In what could be a sign of things to come, US based Farmers Insurance is reported to be suing 200 councils in Cook County, Illinois for their failure to adapt storm water and other flood defenses to cope with the increased intensity of heavy precipitation events. Following major flooding in April 2013, the general risks insurer is claiming elevated levels of loss due to the municipal authorities’ lack of preparedness.
Key to their case is the assertion that the need for councils to adapt for the severe weather was predictable and therefore maintenance and upgrade work should have been up to date. Their argument has some merit given that the defendants in the case had adopted the Chicago Climate Action Plan some years before the flood, a document that anticipated just the type of extreme weather experienced last year.
This case will be watched with concern, since a verdict in favour of Farmers’ could have global repercussions. Access to insurance to cover unforeseen events is one of the bedrocks of our financial and commercial systems. If councils can be found wanting when it comes to flood defenses for events that are now seen as predictable, what does it mean in turn for organisations or individuals seeking to claim on their insurances for damages sustained in future extreme weather events?
While the result will not be known for some time (and the defendants will argue they have government immunity from prosecution), the case should be taken as a wake up call for organisations everywhere. If your operations and supply chains are exposed to extreme weather, you could be at risk. Insurance companies may eventually cease providing cover while in the meantime hiking premiums to cover the increasing likelihood of high payouts.
Another potential avenue for climate change litigants is to target organisations whose actions could be seen as exacerbating the onset of climate change leading to extreme weather events (major greenhouse gas emitters being an obvious but not exclusive case in point). In this case, however, it is an uphill battle for plaintiffs to prove causation between a particular set of emissions and specific damages.
An ironic factor in this case is that in trying to do the right thing by acknowledging the threat of climate change, preparing adaptation plans and commencing a costly program of infrastructure upgrades, these councils have unwittingly set themselves up for this suit. Clearly the insurance industry represents a key stakeholder group with which organisations should consult, advise and negotiate when approaching adaptation initiatives.
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