James Davis and Andrea Yassemedis on Insurance Coverage for Global Warming Litigation

In its 2007 decision Massachusetts v. EPA, the Supreme Court legally recognized global warming as “the most pressing environmental challenge of our time” and held that certain plaintiffs may have standing to sue for damages due to global warming. As the number of suits alleging damages due to climate change threatens to explode, businesses facing the possibility of massive damage awards and high defense costs will seek coverage under their insurance policies. Overall, the article concludes that policyholders should receive coverage for most claims related to global warming.
General liability policies should provide coverage for damages arising from global warming. The “expected or intended” exclusion found in all standard-form general liability policies should preclude coverage only if the policyholder subjectively expected or intended its CO2 emissions to lead to environmental harm due to climate change. Greenhouse gases have never been regulated as pollutants, and ambiguities in the pollution exclusions should be interpreted in a way that preserves the policyholder’s reasonable expectations that its general liability policy would provide broad protection for their normal business activities, including incidental emission of greenhouse gases. In addition, hurricanes, increased incidence of asthma, and other property damage and bodily injuries related to global warming are caused by an “occurrence”—the atmosphere’s continuous or repeated exposure to greenhouse gases. Courts should adopt the “continuous” theory used in other long-tail claims and trigger all policies in effect during the complained-of exposure to greenhouse gases through manifestation of injury. Any triggered insurer should then be held jointly and severally liable for “all sums.”
Other types of policies may provide coverage for various claims related to global warming. For example, corporate officers and directors will be covered under their policy’s carve-out for shareholder derivative suits if they face allegations that they failed to adequately disclose potential liabilities related to global warming. Other types of suits should be also covered, depending on the ambiguities of the particular D & O policy’s pollution exclusion and the policyholder’s reasonable expectations. 
The insurance industry has begun to address global warming by developing new policies and encouraging more environmentally-friendly business practices. Property insurance companies have lobbied for safer building codes and developed new “green” policies that provide incentives for environmentally-friendly building and rebuilding. As a general practice, liability insurance companies have not been inserting global warming exclusions into policies, but some now consider greenhouse gas emissions as part of their underwriting practices. Liability insurance companies in Europe have been particularly active in addressing global warming risks by developing programs and policies that help businesses manage the risks of carbon trading and reduce their CO2 emissions.
In order to ensure coverage going forward, companies that produce large volumes of greenhouse gases should now be taking steps to protect themselves from liability for future emissions, whether through improved efficiency or through carbon-trading programs. Insurance companies, in turn, should continue to evolve new products and programs that help policyholders mitigate their exposure and cover claims that could seriously threaten a company’s long-term sustainability.