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IV AIDA Europe Climate Change Working Party A U.S. Perspective Peter Kochenburger Associate Clinical Prof. of Law Exec. Director, Insurance Law Center.

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Presentation on theme: "IV AIDA Europe Climate Change Working Party A U.S. Perspective Peter Kochenburger Associate Clinical Prof. of Law Exec. Director, Insurance Law Center."— Presentation transcript:

1 IV AIDA Europe Climate Change Working Party A U.S. Perspective Peter Kochenburger Associate Clinical Prof. of Law Exec. Director, Insurance Law Center

2 Public Opinion in the U.S. March 2012 “Global warming should be a (medium, high or very high) priority for the President and Congress.” Overall: 72% Democrats: 84% Independents: 68% Republicans: 52% (Yale Project on Climate Change Communication)

3 The Candidates President Obama And yes, my plan will continue to reduce the carbon pollution that is heating our planet – because climate change is not a hoax. More droughts and floods and wildfires are not a joke. They’re a threat to our children’s future. And in this election, you can do something about it. Dem. Convention Sept 6 Governor Romney President Obama promised to begin to slow the rise of the oceans and heal the planet. MY promise...is to help you and your family. Rep. Convention Aug30

4 National Party Platforms: 2012 Democratic: “We will lead to defeat the epochal, man-made threat to the planet: climate change... Never again will we sit on the sidelines, or stand in the way of collective action to tackle this global challenge... “ Republican: No affirmative statement – removed climate change section that was in 2008 party platform

5 Insurance & Climate Change Litigation AES Corp. v. Steadfast Ins. Co. 725 S.E.2d 532 (Va. 2012) The Virginia Supreme Court, in applying its strict “8-corners” test for determining whether there is a duty to defend, ruled that the Village of Kivalina’s lawsuit against AES was not an “Occurrence” under the Steadfast CGL policy. As insurance policy interpretation is a matter of state law, there is no further appeal, though other states are not bound by this decision

6 Insurance & Climate Change Litigation The Aftermath of AES v. Steadfast is... Lots of attention, but not much action. Major Issues: Applicability of Absolute Pollution Exclusion for Climate Change Claims Climate Change exclusions and state regulatory review

7 Insurance & Climate Change Litigation The U.S. Supreme Court stated the Clean Air Act preempted federal common law claims, but did not decide whether state law claims were also preempted (e.g. public nuisance) Am. Electric v. Connecticut, 131 S.Ct (U.S. 2011) The Indiana Supreme Court ruled that environmental mitigation efforts to avoid future harm is not an “Occurrence.” Cinergy Corp. v. Associated Electric, 865 N.E.2d 571; Cinergy v. St. Paul, 915 N.E.2d 524 (Ind. Ct. App )

8 Insurance & Climate Change Professional Liability Exposure  Professional Services and Errors & Omissions  e.g. Engineers, Architects  Directors & Officers “Yet despite widespread recognition of the effects climate change will likely have on extreme events, few insurers were able to articulate a coherent plan to manage the risks and opportunities associated with climate change.” Ceres: Climate Risk Disclosures by Insurers, Sept. 2011

9 Insurers & Climate Change Public Acknowledgment  State Farm, CNA: no discussion found  Allstate: responsibility/environment/climate-change.aspx  Travelers : https://www.travelers.com/about-us/travelers- institute/thought-leadership/climate-and-environment.aspx  The Hartford : (2010 Sustainability Report) Compare to  Swiss Re: (650 hits)  Hannover re :  Lloyd’s: responsibility/environment/climatewise

10 Regulatory Responses In March 2009 the National Association of Insurance Commissioners (NAIC) approved a mandatory climate risk disclosure survey In March 2010 the NAIC made the survey voluntary in light of industry opposition Three states continue to mandate reporting – California, New York and Washington. The company filings are public: applications/financial-filing-notices-forms/annualnotices/ClimateSurvey.cfm

11 Hydraulic Fracturing: Overview Frequent practice in U.S. (over one million sites drilled). 5X increase in shale gas production between 2006 and 2010 (Marcellus Shale – PA) No direct federal prohibition, though environmental laws applicable (e.g. Safe Drinking Water Act) Individual State Assessments: New York, New Jersey – prohibition Pennsylvania, North Dakota – “drill baby drill”

12 Fracking Pressures: Energy Sufficiency, Energy Cost, Profit & Employment Intense industry pressure in New York to open upstate regions to fracking North Dakota – 575,000 barrels a day (2X two years ago), lowest unemployment in U.S., population decline reversed Great Uncertainty : Environmental effects uncertain and debate “vigorous” Inconsistent Regulatory Approaches: Federal, State, local Private Litigation – state common law, federal & state laws Coverage positions untested

13 Fracking: Insurance Coverage Commercial General Liability – Pollution Exclusion may exclude coverage Specialized environmental liability endorsements – Questions regarding scope, retentions, limits, and judicial interpretations Homeowners First Party Property Coverage: pollution exclusion applies?

14 Fracking Nationwide Insurance: “From an underwriting standpoint, we do not have a comfort level with the unique risks associated with the fracking process to provide coverage at a reasonable price.” July 13, 2012 Press Statement


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