most general liability policies, property damage is often defined as “physical injury to tangible property, including all resulting loss of use of that property.” Many current general liability policies define bodily injury to mean “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.” The complaints in the global warming claims to date are replete with allegations of property damage or bodily injury. For example, the complaint in Comer sought damages for, among other things, loss of property, loss of the use and enjoyment of property, loss of loved ones, and personal injury. Additionally, examples from the current complaints provide fertile grounds for policyholders to argue that the underlying plaintiffs are seeking damages for property damage or bodily injury:(1)

Comer(2)

The Defendants’ GHG emissions have contributed to sea level rise, which has a number of severe consequences including, but not limited to the following:

• (a) Direct loss of private property as land is subsumed under rising sea levels as land is subsumed under rising sea levels and destroyed by saltwater intrusion;
• (b) Loss of use and quiet enjoyment of private property caused by rising sea levels, saltwater intrusion, increased water temperatures, increased tropical storm activity, loss of habitat used for hunting and fishing and other recreation, and numerous other forms of property damage;
• (c) Loss of the use and enjoyment of public property caused by the subsumption and erosion of public beaches;
• (d) Loss of the use and enjoyment of public trust resources caused by subsumption of and saltwater intrusion into habitat for fish and wildlife . . . ; and
• (e) Increased risk of property damage and loss as a result of hurricane activity in the Gulf of Mexico. Coastal wetlands and beaches act as a natural buffer and barrier to cyclonic storms in the Gulf of Mexico, and to the extent that they are being destroyed by rising sea levels, coastal residents have become much more prone to storm damage.

While it is outside our scope to discuss the results of Comer and the many other similar cases (for further reading please see footnote 1 below) it is fair to extrapolate that if the weather patterns continue to become more severe and erratic as many in the scientific community are predicting this will open the door further to an increasing number of related claim attempts. As a result, this may change the complexion of the types of personal injuries being reported and treated and at Benchmark IME our objective is to stay ahead of the curve in terms of trends facing the insurance industry and we thought this holiday season, and the end of the warmest year on record, was an opportune time to bring this topic to your attention.

Notes

1. Insurance Coverage For Global Warming Liability Claims, James S. Malloy & John M. Sylvester

2. Comer v. Murphy Oil USA, Case No. 1:05-cv-00436-LTS-RHW, US District Court, Southern District Mississippi