All posts tagged 'Renewable Energy'

Even if You Can't Insure the End of Days, You Can Insure Some of the Effects of Climate Change

December 22, 2012 00:04
by J. Wylie Donald

Today is the day the world ended.  But it didn’t.  The spin put by some on the Mayan calendar didn’t pan out and the world continued.  Here in Baltimore we didn’t buy into the predictions, but just in case, we went looking for some end-of-the world insurance policies.  We didn’t come up with anything.  But while we were looking we turned up quite a bit of coverage for the-end-of-the-world-as-we-know-it.  Some call it climate change insurance; most just recognize it as an old friend taking on a few new attributes to meet the needs of the present. 

We found quite a bit of that old friend.  There is the simple stuff.  Farmers grow crops.  If it doesn’t rain, there are no crops.  If it rains too much, there are no crops.  If hail is overwhelming, there are no crops.  If frost comes early, or stays late, there are no crops.  Sounds like extreme and variable weather and also the makings of an insurance policy.  Total Weather Insurance agrees.  The beauty of TWI's product is that the farmer need not prove any loss.  As The Economist reports, he or she just bets on the details of the weather on a 2.5  x 2.5 mile grid across the United States, and with data-processing getting more and more sophisticated, the variations of farming are smoothed substantially.  

At the other extreme are catastrophe bonds.  These investment vehicles offer something very few investments can offer – zero correlation with the stock market.  In a nutshell (and according to Investopedia) a catastrophe bond is a “high-yield debt instrument that is usually insurance linked and meant to raise money in case of a catastrophe such as a hurricane or earthquake. It has a special condition that states that if the issuer (insurance or reinsurance company) suffers a loss from a particular pre-defined catastrophe, then the issuer's obligation to pay interest and/or repay the principal is either deferred or completely forgiven.”  We noted earlier this year that Florida’s Citizen’s Property Insurance Corporation issued the largest catastrophe bond ever at $750 million. That trend has continued with this year’s issuance exceeding last year’s by over $2.5 billion.   

Some might say that the above would exist even if climate change were not occurring.  Possibly.  But what about insurance for renewable energy and for green buildings?

William Gallagher Associates offers its Green Energy Insure product, recognizing that new technologies carry more risk than proven ones.  Green energy purveyors need to address the risks accompanying their technology and seek coverage for the failure of the technology itself, the cost of opening and closing the equipment to get to the problem, and any ensuing damage that may occur. 

Green building insurance was pioneered by Fireman’s Fund, but it is no longer alone in the field.  Other companies such as AIG, Zurich, Travelers, and Chubb now offer products addressed to the issues green buildings face like vegetated roofs, building commissioning, recycling of debris rather than disposal, water and lighting efficiency, and certain certified professionals.

One climate change product that has not made an appearance is greenhouse gas insurance.  So far as we know, no one is offering carbon dioxide coverage, at least by that name.  We have written many times before that such coverage is to be found in general liability policies and D&O policies under the general insuring agreement, because the absolute pollution exclusion doesn’t apply.  The issue has been litigated twice and the policyholder has won on both occasions. See Donaldson v. Urban Land Interests, Inc., 564 N.W.2d 728, 732 (Wis. 1997); Steadfast Ins. Co. v. The AES Corp. 

The Mayan prophecy advocated by some did not come to pass today.  To assuage the disappointment, we will offer another.  Insurance products are wonderful; they are even more wonderful when they pay off.  People being what they are, there will be disputes over these new instruments.  The petitioning policyholder will be more likely to prevail where it has prudently purchased.  

Climate Change | Green Buildings | Greenhouse Gases | Weather

Revisions to the Green Guides: Part III - Insurance Coverage for the Claim

October 24, 2010 19:10
by J. Wylie Donald

If you have been following along with the last two posts, you are now aware of the several ways one can trip up as one attempts to use "green" climate change attributes (specifically, claims regarding renewable energy, carbon offsets or carbon neutrality) to win customers or sell products. And the universe is bigger than simply climate change. The Green Guides promulgated by the Federal Trade Commission, address general environmental benefit claims; biodegrable, recyclable, compostable, refillable and recycled content claims; "ozone-friendly" claims; and claims about source reduction. See 16 C.F.R. § 260.7. There are numerous perils and you would like to think that a misstep in this area would not be without succor. And you would be right (in some circumstances).

Included in the general liability policies with which we are all familiar, is coverage for Advertising Injury. As its name implies, it can be a source of coverage for a marketing misstep. Typical insuring language provides that the insurer "will pay those sums that the insured becomes legally obligated to pay as damages because of 'personal and advertising injury' to which this insurance applies." ISO CG 00 01 12 07. These policies often also require the insurer to defend the insured against claims asserting advertising injury.

 

Advertising injury coverage is not triggered by the commonly known "occurrence." Instead, the operative event is an "offense" committed by the insured. These offenses are specifically enumerated in the definition of "personal and advertising injury." Pertinent here is the following offense set forth in the definition: "oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services."

It is easy to understand "oral or written publication," but is a misleading advertisement that does not even mention a competitor's name, a slander, a libel or a disparagement? In a case of first impression in California in 2007, a court of appeals panel found that it could be. Tosoh Set v. Hartford Fire Ins. Co., slip op. (Cal. Ct. App., April 30, 2007) Click here

. The court found that the "duty to defend was triggered by an allegation that [the insured] falsely claimed it alone had developed the detailed specifications and tolerances required for certain replacement component parts used in semiconductor manufacturing equipment, a statement that disparaged its competitors' products and services by implying they were measurably inferior." It does not require much ingenuity to imagine a claim that a certain item "made with renewable energy" constitutes disparagement of other manufacturers' products that are not so made. Likewise, a claim that a service was carbon neutral, might disparage services that were not. So coverage seems possible.

Climate Change | Renewable Energy

Revisions to the Green Guides: Part I - Renewable Energy Claims

October 20, 2010 20:58
by J. Wylie Donald

The Federal Trade Commission proposed revisions to its "Green Guides" at the beginning of this month. Proposed Revisions to the Green Guides (Oct. 6, 2010) Click here. The comment period runs through December 10, 2010. Most interesting for readers of this blog are the two new proposed guides directed to renewable energy and carbon offsets, which we discuss below.

For those unfamiliar with the Green Guides, they are the guidance provided by the FTC for marketers to assist them in avoiding making misleading environmental claims. First published in 1992, and updated in 1996 and 1998, the Guides provide "1) general principles that apply to all environmental marketing claims; 2) how consumers are likely to interpret particular claims and how marketers can substantiate these claims; and 3) how marketers can qualify their claims to avoid deceiving consumers." FTC Press Release (Oct. 6, 2010) Click here.

Although the Green Guides are not law, the FTC uses them to determine when to bring enforcement actions. As stated in the regulations: "These guides specifically address the application of Section 5 of the FTC Act to environmental advertising and marketing practices. They provide the basis for voluntary compliance with such laws by members of industry. Conduct inconsistent with the positions articulated in these guides may result in corrective action by the Commission under Section 5 if, after investigation, the Commission has reason to believe that the behavior falls within the scope of conduct declared unlawful by the statute." 16 C.F.R. § 260.1 test ttt

Climate Change | Renewable Energy


McCARTER & ENGLISH CLIMATE CHANGE AND RENEWABLE ENERGY PRACTICE GROUP

The business case for the development of renewable energy projects, from biodiesel and ethanol to wind, solar, and distributed generation, is more compelling than ever as tax and regulatory incentives combine to attract investments. Emerging issues in environmental law and increasingly recognized principles of corporate social responsibility are encouraging public companies to voluntarily reduce greenhouse gas emissions, install clean energy alternatives, and invest overseas in projects under the Kyoto Protocol to respond to climate change concerns.

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