Canadian oil and gas producers may soon face climate change lawsuits
A multitude of factors, such as a growing worldwide recognition of climate change effects and associated government commitments and international laws, has contributed to the fast growth of ‘climate change litigation’ around the world, with legal analysts speculating on when these types of lawsuits would emerge in Canada. With two recent lawsuits of this nature developing in Canada, climate change litigation may indeed have arrived.
The first, and perhaps most relevant to executive risk, is a proposed class action lawsuit brought on behalf of municipalities in British Columbia against various oil and gas producers alleging climate-related harms. Backed by an advocacy group, West Coast Environmental Law (WCEL), various municipalities have sent demand letters to oil and gas producers seeking compensation for alleged climate-related harms. If a lawsuit is ultimately filed, it would seek to hold some of the world’s biggest fossil fuel producers liable for climate adaption costs incurred by the municipalities. Lawsuits of this nature have previously taken place in the U.S., with municipalities in California and the City of New York bringing climate change related lawsuits against large oil and gas producers. Allegations have included negligence, trespass and nuisance, with plaintiffs contending that the defendant corporations knew of the risk of climate change stemming from their products but tried to hide those risks from the public. These lawsuits have sought billions of dollars in damages for infrastructure costs associated with preparing for climate change impacts.
A second climate change related action proposes to sue the federal government on behalf of Quebec residents aged 35 and younger. ENVironnement JEUnesse (ENJEU) filed a motion for authorization to bring a class action proceeding in the Quebec Superior Court, alleging that the government’s failure to adopt adequate emissions targets violates class members’ rights to life and security of the person, living in a healthy environment in which biodiversity is preserved, and equality. The equality argument is centered around the assertion that younger generations will be disproportionately burdened with the future costs of climate change. ENJEU is seeking a declaration that the federal government has infringed rights protected by the Canadian Charter of Rights and Freedoms and the Quebec Charter of Rights and Freedoms, among other relief.
A directors’ and officers’ (D&O) liability insurance policy can provide board members and executives with financial protection against a variety of management liability claims. This insurance can also provide the corporate entity with varying degrees of coverage if it is named in a lawsuit – if a public company is sued, coverage is restricted to securities claims; however, private and non-profit companies enjoy broad coverage subject only to the policy’s exclusions, terms and conditions. The vast majority of D&O insurance policies exclude pollution-related claims from coverage, which would typically include the climate change-related allegations currently facing oil and gas producers around the world. However, Aon has been successful in negotiating with certain domestic insurers to create coverage for individual insureds when facing select types of pollution claims. In this manner, if an individual director or officer of an oil or gas company were to be named in a climate change-related lawsuit, the D&O policy may respond to provide coverage, in certain instances, for defense costs, settlement and/or judgment amounts.