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GIRO 2007 - Liability Issues

Here's and interesting recent court ruling from the US.

Alongside the more obvious and immediate first party property damage impact of Climate Change, the potential for third party liability claims from Climate Change is less well understood but has even greater potential to effect the industry especially when policies are written on an occurrence basis with the potential for latent claims. The huge economic and social impact of Climate Change will inevitably lead to accusations, claims and lawsuits over attribution of causation which will impact on liability classes:

• D&O: Directors and Officers could be sued where it can be shown they have not managed their company’s contribution to, or exposure to the effects of, Climate Change. There are many benchmarks against which they could now be compared such as the FTSE4Good index and the Carbon Disclosure Project. More disclosure is being called for, for example by some US state treasurers. Some insurers are also asking policyholders to disclose their corporate practices as part of their D&O underwriting
• E&O/Professional Indemnity: the construction industry by its very nature can contribute significantly to weather-related risks through bad planning. Bad planning can endanger both the project work and its surrounding environment. The list of professions with potential legal obligations is very long: architects, consulting engineers, designers, surveyors, study bureaux, insurance brokers, risk managers, manufacturers, suppliers, forwarding agents, shippers, hauliers, access contractors, contractors and sub-contractors, owners, developers and financiers.
• Employer’s Liability: skin cancer litigation and workers’ compensation claims are increasing rapidly in Australia, even affecting companies that comply with the health and safety guidelines.
• Environmental Liability: corporate liabilities may eventually arise from claims against large emitters of greenhouse gases. Many legal cases are testing this in the US over several states. Flooding often leads to very significant pollution which can often be traced back to a source leaving the door open for legal action.
• Mortgage Indemnity Guarantee Insurance: claims may arise both if the property value is individually affected (e.g. because it is in a flood plain and the market starts to factor in flood risk to house prices) or if property values are nationally affected due to a global financial factor (such as a move to high inflation/ high interest rate environment again). In some companies MIG underwriters are not in close contact with property underwriters. If the latter doesn’t wish to cover the risk neither should the former we would argue.

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