Presenting a live 90 ‐ minute webinar with interactive Q&A Climate Change and Insurance: Recent Litigation and Regulatory Developments Navigating the Impact of Climate Change on Coverage Issues, Green Insurance, Supply Chains and More THURS DAY, APRIL 25, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Christina M. Carroll, Partner, McKenna Long & Aldridge , Washington, D.C. J. Wylie Donald, Partner, McCarter & English , Wilmington, Del. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Climate Change and Insurance Presented By: Christina M. Carroll J. Wylie Donald McKenna Long & Aldridge LLP McCarter & English LLP 1900 K S t. NW 405 N. King S t. 8th Fl. Washington, DC 20006 Wilmington, DE 19801 ccarroll@ mckennalong.com j donald@ mccarter.com
Political Back Drop - Obama Administration Signals Climate Action in Second Term • Post-Election – The end of the period of “climate silence.” • Inaugural Address: – Obama vowed to respond to “the threat of climate change,” noting that “the failure to do so would betray our children and future generations.” – “Some may still deny the overwhelming judgment of science, [ ] none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms.” • State of the Union speech : – “We must do more to combat climate change” and called on Congress to pass comprehensive greenhouse gas-related legislation. – “If Congress won’t act soon to protect future generations, I will,” he declared. “I will direct my Cabinet to come up with executive actions to take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change and speed the transition to more sustainable sources of energy.” 6
Background: Extreme Weather • What is it? More storms, stronger storms. Also more thunderstorms and precipitation short of a named storm. Droughts. Tornado activity. • In 2012, natural catastrophes caused $160 billion in overall losses and $65 billion in insured losses worldwide. • North America – largest losses due to extreme weather in recent years. • The National Climate Assessment (draft) – examples: – Additional 2 to 4º F of warming in coming decades – Wildfires and droughts; floods and heavy downpours – Human activity has doubled probability of events like the Texas/Oklahoma heat wave of 2011 – Ocean acidification from carbon dioxide from burning of fossil fuels – Sea level rising; decline of sea ice levels in summer (Arctic) 7
C L I M A T E C H A N G E Insurance Coverage Background The New York Times December 6, 2012, 3:25 pm Comment Gas Tanker Completes Arctic Sea Journey By Clifford Krauss http://www.youtube.com/watch?v=jr_SqvitTzk play this 8
Extreme Weather - Implications • E.g., Superstorm Sandy – $60.2 billion – federal relief (including infrastructure, NFIP replenishment) – Losses: $25 billion (insured) / over $50 billion (total) (Munich Re) • $15 trillion in insured property on Atlantic and Gulf coasts is vulnerable due to hurricanes and other coastal hazards like storm surge • Impacts on critical infrastructure – e.g., power supply, transportation • Implications for how the private and public insurance systems should work going forward • Changes in local, state, and federal regulation – land use, insurance, environmental, FEMA-related 9
Recent Reaction from Corporate America • “Climate change is real, and you don’t risk the solvency of your company by saying, ‘I don’t believe it.’” – Maurice “Hank” Greenberg, CEO of the Starr Cos. (former AIG CEO) • Seventy percent of 2400+ companies surveyed (with a combined spending power of $1 trillion) believe that climate change has the potential to affect their revenue significantly. – Carbon Disclosure Project and Accenture (2013) 10
What is a climate change-related claim? Overview: • Climate change • Depends on who you ask mismanagement claims – D&O • Depends on how insurer or • Liability of governmental insured categorizes claims entities for aging infrastructure Examples : (e.g., Katrina-related) • Greenwashing • Extreme weather event? • Green building – BI, PD, business interruption • Tort claims • Renewable energy – Nuisance, negligence, etc. • Claims against professional – For injunctive relief or damages service providers – Civil conspiracy • Public trust claims 11
Climate Change and Insurance - Overview • What does all this mean for claims, underwriting, and insurance regulation? • What types of coverages might be involved? – CGL – D&O – Professional / E&O – Property / Business Interruption – Political risk • New products, Evolving concerns – Renewable energy – Green building / replacement – Supply chain risk 12
C L I M A T E C H A N G E Insurance Coverage Climate Change Litigation California v. General Motors (9 th Cir.) – DISMISSED, APPEAL WITHDRAWN American Electric Power v. Connecticut (S. Ct.) – DISMISSED, REVERSED, REVERSED Comer v. Murphy Oil USA ( 5 th Cir.) – DISMISSED, 2D APPEAL PENDING Native Village of Kivalina v. ExxonMobil (9 th Cir.) – DISMISSED, AFFIRMED, PETITION FOR CERTIORARI 13
C L I M A T E C H A N G E Insurance Coverage Climate Change Litigation 14
C L I M A T E C H A N G E Insurance Coverage Climate Change Litigation The Future "Pawa likened the current state of climate change litigation to the early stages of suits against cigarette makers and companies with asbestos liability . Before plaintiffs' lawyers in those cases were able to win judgments and settlements, they were stymied by defense arguments. "We haven't exhausted our theories or our efforts," he said. "Future success in climate change litigation, [Maples] said, may depend on whether state attorneys general get involved, as they did in the tobacco litigation of the 1990s. With home insurance premiums rising as a result of climate change, Maples said, the litigation could become attractive to state AGs, who like consumer protection cases . 'If you can't afford insurance, that's almost like not affording food,'“ Andrew Longstreth, RIP, climate change litigation? (Dec. 7, 2012) 15
The First Climate “Coverage” Case: AES Corp. v. Steadfast Ins. Co. • Background: – AES Corporation was sued in the Native Village of Kivalina v. ExxonMobil Corp. , one of the first climate change nuisance cases brought in federal court. – After being sued, AES asked its insurer, Steadfast Insurance Company, to defend. Steadfast denied coverage because: • (1) the Kivalina complaint did not allege “property damage” caused by an “occurrence” under its policies; • (2) the alleged injuries arose before Steadfast’s coverage incepted; and • (3) the GHG emissions alleged in Kivalina were “pollutants” excluded from coverage by virtue of the policies’ pollution exclusion. – Steadfast filed a DJ action against AES in Virginia (where AES is headquartered). 16
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