Commentators have long speculated whether climate change disclosures may result in claims under D&O policies, but such claims have been slow to materialize. This could change in 2019 in view of increasing interest in this area by investors, regulators and the plaintiff's bar, as well as a recent decision in a putative securities class action against ExxonMobil.
Despite the limited success of climate change lawsuits, activists and governmental entities have made it clear that they will continue to utilize litigation and other means to address climate change. In the coming year, plaintiff firms will test various claims and theories of liability, as they did with other mass tort claims. In particular, there is increasing focus on the adequacy of corporate disclosures relating to climate change exposures and opportunities, particularly in the energy sector, but also in other areas such as mining, transportation and insurance. Climate change has become an important board level issue, and corporations themselves as well as their directors and officers may be held accountable if disclosures are not adequate.
Recent regulatory investigations and shareholder litigation against ExxonMobil and its officers demonstrate that D&O insurers may soon be impacted by climate change disclosure claims. On August 14, 2018, the court denied ExxonMobil's motion to dismiss a purported securities class action, finding that the complaint sufficiently alleged securities fraud based on disclosures regarding the company's climate change exposures. On October 24, 2018, the New York Attorney General filed a 91-page complaint against Exxon Mobil alleging that it "essentially kept two sets of books when accounting for the effects of climate change."
Recent regulatory investigations and shareholder lawsuits may indicate an uptick in climate change disclosure risks, and D&O insurers should keep a close eye on this activity in 2019.
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