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Is "Silent Climate" the New "Silent Cyber" for Energy Insurers?

  • Legal Development 9 June 2020 9 June 2020
  • Americas, UK & Europe

Is "Silent Climate" the New "Silent Cyber" for Energy Insurers?

You’re asking us to do a lot of new stuff, aren’t you?” The question was reportedly put to the Plaintiffs' (Claimants') counsel by one of the three judges in the latest (and possibly last) hearing in the long-running case colloquially known as Juliana v United States.

The primary complaint by the Claimants in Juliana is that the US Government and its federal departments have allegedly known for decades that carbon dioxide production as a result of combusting materials for energy purposes (such as coal, oil and natural gas) was having a catastrophic effect on the climate.  The Claimants were – primarily – young US Citizens who argued that the Defendants had violated their civil rights by (in effect) knowingly allowing or encouraging the pollution of the atmosphere.  The case was originally scheduled to be heard in October 2018, but earlier this year the US Court of Appeals for the Ninth Circuit dismissed the claim.  The lead Opinion dismissing the claim expressed some sympathy with the Claimants, but found that what they were seeking was outside of the Court's jurisdiction.  In most common law jurisdictions, asking a court to do too much "new stuff" is not usually an indication of success.      

Whilst Claimant successes in climate liability cases have so far been limited, there is no question that the volume of such cases being filed globally is increasing.  If an increase in the number of cases being filed against companies operating in the energy industry increases the risk – and potential cost – of liability, then is there also a risk of such liabilities falling on existing liability policies (i.e. policies not rated or written specifically with coverage for climate litigation in contemplation)?  Much in the same way that "silent cyber" has been categorised as liabilities potentially attaching to non-cyber policies, is there a risk of "silent climate"? 

One point to consider in this "silent climate" arena is the potential for national or international legislation – or decisions of domestic courts with the impetus to do something "new" – to attribute legal personalities to natural objects or eco-systems.  For example, a Colombian Supreme Court decision of 2018 attributed legal rights to the Amazon basin and a prior decision of the Colombian Constitutional Court assigned legal rights to a river.  If such attribution became part of a wider trend, then it is not difficult to foresee even greater volumes of climate litigation.  To take an extreme example, if London's "air" was given a separate legal personality capable of suffering damage, it is not difficult to foresee the wide variety of claims that might be pursued against factories, motorists or others who are alleged to be damaging it.  Any such trend would certainly require insurers to take the "silent" out of climate by considering specific forms or cover, and / or exclusions in their existing wordings, much in the same way London insurers have sought to take the "silent" out of cyber.

Indeed the net could yet be cast even wider as investors and supporters of the energy industry, including insurers, are increasingly being targeted with legal letters from environmental groups warning them of the potential consequences of supporting traditional energy industries.  This at least raises the possibility of insurers and other indirect "supporters" of energy industries facing primary climate claims themselves.

What is notable from the latest decision in Juliana is that the ruling to dismiss the case was not unanimous, but was made by a majority of 2-1, with a strong dissenting Opinion.  A fine margin for "new stuff" in a major common law jurisdiction and certainly worthy of insurers' attention.


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