All posts tagged 'Hurricane Katrina'

The NFIP is Renewed and Reformed, and Climate Change Is Very Much in the Picture

July 8, 2012 14:18
by J. Wylie Donald
President Obama signed the Moving Ahead for Progress in the 21st Century Act, aka "MAP-21", this past Friday.  Support was broad:  the House voted 373-52; in the Senate it was 74-19 in favor.  The bill is a potpourri.  The bulk of the enactment addresses surface transportation topics, but it also includes measures to keep down student loan interest rates, overflights of the Grand Canyon, sport fish restoration, and extensive reform of the National Flood Insurance Program (including significant climate change provisions).  Interestingly, the White House eschews both statutorily-provided titles and chooses a simpler nomenclature, the Transportation and Student Loan Bill.  According to the White House, the Bill "accomplishes two important goals -- keeping thousands of construction workers on the job rebuilding America's infrastructure and preventing interest rates on federal student loans from doubling." These features are important, but we think the bill's significance will come from the unheralded feature:  reform of the National Flood Insurance Program (NFIP).  Reform is sorely needed.  As stated on the FEMA "Rethinking the NFIP" website, "The NFIP was designed as a means of discouraging unwise occupancy of flood prone areas, yet occupancy of these areas has expanded since 1968. Additionally, as risks continue to increase, the cost of flood insurance mirrors that increase, making it unaffordable for many Americans."  Criticism of the NFIP was nearly universal following Hurricane Katrina.  The program was underfunded - premiums came nowhere near the amount needed to cover claims (the NFIP is over $15 billion in debt).  Floods were repeatedly damaging the same properties, which had been rebuilt sometimes three or four times in the same location.  Fewer than half the properties at risk were covered; in some areas uninsured properties were the substantial majority.    The Washington Post in a 2005 editorial called for compulsory insurance and the end of subsidized rates.  A Wall Street Journal article reached similar conclusions.  Notwithstanding, reform could not be obtained.  The NFIP limped along living (and, on occasion, even dying) on borrowed time.   Since 2008, it has been extended no fewer than 15 times.  Four times the program lapsed as lawmakers could not come to terms.    Somehow, however, with the most recent extension due to expire on July 31, reformers prevailed and the act was revised and extended for another five years to September 30, 2017.  The reform act, known as the Biggert-Waters Flood Insurance Reform Act of 2012 (sec. 100201)), can be found at Title II of Division F (Miscellaneous) of MAP-21.   The reforms are extensive (and they will leave many wondering how any of these reforms were opposed in the first place).  Among other things, the bill provides: Subsidies for many properties are being phased out.  For example, a "severe repetitive loss property" (i.e., where payments for flood-related damage exceed fair market value of the property) is no longer eligible for a subsidized rate (sec. 100205(a)(1)). In setting rates the principles and standards of the American Academy of Actuaries and the Casualty Actuarial Society are to be followed, including "an estimate of the expected value of future costs" (sec. 100205(b)(3)).  The "average historical loss year" is to include "catastrophic loss years" (suggesting that previous averages did not include catastrophic losses, which is a calculus many would like to use with their insurers) (sec. 100211). Insurance premiums can now rise up to 20% per year (sec. 100205(c)).  10% was the earlier cap on premium increases. Multifamily properties (greater than 4 residences) can now  purchase NFIP policies (sec. 100204). There are now minimum deductibles for flood claims (sec. 100210).. A Technical Mapping Advisory Council is established to address flood map revision and maintenance  (sec. 100215(a)). A variety of studies are required:  among others, a study of the addition of business interruption and additional living expenses coverages; a report on graduated risk behind levees; a report on privatizing the NFIP; a report on "nationally recognized building codes as part of the floodplain management criteria", and a study on participation in, and affordability of, the NFIP (secs. 100231, 100232, 100233, 100235, 100236). In light of the politicization of the climate change topic, perhaps the most astounding of all the changes in the NFIP is the acknowledgement in the bill that climate change is a critical consideration in establishing a program that works.  (We and others have called for this for some time, see Underwater?  What Climate Change Means for a Loan Portfolio Near the Flood Plain).  The Technical Mapping Advisory Council must report to the FEMA Administrator within one year of enactment on the following: 100215(d) Future Conditions Risk Assessment and Modeling Report- (1) IN GENERAL- The Council shall consult with scientists and technical experts, other Federal agencies, States, and local communities to-- (A) develop recommendations on how to-- (i) ensure that flood insurance rate maps incorporate the best available climate science to assess flood risks; and (ii) ensure that the Federal Emergency Management Agency uses the best available methodology to consider the impact of-- (I) the rise in the sea level; and (II) future development on flood risk; ... And this report cannot just sit on the shelf.  The Administrator is obligated to, "as part of the ongoing program to review and update National Flood Insurance Program rate maps ..., shall incorporate any future risk assessment submitted [in the required report] in any such revision or update." (sec. 100215(d)(2)). We note that the statute speaks definitively about sea level rise.  It is not something indefinite; rather, the report must consider the impact of the rise in the sea level.  We also note that "best available climate science" is standard phrasing at NOAA, and the National Park Service, as well as among NGOs.  How it will fare in the ultimate report is, of course, unknown.  But we do not expect the effects of climate change will be shouted down, turned away or buried.  At the end of the day, the conclusions in the report will influence how money is to be spent and who will profit.  The best way to figure that out is to use the best information.  Certainly some will have an interest in obscuring the best available science, but the bipartisan support of the bill suggests that many more may have an interest in just getting the best answer.

Climate Change | Climate Change Effects | Flood Insurance | Legislation | Regulation | Rising Sea Levels

Dismissed Means Dismissed: Comer v. Murphy Oil, the First Climate Change Liability Damages Suit, Is Tossed Again

March 22, 2012 19:14
by J. Wylie Donald
In a case of surprising longevity, Comer v Murphy Oil USA, Inc., may finally have been laid to rest. In a decision filed Tuesday, Judge Louis Guirola, Jr., Chief Judge of the United States District Court for the Southern District of Mississippi, concluded that the plaintiffs in the first climate change liability damages suit were not entitled to a second bite at the apple. And even if they were, their case still failed. In the aftermath of Hurricane Katrina, numerous parties filed scores of lawsuits seeking to find some source to pay for the awful devastation. One suit, Comer, asserted through various amended complaints that electric utilities, coal companies, chemical companies and oil companies  were responsible for the increased ferocity of Hurricane Katrina because of their emissions of greenhouse gases and their alleged resultant contribution to global warming.   Following various iterations, plaintiffs ultimately alleged:  "Prior to striking the Mississippi Gulf Coast, Hurricane Katrina had developed into a cyclonic storm of unprecedented strength and destruction, fueled and intensified by the warm waters and warm environmental conditions present in the Atlantic Ocean, Caribbean Sea, and the Gulf of Mexico.  These high sea surface temperatures, which were a direct and proximate result of the defendants' green house gas emissions, increased the intensity and magnitude of Hurricane Katrina."   Amended Complaint, 1:11-cv-00220-LG-RHW, ¶ 17.  Plaintiffs also alleged risks of future harms as a result of effects of global warming. Motions to dismiss were filed, which ultimately led to judgment in favor of the defendants. Judge Guirola ruled that plaintiffs lacked standing and that the claims were non-justiciable under the political question doctrine.  2007 WL 6942285 (S.D. Miss. Aug. 30, 2007), Plaintiffs appealed and were initially successful before the Fifth Circuit, which reversed the district court and concluded:  "Like the district courts in [Connecticut v.] American Electric [Power Co., 406 F. Supp. 2d 265 (S.D.N.Y. 2005)] and [California v.] General Motors [, 2007 WL 2726871 (N.D. Cal. 2007)], the defendants begin with an assumption they cannot support, viz., that the adjudication of plaintiffs' claims will require the district court to fix and impose future emission standards upon defendants and all other emitters. Then, again in a fashion similar to those district courts, the defendants proclaim that it would be "impossible" for a court to perform such an obviously legislative or regulatory task so that the case must present a nonjusticiable political question. The defendants have failed to show how any of the issues inherent in the plaintiffs' nuisance, trespass, and negligence claims have been committed by the Constitution or federal laws "wholly and indivisibly" to a federal political branch."  Comer v. Murphy Oil USA, 585 F.3d 855, 879 (5th. Cir. 2009). That was the high water mark of the plaintiffs' bar's success in climate change liability cases. With the Second Circuit's decision in Connecticut v. American Electric Power Co., 582 F.3d 309 (2nd Cir. 2009), just one month earlier, the tide crested with the Fifth Circuit's decision in October.  Two federal courts of appeal had found standing for climate change liability plaintiffs, and rejected the political question doctrine.  Concurrently, however, a new climate change liability suit, Native Village of Kivalina v. ExxonMobil Corp., was dismissed at the end of September.  663 F. Supp. 2d 863 (N.D. Cal. 2009).  From the present perspective, Kivalina's dismissal marked the turning of the tide. The next dark moment for the plaintiffs occurred when the Fifth Circuit en banc accepted the appeal of Comer, automatically vacating the panel's decision. Then the en banc court's quorum dissolved, requiring the court to dismiss the appeal.  But with the panel decision already vacated, that meant the controlling law was Judge Guirola's 2007 dismissal. The Supreme Court refused to issue a mandamus order, which meant Comer was over.  It got darker.  The Supreme Court dismissed the plaintiffs' federal common law claims in American Electric Power; the gutted case was remanded to the Second Circuit (and plaintiffs ultimately dismissed voluntarily).  So as of June 2011 all the climate change liability suits had been disposed of. Well, not entirely.  Kivalina was pending on the Ninth Circuit's docket.  And the Comer plaintiffs refused to abandon the field and re-filed their claims, relying on a Mississippi statute purportedly permitting refiling. Judge Guirola, however, did not agree. Plaintiffs' claims were barred because the doctrines of res judicata and collateral estoppel applied. Slip op. at 12.   Plaintiffs had had a previous  opportunity to litigate their claims, which had been decided against them with prejudice.  Moreover, plaintiffs still lacked standing because they could not demonstrate that their alleged injuries were "fairly traceable" to the defendants' activities:  "As this Court stated in the first Comer lawsuit, the parties should not be permitted to engage in discovery that will likely cost millions of dollars, when the tenuous nature of the causation alleged is readily apparent at the pleadings stage of the litigation. The Court finds that the plaintiffs have not alleged injuries that are fairly traceable to the defendants’ conduct, and thus, the plaintiffs do not have standing to pursue this lawsuit."  Slip op. at 23.   In addition, the political question doctrine still applied:  " The Court finds that the claims presented by the plaintiffs constitute non-justiciable political questions, because there are nojudicially discoverable and manageable standards for resolving the issues presented, and because the case would require the Court to make initial policy determinations that have been entrusted to the EPA by Congress."  Slip op. at 29.   And just in case all that was not enough, Judge Guirola also ruled that 1) "the plaintiffs’ entire lawsuit is displaced by the Clean Air Act", slip op. at 30 (relying on American Electric Power); 2) the three-year statute of limitations applied to the Hurricane Katrina-based claims because the Mississippi "savings statute" did not apply, and the alleged continuing torts were not ripe, slip op. at 33; and 3) plaintiffs could not demonstrate proximate cause because "[t]he assertion that the defendants’ emissions combined over a period of decades or centuries with other natural and man-made gases to cause or strengthen a hurricane and damage personal property is precisely the type of remote, improbable, and extraordinary occurrence that is excluded from liability."  Slip op. at 35. Judge Guirola's decision is well-written and thorough.  Will it be enough? We expect so but we cannot be pollyana here.  A Fifth Circuit panel has wrestled with Judge Guirola's standing and political question analysis before, and reversed him.  This time, however, they will also need to avoid his res judicata, collateral estoppel, displacement, statute of limitations and proximate cause analyses.  That seems a tall order.  As for the the Second Circuit, its decision on standing is still valid law because that issue was not resolved by American Electric Power.  Indeed, the Supreme Court split 4-4 on the issue (Justice Sotomayor recused herself because of her participation in argument at the court of appeals).  Should Comer (or Kivalina) make it to the Court, the standing question could come out badly for the defense if Justice Sotomayor is the swing vote needed for a bare majority in favor of broader standing.  Last, we have Kivalina before the Ninth Circuit.  While undoubtedly the court will have read Judge Guirola's opinion, it will also have read the Fifth Circuit panel's decision.  Which will be more influential?  We'll make that decision then.

Carbon Dioxide | Climate Change Litigation

Comer Resurgens: Life After American Electric Power v. Connecticut

July 7, 2011 10:23
by J. Wylie Donald
We thought last January, when the Supreme Court denied a writ of mandamus, that the long saga of Ned Comer through the courts had finally come to an end.  We were wrong.  At the end of May, the case, Comer, et al. v. Murphy's Oil USA, et al. (attached), was refiled in the Southern District of Mississippi.  Although predating the Supreme Court's June decision in American Electric Power v. Connecticut, one could be excused for concluding that it was filed afterward as it relegates federal common law to a sentence and instead is all about state law causes of action. But before we get into the resurgent Comer, we thought we would point out a June paper published by the Geneva Association, an insurance industry think tank.  One of the industries most affected by climate change is insurance. In Why Insurers Should Focus on Climate Risk Issues, Chief Climate Product Officer, Lindene Patton, outlines some of the risks and opportunities she perceives.   Her perspective is particularly worth considering as her employer, Zurich Financial Services, faces climate change issues across a broad spectrum of activities. (Ms. Patton notes, however, that the positions in the paper are hers alone.) Ms. Patton's views are insightful:  "society at large appears increasingly underinsured for the impacts of climate change at the time of its greatest need."  And they are ominous:  "Unless global societal risk management of climate change improves, the mismatch between the loss exposure and monies needed to cover economic loss associated with climate change-related severe weather events and other impacts will only become more extreme."  The solution she calls for is for insurance companies to take the lead to overcome the current "governance gap with respect to climate change policy."  Even without leadership, important social decisions can be made if the right price signals (i.e., premiums) are sent. Such signals can lead to "cogent risk management decision-taking" and assist in the spreading and management of climate change risks. An example of such price signals from an earlier period are the fire proofing of much of America as the result of the insurance industry's support of fire codes and the underwriting to go with them. The alternative to leadership in the marketplace is what Ms. Patton refers to as the frictional costs of litigation. In some cases those costs can be trivial, such as occurred with Y2K. In other cases, the outcomes can be devastating -- think asbestos and tobacco, on which insurers have paid, by some estimates, $150 billion and $750 billion respectively. Driving litigation in the climate change sphere is the relatively unknown fact of "a trend of decreasing percentage of insured loss when calculated as a percentage of damages from extreme weather events on an annualized basis."  Stated more simply, those harmed by hurricanes are not insured or are underinsured and the path to being made whole lies with a judge, not with an adjuster. The litigation path is not set out in black and white. Yet. But there are areas that may be fruitful for plaintiffs. Ms. Patton identifies SEC disclosure rules, fractional allocation (market share) schemes, and de minimus liability regimes as potential routes for "activist judges to find liability associated with" greenhouse gas emissions.  Regardless of the theory du jour, the ongoing injuries and displacement caused by climate change "may ultimately end up over a number of years in dedicated, repeated efforts by plaintiffs to find a legal theory that 'sticks' as happened in tobacco or asbestos." Which brings us back to Ned Comer and his protean and unvanquishable litigation.  All remember Hurricane Katrina; most will recall the lawsuit filed 20 days after Katrina made landfall.  In various iterations it sued insurance companies, mortgage lenders, oil companies, electric utilities, coal companies, and chemical companies; it alleged against all of the greenhouse-gas-emitting defendants responsibility for Katrina's "unprecedented" ferocity.  Its appellate travails are legend.  Following dismissal in the district court, and reinstatement by a Fifth Circuit panel, that decision was vacated when the Fifth Circuit accepted the case for en banc argument, and then dismissed the case when its quorum dissolved.  The petition for mandamus did not avail and everyone thought the case was gone. Everyone, that is, except Ned Comer's lawyers.  On May 27, 2011 Comer v. Murphy Oil USA, Inc. was re-filed.  It is a monstrous class action lawsuit with over 90 named corporate defendants - a crowd even larger than the earlier iterations of the case.  Like a Who's Who of particular industries, it alleges against classes of oil companies, utilities and coal companies, and chemical companies claims in three counts of public and private nuisance, trespass and negligence. But it also includes, almost as afterthoughts, a strict liability claim (¶ 36) and a conspiracy claim (¶ 41).  It concludes with a count for a declaratory judgment that federal law does not preempt state law claims. Ms. Patton's frictional costs are here in vast numbers.  As is her recognition that it is injury rather than an interest in climate change policy that provides the litigation incentive:  "Plaintiffs do not ask this Court to regulate greenhouse gas emissions or change national policy regarding climate change. Instead, Plaintiffs seek legal redress for the damages caused by these Defendants."  (¶ 11). Those damages are broad.  "[Plaintiffs'] homes and property were destroyed by Katrina's destructive winds and storm surge, which effects were increased in frequency and intensity by Defendants' emissions of greenhouse gases." (¶ 18)  "Plaintiffs' property also is damage[d] by sea level rise as a result of submersion and/or increased exposure to hurricanes. (¶ 19) "Plaintiffs' insurance premiums for their coastal Mississippi property have risen dramatically, and the resale values of their homes and property values have plummeted."  (¶ 20) The insurance premium allegation is thought-provoking.  Plaintiffs recognize that proving a particular defendant caused Hurricane Katrina will be difficult. Pleading in the alternative, they assert that the Defendants' greenhouse gas emissions "put Plaintiffs' property at greater risk of flood and storm damage, and dramatically increase Plaintiffs' insurance costs." (¶ 37) They link insurance company efforts to price climate change risk to increased premiums (Ms. Patton's risk-based price signals), and, because those "insurance costs attributable to global warming are distinct and quantifiable", they assert they are entitled to recovery. (¶¶ 38-40)  This theory of damages based on increased risk, rather than actual harm, bears watching. Ms. Patton concludes, "the AEP case only addresses nuisance cases and does not address broader theories under tort liability law.  A verdict for the defendants on the nuisance issue may not arrest the flow of cases and associated defence costs.  The plaintiffs bar may still continue to file demands and claims for other types of tort damages."  We would go further. With apologies to Atlanta, Comer Resurgens demonstrates that the conditional "may" is being replaced by the declarative "will." 20110527 Comer v. Murphy's Oil (re-filed) Complaint.PDF (796.31 kb)

Climate Change | Climate Change Litigation | Greenhouse Gases | Insurance | Supreme Court

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