Oil Majors Face Rising Tide of Climate Lawsuits

July 20, 2019

The fact that there is a website called “Climate Liability News” suggests that polluters are at increasing risk from a rising number of climate-based lawsuits.

Some 20 years ago I actually called and got thru to Rush Limbaugh, who was in the midst of a climate denial rant. I suggested, among other things, that a titanic showdown was going to emerge between the Insurance Industry and the Fossil Fuel industry. Immoveable object vs Irresistable force.
It’s taken a while but seems to be gelling now.

Financial Times (Paywall):

Fossil fuel companies are already grappling with the risks posed by climate change, from the physical threats of extreme weather to the challenge of switching to cleaner energy. Now they have a new item rising up their list of worries: liability lawsuits.

Over the past two years, a growing number of legal cases in the US — brought by cities, counties, and the State of Rhode Island — are seeking damages from energy companies for a litany of climate-related problems. Baltimore wants compensation for the cost of retrofitting storm drains to prepare for worsening storms.

In San Francisco, the city says it will cost $5bn to upgrade the city’s sea wall to prepare for higher sea levels. Meanwhile, Rhode Island expects coastal properties worth $3.6bn to be under threat by the end of the century.

Taken together, these lawsuits amount to a legal onslaught that climate activists hope will have a profound financial impact on oil and gas producers, by imposing huge penalties. The example they draw on is the years of litigation against tobacco companies that culminated in a settlement guaranteeing $206bn in payments to 46 US states over the first 25 years.

Sheldon Whitehouse, a democratic Senator from Rhode Island known for his climate activism, said the threat of litigation is a major worry for oil companies at the moment. “They are frightened at the prospect of liability at what they have done, and they are scared of courts.”

He said the comparison with the tobacco lawsuits is apt. “If you . . . pop out the word tobacco, and put in the word fossil fuels; pop out the word health, and put in environmental harms. The complaint writes itself,” he said.

Climate Liability News:

Lawsuits filed by insurance companies against the fossil fuel industry seeking to recoup payouts to policyholders for climate damages could become the second wave of climate change litigation.

That possibility exists if the first wave of climate lawsuits—communities suing the industry under public nuisance and other laws to hold them liable for the impacts of climate change—starts to be successful, legal experts say. 

The next kind of lawsuit could come from insurance companies attempting to recover part of what was paid to policyholders for damage caused by climate disasters. These are called subrogation claims, and are commonly used in the U.S. by insurers who try to prove those losses were caused by a third party, which should be held liable for those damages.

“Subrogation claims are unlikely until liability is established in other litigation. Once a precedent is set in these cases, it will be a blueprint for what happens with subrogation,” said Jason Reeves, an attorney at Zelle International in London who specializes in disputes involving energy, property and power. “But there are still a lot of hoops to go through.”

Last year, insurers paid out $90 billion worldwide to policyholders impacted by natural disasters. Sixty-four percent of those losses were incurred in the U.S., where subrogation is an established part of insurance law. As massive wildfires and rising sea levels increasingly cause damage to property, insurers may consider pursuing subrogation against those found responsible for climate change. Increasingly, researchers have been able to identify the proportion of global warming caused by the major fossil fuel producers, called the Carbon Majors.

“Once a court finds a carbon major liable for causing climate change-related damage to the property of a private plaintiff or government entity, we expect that the litigation flood gates will open, and many other parties will bring damages lawsuits against greenhouse gas polluters, relying on the same type of evidence and arguments that the court found satisfactory,” Reeves wrote in a recent article

There is already some precedent for subrogation claims involving climate, said Stephanie Morton, an insurance lawyer with Client Earth, a non-profit legal organization based in London.

“The link with climate change presents new opportunities for subrogation and the cases currently in the courts are very relevant for insurers. Subrogated claims in connection with climate risk are not without precedent. We have seen insurers explore this before and we may see them do so again,” Morton said.

Morton said that precedent was set in 2014 when Farmers Insurance Group filed nine class-action lawsuits Cook County, Illinois–– which includes Chicago –– on behalf of 600 property owners who were paid insurance claims for flood damages in 2013. At the time, it was considered an extreme example of subrogation. The lawsuit alleged that public agencies failed to take measures to prevent at least some of the damage caused by the floods. Farmers  dropped the suit just two months after filing it and according to a company spokesperson at the time, the purpose of the suit was to serve as a warning that municipalities must do more to reduce risks of flooding. 

“Climate subrogation in the short term is a real thing and quite active,” said Donald Hornstein, professor of law at the University of North Carolina. 

4 Responses to “Oil Majors Face Rising Tide of Climate Lawsuits”

  1. rhymeswithgoalie Says:

    I’d like to know if Fannie Mae or Ginnie Mae are still buying 30-year mortgages from coastal Florida and Maryland, or the Gulf Coast from Mobile to Houston.

    • dumboldguy Says:

      I’d bet yes, at least until more disasters occur and more successful climate liability cases are brought in the courts. Those sea coast developers need to get richer, and their political contributions won’t stop buying our government until we elect Warren and she shuts them down. And you forgot NC—the home of the infamous group NC-20 and their shill Dave Burton—they’re the ones that got NC to legislate SLR out of existence in NC.

      PS An excellent Crock Piece, both the video clip and the links—-good info and a glimmer of hope here.

  2. rsmurf Says:

    The oil companies knew in the 80’s what was going to happen, they said NOTHING. Take all their profits to fix it.

    • dumboldguy Says:

      Smurfy says something insightful for a change. Good idea, although taking ALL they’re profits is maybe a bit extreme—-How about 80%? (after making sure their not hiding any). (Sorry, couldn’t resist the word play).

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