The insurance industry has the tools and experience to provide needed coverage when the storage of carbon emissions becomes the primary method to prevent build-up of gases in the atmosphere, a leading brokerage contends.

In a recent webinar titled “A Lot of Hot Air or Coming Disaster?” two executives from the insurance brokerage firm Marsh joined an attorney with the law firm McGuire Woods to discuss the legal and insurance implications and remedies for the storage of carbon emissions.

Businesses and governments are beginning to experiment with ways to capture and store carbon emissions, according to Peter Mavraganis, senior vice president of the global energy practice group at Marsh.

He advised that many of the processes that will be involved in carbon sequestration are already in use today in other energy fields, while the same can be said for the insurance products that could be brought into play to deal with client's insurance needs.

Commercial coverage typically purchased to cover power, energy and utility clients could be pressed into service to cover carbon capture and storage clients, noted Mr. Mavraganis.

The challenge, he warned, will be to identify the coverage gaps in current policies and identify the mitigation language to cover those exposure gaps.

Mr. Mavraganis explained that the potential risks of transfer, storage and contamination are similar to coverage that is provided to utilities and energy companies today.

Chris Smy, global practice leader of the environmental practice at Marsh, said coverage for carbon-related litigation would more than likely fall under one of two policies: commercial general liability or pollution liability.

There is still a lot of uncertainty over questions of liability and the duty to defend under these policies and what the triggers will be, he added.

If a client seeks coverage under their CGL policy, they can be assured of a broad duty to defend and limits outside of the policy, he explained.

However, the policies do have exclusions, and there is a question over whether carbon emission suits brought as a public or private nuisance, negligence or trespass would be indemnified under a CGL form, he warned.

Pollutions liability policy would provide defense cost coverage, but within the limits of the policy, he added. Insurers could also argue that carbon is not a pollutant under a list of pollutants, and that it occurs naturally in the environment, thereby not providing indemnification.

Mr. Smy said some policies could provide coverage outside of the limits, but few do.

While there have been no definitive rulings on the subject yet, according to Colin Hite, an attorney and leader of McGuire Woods insurance coverage counseling and litigation group in Richmond, Va., he cited four major suits working their way through the court system that could ultimately decide what liability, if any, carbon producers have because of any changes their production of carbon has had on the environment and the plaintiffs' lives.

Still at issue, he said, is if the courts consider this a real event, the severity of the loss, and how the responsibility for any ill-effects of carbon emissions should be shared among defendants.

One issue that has yet to be settled, according to Mr. Hite, is whether such issues are best decided by the judiciary, or are political questions that the courts feel should be best decided in public forums.

Special Reports /

Insurers Already Have Tools On The Shelf To Cover Emerging Carbon Storage Risks

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