Litigation related to climate change has increased in recent years. Many lawsuits center on enforcement or interpretation of environmental laws and regulations, often seeking to use litigation as a tool to influence government and corporate climate policies. Other cases seek damages for alleged contributions to climate change, insufficient disclosure around material financial risks or “greenwashing” false advertising claims. Additionally, even where climate change is not the subject of a lawsuit, it can still create circumstances that give rise to or substantially impact the magnitude of litigation.
Some of this recent litigation includes lawsuits brought by municipalities throughout the U.S. against fossil fuel companies that seek to hold the companies accountable for past, present and future costs allegedly arising from climate change. While such cases have been unsuccessful thus far, AIG tracks the underlying cases and factors that can change their risk profile. These factors include scientific developments that claim to tie climate-related harms to individual companies and legal developments such as giving personhood and legal rights to natural objects or ecosystems.
Securities actions are another form of direct litigation over climate change. These include shareholder securities suits against companies, directors and officers, as well as derivative actions brought against directors for alleged disclosure or climate risk management failures. While these kinds of actions have not resulted in material losses, AIG continues to assess the evolving norms for disclosure and expectations for corporate action around climate change, which create the potential for more climate-related litigation.
AIG also considers and monitors the indirect effects of climate risk on litigation, which have already resulted in losses. Severe weather and other effects of climate change result in more frequent and more severe damages, leading to lawsuits. For example, wildfires in the western U.S. created significant litigation liability for utility companies whose actions allegedly affected the fires. Litigation about injury or damage from flooding, mudslides and other severe weather as well as litigation about construction defects, chemical release and workers compensation are all indirectly affected by climate change. AIG regularly assesses how climate change indirectly affects claim frequency and severity and engages in discussions among business units to ensure we are understanding and addressing these trends.