Renewable Energy Resources at Risk from Climate Change: Property Insurance - the Prelude

Renewable Energy Resources at Risk from Climate Change: Property Insurance - the Prelude

July 2, 2008 16:16
by J. Wylie Donald
An article in the New York Times on July 1, 2008, by Jad Mouawad, titled Weather Risks Cloud Promise of Biofuel, points out that renewable energy sources could be especially susceptible to weather conditions because they often depend on fragile crops, which while renewable, also can be wiped out in one swift stroke.  Those crops can be regrown, of course, but that takes time.  Further, these energy sources are usually found above ground, in places exposed to weather.  Although the article focuses on the effect of the recent flooding in the Midwest of the United States and along the Mississippi river on corn crops, and the corresponding impact on ethanol production, it is not hard to imagine similar problems for other crop sources for renewable energy, such as rice or sugar, in this country and around the world.  It also is not hard to imagine the adverse impact that weather conditions can have on fields of wind turbines and solar farms, or any other energy source that has a fuel derived aboveground.  And, again, those problems would be faced not only in this country but elsewhere.

The Times article highlights a particularly vexing problem created by the, for lack of a better word, confluence of climate change and renewable energy.  As other entries here have noted, litigation alleging damages from climate change has sprung up.  Some of those cases have asserted that climate change has caused more numerous and violent storms, which in turn have caused damage to homes and businesses.  A logical next step could be lawsuits brought by the users and purveyors of renewable energy, alleging that energy sources were lost, or made more costly, because of the adverse affects of climate change.  The defendants in such actions, subject to the terms and conditions of their policies, should have insurance coverage under various different types of liability insurance policies, such as general liability policies, directors and officers liability insurance policies, or errors and omissions liability insurance policies, to name a few, to help pay for the defense costs incurred in relation to such actions, and perhaps any settlements or judgments in those actions.  We have discussed here and will continue to discuss issues that may arise relating to third-party insurance claims for alleged climate change losses.

But another insurance source to think about is first-party insurance, which generally provides coverage for physical loss or damage to the policyholder’s own property.  Thus, going back to the Times article, first-party property insurance may provide coverage for physical loss or damage suffered by the farmers and producers devastated by the flood damage in the Midwest.  The applicability of a flood exclusion will be of particular interest.  See June 30 post.  Such an exclusion, however, will not apply to losses occasioned by other weather-related events such as wildfires, droughts, and hailstorms, among others.  In addition, first-party property coverage often will  provide coverage for certain economic losses associated with physical loss or damage to property, such as business interruption or business income coverage and extra expense coverage.    Future posts will discuss these various coverages, what types of policies may provide these coverages, and some tips on how to pursue claims for such coverages.  (I thank my colleague Nick Insua for these thoughts and others that will follow).

Tags:

Comments (1) -

6/6/2011 11:44:23 PM #

The post is written in very a good manner and it entails many useful information for me. I am happy to find your distinguished way of writing the post. Now you make it easy for me to understand and implement the concept. Thank you for the post.

real estate vancouver island

Comments are closed

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.

Click here for more information and a list of our group members.

MONTH LIST

© 2018 McCarter & English, LLP. All Rights Reserved. disclaimer
navbottom image