Limiting Liability in the Greenhouse: Insurance Risk-Management Strategies in the Context of Global Climate Change

Abstract

Emitters of greenhouse gases externalize the true costs of their contribution to climate change. Efforts to recover these costs, which manifest both through the costs of impacts and the costs of efforts to prevent impacts, can take the form of insurance claims as well as legal remedies. The most widely discussed insurance-related consequences of climate change are the impacts of property damage from extreme weather events. However, there is increasing awareness of the relatively subtle but equally important dimension of liability. Liability insurance risks - risks to insurers from claims of third-parties who allege injury or property damage that may be the fault of the insured - are rising as scientific uncertainty surrounding climate change declines. This Article explores three major dimensions of the issue: (1) sources of climate-change-related legal liability to third parties and their nexus with insurance and law, (2) new liabilities associated with potential technological responses to climate-change, and (3) potential roles for insurers, reinsurers, and other industry actors in proactively managing climate change-related liability insurance risks for themselves and their customers. Because the insurance sector is the world's largest industry, the response of insurers to the broader climate-change challenge will no doubt be key to the ultimate success of society's overall response.

Keywords: global warming, corporate responsibility, insurance, environmental law, climate change, property damage, extreme weather events, legal liability for property damage, liability insurance