US Supreme Court decision on Big Oil could fuel flood of claims

A recent decision by the US Supreme Court has dealt a “heavy blow” to Big Oil defendants seeking to move climate change cases to federal court as it refused to hear appeals in five high-profile cases, according to experts at Zelle LLP, the specialist US insurance and commercial litigation firm. If the series of cases brought against leading oil firms proceed as expected by Zelle, insurers and reinsurers can expect to face a slew of major claims. In a recent note published in Law360, Dennis Anderson and Deepa Sutherland said forum disputes have been one of the main obstacles holding up climate lawsuits throughout the US. The Supreme Court's ruling at the end of April ensures that these and other similar cases will be litigated before potentially hostile state judges and juries, the experts said. The ruling also moves such cases one step closer to the actual litigation of substantive climate change claims and defences, and all the consequences that may follow, added Anderson and Sutherland. “The Big Oil defendants in these cases and many others now face the prospect of protracted litigation in state courts around the US, with each case presenting the risk of an adverse verdict and damages in the billions,” stated the lawyers. “Meanwhile, the insurance industry should expect that Big Oil insureds will make every possible effort to shift the burdens of defence costs and damages awards to their insurers and reinsurers,” they added. The Supreme Court's ruling concerned five cases: California's Chevron Corp. v. San Mateo County; Colorado's Suncor Energy Inc. v. Board of County Commissioners of Boulder County; Hawaii's Sunoco LP v. City and County of Honolulu; Maryland's BP PLC v. Mayor and City Council of Baltimore; and Shell Oil Products Co. LLC v. Rhode Island. The plaintiffs filed their climate change lawsuits in state courts, and the fossil fuel industry defendants removed the cases to federal courts perceived as friendly to corporate interests, explained the lawyers. In all five cases, federal district court judges ruled that the claims must be sent back to the state courts where they were originally filed and, following appeals by the defendants, federal appellate courts affirmed those rulings. “In last-ditch efforts to shift their cases to federal courts, the Big Oil defendants petitioned the Supreme Court to review the appellate decisions. By rejecting these five petitions, the Supreme Court has effectively resolved the forum disputes that have been delaying substantive climate litigation in the US for the last several years,” explained Anderson and Sutherland. “The significance of these decisions in the evolution of US climate change litigation cannot be overstated. Over the past two decades, state and local governments across the US have filed dozens of lawsuits seeking to hold fossil fuel producers accountable for their products’ impacts on climate change. Big Oil defendants have removed such cases to federal courts, which are regarded as industry-friendly fora for litigation of environmental claims,” they continued. “Efforts by plaintiffs to remand climate lawsuits back to state courts were generally unsuccessful because the cases asserted legal claims implicating federal environmental regulations and laws, cross-border treaty obligations, and other matters that triggered federal court jurisdiction. “In 2017, however, three complaints filed in California employed a new strategy that ultimately held the key to remanding such cases to state courts,” they explained. The Zelle team said this is precisely the outcome Big Oil has been fighting to avoid for the last five years. “Insurers and reinsurers who have taken a wait-and-see approach now face the prospect of their policyholders being involved in protracted, complex and expensive litigation. “To the extent that there is any coverage for such claims under liability policies – which remains to be seen – the exposure to carriers could be very significant,” they said. “As the general direction of travel is clearly unfavourable to the fossil fuel industry, and any one of these cases could potentially result in billions of dollars in adverse judgments, insurers may face both runaway defence costs and runaway judgments. Insurers and reinsurers would be wise to consider their potential exposure to these types of suits sooner rather than later,” advised Anderson and Sutherland. ------------------------------------------------------------------------ Commercial Risk and Global Risk Manager are to launch a dedicated information service covering Environmental, Social and Governance (ESG) issues, aimed primarily at large organisations in Europe. ESG Risk Review will provide insight and intelligence on sustainability risks, covering regulation, litigation and insurance market news, as well as analysis, comment, interviews and webinars. ESG Risk Review will be supported by Zurich as our headline partner and will be free to access content for all risk and insurance managers and related ESG officials within corporates. It will launch on 17 May 2023.

US Supreme Court decision on Big Oil could fuel flood of claims

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