Climate and Insurance.org | takefive on LexisNexis Environmental Law & Climate Change Center

As Vice President of Transactional Practice Area Product Strategy for LexisNexis, Molly Miller develops strategies to address customer product needs by practice area and industry. She recently launched Practice Centers on lexis.com for Insurance, Real Estate, Commercial Law, and Corporate Law. She also worked with the Web 2.0 team at Lexis to develop web centers for Insurance, Environmental Law & Climate Change, as well as Business, Real Estate, and Commercial Law. Prior to her current role, she was focused on product strategy for Insurance, developing a solution for compliance professionals, LexisNexis® Insurance Compliance, which was nominated for a Cody Award in 2006. She has also been responsible for driving the plans for revitalization of Appleman on Insurance Law, a comprehensive multi-volume treatise devoted to all aspects of insurance from coverage to regulatory compliance. Molly received her J.D. from the University Of Cincinnati College Of Law and is a member of the ABA Section of Litigation Committee on Insurance Coverage Litigation.

Steve Jones, a partner with Marten Law Group, is the chair of the firm’s litigation department. He has handled complex environmental and land use litigation for both public and private clients for 15 years. Steve has particular expertise in litigation arising under CERCLA, the Clean Water Act, the Federal Torts Claim Act, and representing clients in litigation involving solid waste and nuisance issues. He also has extensive experience litigating land use issues under both SEPA and under Washington’s Growth Management Act. Steve has handled cases before all levels of the state and federal courts, along with administrative litigation before Washington’s Pollution Control Hearings Board, the Growth Management Hearings Boards and Washington’s Utilities and Transportation Commission.

Steve writes and speaks frequently on environmental and land use issues and has contributed to chapters to both the AWB Environmental Compliance Handbook and WSBA Real Property Deskbook. He is the editor of the ABA’s Superfund and NRD Litigation Committee Newsletter. more...

Gabrielle Sigel is a partner in Jenner & Block’s Chicago office. She is Co-Chair of the Firm's Climate and Clean Technology Law Practice and a member of the Firm’s Environmental, Energy and Natural Resources Law Practice. Ms. Sigel is the Editor of the Firm's Climate Change Update and Environmental Lender Liability Update online resource centers, which provide regular reports on these legal issues. Ms. Sigel is AV Peer Review Rated, Martindale-Hubbell’s highest peer recognition for ethical standards and legal ability.

Ms. Sigel’s national practice focuses primarily on environmental, safety and health litigation and counseling, toxic tort defense, and insurance coverage litigation and counseling. more...

Matthew L. Jacobs is a partner in Jenner & Block’s Washington, DC office. He is a member of the Firm’s Litigation Department and its Insurance Litigation and Counseling, Professional Liability Litigation, Arbitration: Domestic and International Practices, and Climate and Clean Technology Law Practice. Mr. Jacobs is AV Peer Review Rated, Martindale Hubbell’s highest recognition for ethical standards and legal ability.

Mr. Jacobs is responsible for complex, multi-party insurance coverage litigation matters in state and federal courts, and he regularly advises corporations on the availability of insurance coverage for a wide variety of claims, including those related to directors and officers liability, errors and omissions, mortgage lending practices, mold and water damage, business interruption losses, product liability, mutual fund late-trading and market timing lawsuits and regulatory investigations and environmental matters. more...

Editor's Note: LexisNexis recently launched a new website, The LexisNexis Environmental Law & Climate Change Center. We sat down with Molly Miller, vice president of transactional practice areas for LexisNexis; Steve Jones of the Marten Law Group; and Gabrielle Sigel and Matthew L. Jacobs, both of the Jenner & Block law firm, to learn more about the new site and the experts contributing to it.

Takefive:
Let’s begin, Ms. Miller, by having you tell us why LexisNexis decided to create its new Environmental Law & Climate Change Center and how did you come to partner with the two environmental law firms, Jenner & Block and the Marten Law Group?

Molly Miller:
LexisNexis recognized that climate change was a developing legal issue critical to our law firm and corporate clients. From regulatory compliance to litigation, from energy to manufacturing, climate change represented an unresolved legal and policy issue that would drive search behavior on Lexis.com. In order to get in front of this emerging issue, we wanted to surface insightful discussion and analysis by experts on an online platform that would make the ongoing debate available to customers and non-customers alike.

To make this happen, LexisNexis partnered with Jenner & Block and the Marten Law Group, two law firms with extensive expertise in the legal issues surrounding climate change. By working with these two firms -- as well as our existing authors of leading treatises in the field -- LexisNexis is able to offer customers substantive analysis of this developing area of the law.

Takefive:
Can you briefly describe some of the features at the Environmental Law & Climate Change Center and features or other practice areas that you may be contemplating adding in the future?

Molly Miller:
The Environmental Law & Climate Change Center features an Expert Forum, where our experts post articles and engage readers in discussion. There is also the Insider Perspective Blog, which features a key contribution by any of our subject-matter experts, environmental news, Movers & Shakers, and helpful links that connect subscribers to extensive libraries of legal information on lexis.com. LexisNexis has also developed the Insurance Law Center, the Emerging Issues Law Center and the Torts Law Center. More centers are scheduled to launch in 2008.

Takefive:
Mr. Jones, California and 15 other states recently announced they are suing the U.S. Environmental Protection Agency over its refusal to grant a waiver request to allow the states to adopt their own vehicle emission standards. In your opinion, is this action by the states likely to lead to protracted litigation or could a “compromise” on this issue be worked out in the near future with the EPA?

Steve Jones:
While a compromise is always possible, a number of procedural issues will likely need to be addressed first. California filed its petition in the Ninth Circuit, rather than the D.C. Circuit, based on EPA’s failure to make a “finding of nationwide scope and effect,” as required in Section 307(b)(1) of the Clean Air Act. Final action by EPA triggering a right to appeal normally comes through EPA’s publication of its decision in the Federal Register.

California chose to sue in response to EPA’s letter denying its waiver request, rather than wait for this step. It is possible that EPA may use Federal Register publication as an opportunity to make a finding of nationwide scope, and then argue for a change in venue to the D.C. Circuit Court of Appeals, which is normally considered to be more deferential to agency action.

Some have speculated that EPA might take both of these steps as a means of extending the case through the date of the Presidential election, and, following a change in administration, attempt to settle the case at that point. The immediate intervention of 15 other states in California’s lawsuit demonstrates the frustration that many states have over the federal government’s response to climate change, and could indicate that any sort of immediate compromise is unlikely.

Gabrielle Sigel:
On December 19, 2007, the Environmental Protection Agency (EPA) denied the State of California’s request for a waiver under the federal Clean Air Act (CAA). California needs EPA’s approval of the waiver so that it can implement its regulation to control greenhouse gas (GHG) emissions from motor vehicles.

In its press release denying the waiver request, EPA justified the denial by noting that President Bush had recently signed the Energy Independence and Security Act of 2007 (EISA), which raises the corporate average fuel economy standard for cars and light trucks, and increases renewable fuel use. According to EPA, EISA will be more effective in reducing GHG emissions than the state GHG emission standards.

On January 2, 2008, California appealed EPA’s decision to the United States Court of Appeals for the Ninth Circuit.

EPA’s decision was the first time the agency had ever denied a California request for a CAA waiver, which allows California to impose emission requirements more stringent than federal law. The Administration’s decision, therefore, can be seen as a strong policy statement on this issue. The implications of the California waiver for the Bush Administration’s position on the climate change issues are significant. Thus, there is little indication that this issue will be resolved through a political compromise by the current Administration.

California’s litigation on the waiver denial will likely continue throughout the rest of the calendar year. Because the litigation likely will continue into a new President’s term in office, the opportunity for a political and/or litigation settlement may depend on the outcome of the national elections later this year.

Takefive:
Mr. Jacobs, some climate change commentators have suggested that the insurance industry could see an increase in climate change-related litigation in the future. In your opinion, where could insurers be most vulnerable?

Matthew L. Jacobs
The various risks facing industrial and other policyholders will drive the insurance claims, which will, in turn, drive the insurance coverage disputes and litigation resulting from such claims. Climate change, or “global warming,” is already affecting policyholders in their operations and businesses in many ways. There are regulatory exposures and risks, there are first-party property and business interruption risk and potential liabilities, there are third-party liability risks and there are transactional risks arising from emissions trading, which often involves the failure to deliver credits, political risks in developing and third-world countries, performance risks associated with the development of new emission reduction technology and noncompliance risks. See, generally, “Climate Change -- Issues for Policyholders,” The Insurance Coverage Law Bulletin, Vol. 6, No. 4 (May 2007).

These risks and potential liabilities, in turn, could trigger coverage under first and third-party liability policies, Directors and Officers, Errors and Omissions and new policies now being marketed by the insurance industry in response to anticipated climate change exposures, such as Energy Savings Insurance, or the credit delivery guarantee, which is designed to provide coverage for non-delivery of carbon emission credits due to a specified event. See, Tom Walsh, Risk Alert: Climate Change: Business Risks and Solutions, at 28 (Marsh, Apr. 2006).

In the third-party comprehensive general liability insurance context, one utility already has sought insurance coverage for the costs of defending against a federal enforcement lawsuit under the Clean Air Act involving the installation of green-house gas (“GHG”) emission equipment and in which the government alleged that the utility had caused “extensive damage to human health and welfare, to the environment, and to historic buildings and monuments.” Cinergy Corp., et al. v. Associated Elec. & Gas Ins. Services, Ltd, et al., 865 N.E.2d 571 (Ind. 2007). In that case, the Indiana Supreme Court affirmed the lower courts’ rulings that costs of defense incurred in response to the government’s action were not covered. The court ultimately determined that the relief being sought by the utilities -- costs of complying with the CAA and GHG regulations and requirements to install GHG-controlling equipment -- were not covered “damages” under the policies at issues, and were, instead, “prophylactic” in nature. Id. at 582. The court found that these costs were incurred to prevent future emissions, which were to be distinguished from covered “damages” resulting from environmental contamination that is already in the ground or groundwater. Id.

Other courts may not be so inclined to follow the Indiana Supreme Court’s ruling in Cinergy to the extent they find that some past “bodily injury” or “property damage” already had taken place or is imminent, or the definitions in the governing policy for “ultimate net loss,” “occurrence,” or “defense costs” depart from those in the AEGIS policies before the court in Cinergy.

Carriers are likely to be most vulnerable, however, with respect to D&O claims arising from allegations of non-disclosure by companies facing massive climate change costs and potential remedial efforts to deal with GHG. One report notes that, in 2006, more than two-dozen climate-related shareholder resolutions were filed with U.S. companies requesting that the financial risks and costs associated with the installation of GHG-controlling technology be disclosed. Once the management of these companies complied with the shareholder’s requests, many of these claims were withdrawn. Climate Change Concerns Raise Questions On D&O, Business Insurance (August 14, 2006), at 28.

If shareholders follow-through with certain demands and threats, claims could emerge in two separate areas. First, shareholders may file claims alleging breach of fiduciary duties by directors and officers to the corporation. Second, shareholders could file claims regarding inadequate disclosure of the risks associated with climate change and global warming, including the costs of complying with the Clean Air Act and GHG-related regulations. The claims would likely include allegations that significant losses of market capitalization resulted once disclosure of the financial consequences was finally made. While breach of fiduciary duty claims would most likely take the form of derivative actions, non-disclosure claims would probably be asserted through securities fraud class actions. The securities claims would likely trigger coverage obligations under applicable D&O policies. See, generally, Monteleone, J., “Global Warming: Will There Be Exposure for Directors and Officers and Will it Be Covered?” Environmental Claims Journal, 19(3):144-154 (“Monteleone”).

While the possibility of such actions against corporations, and their directors and officers is still remote, there is one action currently pending that -- at least in part -- appears to raise the potential for linking global warming and climate change to actions taken by a company’s directors and officers. See People of the State of California ex rel. Lockyer v. General Motors Corp., Case No. 3:06-cv-05755-EMC, Complaint (N.D. Cal., September 20, 2006) (California AG sued six auto manufacturers for alleged adverse environmental and financial impact on California because autos contribute to global warming and climate change). While this case does not yet include direct claims against directors and officers, one commentator has suggested that “there is a possibility that certain adverse results for the corporate defendants in [this] litigation[ ] may lead to shareholder litigation that could pose both the liability and coverage exposures to the directors and officers and insurers, respectively.” Monteleone, at 146.

Such suits, which could arise in many circumstances, could pose substantial risks to D&O carriers -- which would most likely aggressively seek to avoid such exposures -- and which, in turn, would result in coverage litigation, litigation expenses and, inevitably, settlements and judgments. Carriers already have started to generate a PR campaign seeking to deter such policyholder efforts, and to suggest that various policy exclusions will apply to claims for coverage of damages incurred as a result of climate change. It is too early to tell how such actions will turn out, but the D&O market is preparing for an onslaught of claims and possible payments - an onslaught that may almost be as inevitable as climate change itself.

Takefive:
Finally, Ms. Miller, how can insurance professionals take full advantage of the Center?

Molly Miller:
Given the multi-disciplinary nature of the climate change topic, our experts will provide discussion of insurance issues as part of their regular contributions on implications analysis. Insurance professionals can use the site to stay on top of legal and policy developments relative to climate change, in addition to specific insurance regulatory and coverage issues. Users can peruse the site at no cost, can register to participate in blogging, and can contact LexisNexis if they are interested in subscribing to the Insurance solutions on lexis.com.