WASHINGTON--Insurance companies will be forced to pay huge costs resulting from litigation that will follow the Supreme Court's decision yesterday allowing states and municipalities to sue companies over greenhouse gas emissions, according to one legal expert.

"Insurers will pick up much of the tab, pollution exclusions notwithstanding," said James Davis, managing partner of the Chicago office of Anderson Kill & Olick, who foresees emission claims rivaling the cost of asbestos injury actions.

Mr. Davis advises insurers and their policyholder companies to try and negotiate an agreement with governments on global warming issues to avoid a wave of major mass torts.

The high court's ruling that Massachusetts has standing to file suit, meaning it had shown a real injury of damage to its environment and that greenhouse gases are a pollutant, opens the door for every other state and municipality to file suit as well, Mr. Davis explained, adding that suits could be filed against a number of industries.

Insurers can expect to shoulder a large part of the financial burden of such suits, he said, because pollution exclusions in older policies will generally not apply.

Under common law in most states, he explained, a policyholder has a reasonable expectation of coverage for liabilities resulting from their normal business operations and must be granted that coverage.

If the releasing of greenhouse gases were a part of those operations, and since greenhouse gases were not regulated as emissions during the coverage period, Mr. Davis said that policyholder companies can reasonably expect that their coverage will apply regardless of the pollution exclusion.

The stakes, financially, are extremely high, Mr. Davis noted. The history of greenhouse gases could involve as much as 60 years of historic coverage, he said.

Companies, he advised, will have to look back at decades-old liability insurance policies for protection. If the Environmental Protection Agency seeks to regulate greenhouse gas emissions, or force companies into participating in cleanup programs financially, Mr. Davis said the cost to the industry could "dwarf" the costs of Superfund or asbestos claims.

Special Reports /

U.S. Environment Ruling A Huge Blow To Insurers?

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