Insurers predict the frequency and sustainability of climate change-related litigation could soon become a significant issue.
But there are ways for risk managers to pursue coverage effectively when their businesses are faced with climate-related claims, such as quantifying risk, working on a claims strategy and hiring experts, said industry observers in a panel discussion at the RIMS Canada Conference in Halifax.
What claimants should avoid doing is neglecting to put insurers on notice, said panellists.
“As lawsuits come from climate change liabilities, so too will the insurance coverage disputes as it becomes more and more financially necessary to pursue coverage when there’s denial,” said Pamela Hans, insurance recovery attorney at Anderson Kill. “Policyholders are waiting in the wings to see how some of these global warming lawsuits evolve over time.”
Liability stemming from climate change will outstrip asbestos-related claims, Swiss Re forecast in a 2009 report that was referenced by the panellists, who said it outlined the pressing nature of this snowballing risk.
In that light, there are steps claimants should take before a global warming loss — and quantifying risk should be among the first, said Hans.
“Looking at quantifying your risk before there’s a loss, so you understand what you’re potentially dealing with and whether there’s coverage or not at the front end,” she said.
“[Don’t just ask] do we have a risk of fire, flood, hurricane, oil spill, chemical spill?” said Hans, “but [ask] what are the dollars attached to that? What would our business-interruption loss be if there was a hurricane? How would we quantify that?”
“In a catastrophic situation, you get them there fast and they go on to the next thing. It’s important to be the squeaky wheel and get them there,” said Robert Glasser, managing director at BRG. “You can then do [remediation] quickly and not be second guessing three weeks later when the adjuster doesn’t get there quickly and you’ve already made decisions.”
Following a loss, clients need to work on their claim strategy, which is why it’s important to get adjusters on-site quickly, where possible. “How are you going to rebuild? Are you going to rebuild the same location or configuration of your factory? If it was flooded what are you going to do? You may look for alternative space,” Glasser said.
It’s important that policyholders review their insurance contract following a claim. “It’s your claim — it’s not the insurance company’s claim,” he said, making it even more important to have multiple eyes on the contract.
“It’s very important to read it with other people because you can read it one way and then you’ll have a claim, and I can guarantee you, in greater than 50% of the situations, the interpretation of that language is going to be different when you have a claim,” added Glasser. “[Reviewing the contract] by yourself gives rise to grey area.”
But when it comes to claims, Glasser said, it’s important that claimants hire their own experts.
“Don’t rely on the experts of the insurance company. And especially if you have claim preparation coverage, like everyone has, it doesn’t cost you anything to understand your password, usually no increase in premium because of it,” he said. “If you hired your outside forensic accountants, they’ll help you put together reserve, which is really important to settle the claim.”
What claimants should avoid doing in a climate-change litigation event is fail to put their insurer on notice, said Hans.
“[Keep your broker] in the loop and provide notice to your insurance company so that, if you have coverage, you can make sure you take advantage of what you’ve already paid for.
“A lot of people are hesitant to put insurers on notice, but you can always take it back or you can always get confirmation and coverage. [You] can’t go to trial and then [say] ‘oh, by the way, do you want to pay this?’ That’s not going to work,” said Hans.
“Don’t negotiate with yourself,” added Glasser. “If you think you have something, it doesn’t cost anything to put on notice,” but claimants will have more headaches if they don’t, panellists warned.