Climate change litigation: issues for casualty insurers
London Market casualty insurers are experiencing increased notifications for climate change related tort claims pursued against 'Big Oil' defendants in the USA and other jurisdictions. We outline the headline policy coverage issues arising from these claims and whether the experience of other jurisdictions will be replicated in the UK.
Climate change litigation in the USA and other jurisdictions
A number of cities, counties and states in the USA are pursuing public nuisance and product liability claims against various Big Oil defendants. They allege the defendants sold defective products which have contributed to global warming, misled the public about the ability of those products to damage the climate and advocated against climate science and regulation. It is further alleged:
- The defendants owe a duty of care to prevent their products causing harmful effects
- The defendants’ carbon emissions have contributed to extreme weather events which have damaged public infrastructure and other property.
In addition, the claimants allege public nuisance, strict liability, trespass and impairment of public trust. Compensatory damages to abate the alleged damage are sought.
The hurdle for claimants pursuing these cases is demonstrating causation between the defendants’ actions and the harmful effects of climate change. How can a court, if at all, assign a part of the damage caused by climate change to each defendant? In the US, courts have apportioned damaged based on local market share.
The German case, commenced in 2015 but ongoing, of Lliuya v RWE may provide clues as to whether this approach will be followed in Europe. Here, the claimant Peruvian farmer experienced an increased risk of flooding allegedly caused by German utility company RWE. The farmer seeks payment of RWE’s pro-rated share of global emissions, so that the farmer can build flood defences. The outcome of this matter is awaited.
Could we see these claims in England and Wales?
To date, we have not seen climate change tort litigation pursued in the UK with the same fervour as in the USA and elsewhere. Cases have instead focussed on judicial review and administrative action, for example the 2020 Court of Appeal decision against Heathrow Airport expansion based on the failure of the government to properly consider its climate commitments under the Paris Agreement. Heathrow Airport Ltd. has since been given permission to appeal to the Supreme Court. The success or otherwise of their appeal could have a major influence on the willingness of claimants to pursue litigation in future.
One of the major reasons for little litigation in the UK seems to be the cost of pursuing such actions and the costs consequences of losing them. Could such claims materialise as they have in the USA?
Public nuisance law permits a local authority to sue either on its own behalf or in its name to protect the inhabitants of its area. In addition, the Attorney General may bring a public nuisance claim on behalf of a class of affected individuals under his statutory function to represent the public in proceedings for the assertion or protection of public rights.
In contrast to the far reaching future remedies sought in the USA, the remedy for public nuisance is injunctive relief and compensation, which places the claimant in the position they would have been in had the nuisance not occurred. That said, in Coventry and others v Lawrence and another , the Supreme Court confirmed it is a matter of discretion for the Court as to whether to award damages in lieu of an injunction.
Issues for casualty insurers
Whichever jurisdiction claims are pursued in, coverage issues arise. Casualty insurers in the London Market are being notified of climate change litigation related to Big Oil and others, whether to Bermuda Form or other forms of general and products liability excess of loss policies.
Such policies tend to provide coverage for personal injury and property damage, caused by an occurrence during the policy period.
UK policies generally exclude pollution unless caused by a specific, sudden, accidental event, and contain a total US pollution exclusion.
The standard Bermuda Form policy excludes from coverage almost all pollution, with limited (but important) exceptions, e.g. where the “end-use” of the insured’s products causes personal injury or property damage. The question of what constitutes “end-use” provides fertile ground for disputes in the climate change context.
In the US litigation, the claimants seek the cost of taking future action to deal with climate change i.e. abatement – rather than just damages/compensation for property damage occurring within the policy period.
It seems clear cut that unless there is cover for mitigation expenses, the remedy of abatement generally falls outside the scope of standard UK liability policies, which instead respond to damages for personal injury and/or property damage that has already been suffered (and future damages consequent on those past injuries/ property damage) as per the Court of Appeal decision in Yorkshire Water v Sun Alliance & London Insurance Ltd .
In a climate change context there are also questions for the defendants to answer with regard to known occurrences, which liability policies often exclude. In the Bermuda Form context expected or intended loss exclusions could well apply.
If defendants start to settle such claims, an issue for casualty insurers will likely be whether defendants settle on a global basis with no differentiation between the various pleaded allegations or heads of damage.
Insurers can expect insureds settling climate change claims to argue that settlements relate entirely or in the main to the possibly small elements of claims which are potentially covered e.g. where there has been some minor property damage to residents but the settlement agreement makes no differentiation between this and the costs of abating the nuisance.
Whilst, the broad pollution exclusions may bite, the wording of the exclusions and the definition of “pollution” in the policies will be tested by insureds. In the context of Bermuda Form exclusions, insureds may argue property damage was caused by the “end-use” of its products.
While there seems limited appetite to pursue climate change litigation under General and Products Liability policies in the UK (unlike the USA), casualty insurers considering notifications arising from any jurisdiction relating to climate change issues will no doubt identify common themes, as set out above.
For claims personnel handling such notifications under English law, a key question to clarify at the outset will be whether what is alleged against the defendants broadly falls within the wording of the pollution exclusion and whether what is claimed for is (1) abatement, which is likely to fall outside the scope of coverage, or (2) specific personal injury and/or property damage, which may be more likely to fall within the scope of coverage.