Winning Climate Change Coverage Likely to Be a Tall Order
The outlook for coverage fights over suits alleging a link between oil companies' conduct and climate change, resulting in increased infrastructure costs to deal with catastrophic weather events, is not bright for policyholders, as experts say disputes are likely to be riddled with issues.
Amber N. Morris, an insurance recovery associate at Blank Rome LLP's Philadelphia office, said there are a number of reasons why there has been a gap between the filing of underlying suits and coverage fights.
"There's a lot of factors that go into when a coverage suit is actually going to be filed," said Morris, who represents policyholders. "There are certain provisions and policies that require mediation or arbitration that have to be met first, and that can take some time."
Some alternative dispute resolution provisions include a "cooling off" period of 60 to 90 days, she said. Regardless of the time between the filing of the suits, Morris explained that litigation is often viewed as a last resort.
Self-insured retentions, which require the policyholder to pay a certain amount toward costs before coverage is triggered, could also play a role, Morris said.
"Say a retention is a couple million dollars or more, it's going to take a while to hit," she said. "Even if defense costs are currently being paid, or an underlying matter has been resolved, there could also be a question of indemnification."
Blank Rome's Morris said the Delaware high court's ruling was "opioid-specific" and predicted that a court's interpretation of a pollution exclusion, if the relevant policy contains one, would likely be a focal point for determining the duty to defend in climate change suits. Aloha, for example, noted in its complaint that National Union cited a pollution exclusion in its policy to deny coverage.
"It's interesting because the world is always changing, as is the law and the facts in the underlying litigation," Morris said. "These climate change suits are relatively new in the eyes of the law, and it's interesting how an exclusion that's been interpreted for years now can come back to the forefront. Courts have to reanalyze it in the context of the specific allegations."
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"Winning Climate Change Coverage Likely to Be a Tall Order," by Shane Dilworth was published in Law360 on September 30, 2022.