Insurers face a raft of new claims in the climate litigation space

Despite its reputation as a largely arid land, Australia is shaping up as a most fertile ground for climate litigation.

As meaningful progress on climate policy is stalled by politics, Australian school students, activists and not for profit organisations are stepping up to launch creative climate action to quell the encroaching tide. And they will not be greenwashed away.

For insurers, climate exposure is no longer limited to the flames and storms that herald the start of the first party disaster season. Rather, insurers can expect to see more policy claims from insureds being pursued for misleading and deceptive conduct, non-disclosure, regulatory breaches and discovery requests. So too, as recently seen in New Zealand, insureds might well find themselves contesting novel duty of care claims. 

Cover will, of course, depend on the facts and the specific policy terms. However, it is essential that insureds and insurers recognise where future risk might arise, as the below examples show.

Abrahams v Commonwealth Bank of Australia (CBA) NSD864/2021

In August 2021, CBA shareholder Guy Abrahams, brought an application under section 247A of the Corporations Act 2001 (Cth) for access to certain documents pertaining to the funding of oil and gas projects.

Abrahams’ concern was that the projects (which included funding for oil tankers, gas pipelines and development of coal seam gas facilities) might be contrary to CBA’s own 2019 Social and Environmental Framework and Environmental and Social Policy.

In a decision described as the first of its kind, Justice Cheeseman of the Federal Court granted access to the documents (allowing some redactions) on 4 November 2021. The watershed decision may well encourage similar actions globally and, depending on what Abrahams finds, potentially exposes CBA to future litigation.

Australasian Centre for Corporate Responsibility (ACCR) v Santos – Federal Court

It might have been the poster child for Australia’s fraught net zero targets at Cop26, but shareholders are not buying Santos’s statements about natural gas.

In another reported world first, also in August 2021, ACCR brought proceedings against Santos alleging that it engaged in misleading and deceptive conduct when it made statements to the effect that: 

• The natural gas it produces is a “clean fuel” and provides “clean energy”
• It has a “clear and credible” plan to achieve “net zero” scope 1 and 2 greenhouse gas emissions by 2040.

 The allegations are understood to be made under corporate and consumer protection laws. 

Complaint to Ad Standards on HSBC’s Great Barrier Reef Ad – 0265-21

HSBC was referred to Ad Standards over a social media post declaring: “water quality is the second greatest risk to the Great Barrier Reef after #climatechange. HSBC is working with @GreenCollarGCS to help fix it.”

The complainant, a 17 year old part-time snorkelling guide working on the reef, was concerned that the post was deceptive, given that HSBC had made large investments in global coal mining and fossil fuel projects, allegedly including the highly controversial Adani Carmichael coal project in Queensland, which had drawn criticism for its environmental impacts on the Great Barrier Reef.

Ad Standards dismissed the complaint. It did not accept there had been greenwashing, taking the position that HSBC had represented that it was working to fix water quality specifically, rather than climate change generally. Ad Standards was satisfied that HSBC had not directly invested in Adani and had public committed to phase out financing of coal by 2030. Further, “while the advertiser may currently fund some coal-mining projects, however, this did not mean the Environmental Claims that HSBC is making in this advertisement were overstated.”

Novel duty of care

So far in Australia we have seen claimants target novel duty of care claims against the government rather than corporations.

Earlier this year, school students were able to establish the Minister for Environment owed children a duty of care when considering an application for a mining licence. That decision was overturned on appeal on 15 March 2022, and we are waiting to see whether it will be the subject of a special leave application to the High Court of Australia. 

Additionally, in October 2021, a group of Torres Strait Islanders filed proceedings against the Commonwealth government, claiming it owes a duty to protect them, their traditional way of life and the marine environment from the current and projected impact of climate change (Pabai v Commonwealth of Australia). You can read more about these developments here. 

While the focus may well shift to the private sector, such claims will be dependent on the common law for the time being with The Greens’ Liability for Climate Change Damage (Make the Polluters Pay) Bill 2021 (Cth) having been withdrawn on 30 November 2021.

Take-aways

With the advent of consumer action groups, crowd funding and niche law firms, frustrated individuals are accessing climate justice in new and niche ways.

It is increasingly likely that insureds will be targeted in these actions, be they financial institutions, mining companies or organisations that have strayed into the greenwashing arena, making unsubstantiated representations.

Insurers would do well to take heed of these developments and consider future policy risks and exposures.

Read other items in the Australian Insurance Brief - December 2021

Read other items in London Market Brief - February 2022