Climate change risks
While climate change risks have long been associated with weather related events impacting the property insurance sector, general liability insurers should remain alert to exposures (both direct and indirect) as well as judicial activism in Australia. In the US, general liability insurers are starting to see third party liability claims brought against insureds alleging their actions contributed to climate change, which caused weather related events causing property damage and/or injury. These claims have focussed on the gas and oil sectors and their historical operations impacting the environment. As those litigations play out, and observed by Australian lawyers who have a tendency to follow the US lead notwithstanding the obvious causation issues that feature, insurers need to take stock of historical accounts where an insureds’ operations may have contributed to high levels of greenhouse gases.
Insurers should remain cognisant of the flow on effect that weather related events may have on broader liability portfolios. Whether it is consequential losses from a bushfire, property damage from spills of waste or oil from a burnt depot or terminal, spoilages from shut down operations caused by a storm, or defects in constructions, those who have suffered harm will look to trigger liability from occupiers of premises of the source of ignition, or who may have contributed to the damage which manifested following a climatic event. Closer to home climate-related liability has already been extended by the Australian courts to the government. In May 2021, Justice Bromberg of the Federal Court identified a novel duty of care owed by the Minister for the Environment to Australian children to consider potential personal injury to them due to climate change in deciding whether to approve the extension of a coal mine ( Sharma by her litigation representative Sister Marie Brigid Arthur v Minister for the Environment [2021] FCA 560). The decision, in which Justice Bromberg agreed that climate change would cause catastrophic and "startling" harm to young people, is likely to set an important precedent.
Presently, climate change class actions are mostly being driven by activist legal firms on behalf of young people over government’s alleged duties to protect against climate change harms. These lawsuits are often focussed on the courts making declarations about climate risks rather than on receiving compensation for actual loss. While this is likely to make these actions unappealing to litigation funders, perceptions of government inaction on climate change suggest this trend will continue. Liability insurers will need to watch this space as duty of care decisions may have broader application.
Insurers should remain cognisant of the flow on effect that weather related events may have on broader liability portfolios.
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