Corporate liability to greenhouse gasses likely to increase in the future: Willis

Corporate exposure to liability for environmental damages related to greenhouse gasses is expected to increase, according to a report by Willis’ North American Environmental Practice.
As a result, D&O exposure is expected to increase as well, as governmental agencies and environmental advocacy groups get closer to proving a link between climate change and the emission of greenhouse gasses.
In an article in Willis’ latest edition of Environmental Risk, “Feeling the Heat: How Greenhouse Gas Emissions Standards and Trading Systems are Creating Risks and Opportunities Around the Globe,” author David Orleans looks at litigation trends and the evolving response of the insurance industry to the emerging risk exposures and new marketplace demands.
He notes U.S. “environmental advocacy groups are gaining momentum” in legally proving causation between the production of greenhouse gasses and global warming. “Cases dismissed today, if presented tomorrow in a different light with better science, will likely have the traction necessary to establish that emitters of greenhouse gasses are liable for damages to natural resources and other effects of climate change,” Orleans writes.
Such a result would have an impact on companies and their D&O insurers akin to that of the asbestos, tobacco or mold litigation, the report notes. “Mention asbestos or mold and corporations are often ready to settle rather than face the ultimate consequences of paying substantial compensatory and punitive damage awards.”
Risk managers will need to assess their companies’ risks associated with the emission of greenhouse gasses, Willis observes, particularly now that companies must address environmental risks specifically in their annual reports.
Given the insurance industry’s track record for excluding newer environmental risks such as asbestos and mold, “it is possible that greenhouse gas emissions will become excluded in standard property and casualty policies,” the report notes. “This will heighten interest in environmental [insurance] products.”