New insurance clauses
We have published a new clause and updated one of our existing clauses to provide further climate-aligned contract solutions for the insurance industry. We recommend using these clauses together to provide a comprehensive contract solution for climate-related liability claims.
New clause: [Seb & Abby’s Clause] Climate-Related Liability Cover (Commercial Insureds)
This clause fills a gap in the UK insurance market where there is currently no specific insurance cover for climate-related liability claims. This includes climate-related property damage or personal injury claims caused/ contributed to by the Insured’s business.
Updated clause: [Connor’s Clause] Condition to Liability Cover for Climate-Related Claims (Commercial Insureds)
Connor’s Clause now requires a commercial policyholder to have a robust net zero transition plan in place (including emissions reductions targets) at the inception of an insurance policy, before it can access insurance liability cover for climate-related claims. This clause has been updated in light of the release of [Seb & Abby’s Clause] and has been re-written as a condition of cover to deliver the intended climate outcomes of [Seb & Abby’s Clause].
Denise Eastlake, Legal Director at Kennedys, says:
‘Climate-related litigation is only going to increase – an extreme heatwave resulting in injury and/or damage to property, for example, could give rise to claims against corporates responsible for producing greenhouse gas emissions. This cover provides a way for businesses to mitigate that risk, while also taking meaningful action to reduce their emissions.’
Context
[Seb & Abby’s Clause] and [Connor’s Clause] are the first of their kind in the UK insurance market, where bespoke climate-related liability risk cover is not currently available. [Seb & Abby’s Clause] provides insurance cover for climate-related injury or property damage for commercial insurance policies. The Condition to Cover is contained in [Connor’s Clause] and requires a policyholder to have a robust net zero transition plan in place at the inception of an insurance policy.
Climate litigation is an increasing risk for corporations. All organisations emit carbon to a great or lesser extent and are therefore potentially all targets for climate litigation. These organisations may wish to take out insurance to cover this risk, and insurers can use their position to drive good behaviour. These new clauses incentivise companies to implement robust transition plans, reviewed and assessed at renewal. In exchange, companies can access insurance cover, providing a risk transfer solution if needed.
The increasingly confident position of the scientific community, demonstrated in the latest IPCC report AR6, is likely to increase climate-related litigious claims as those affected by climate change seek to recoup their losses. Insuring against such litigation risk, when used in conjunction with mechanisms to reduce the risk of exposure to litigation in the first place, may be a risk transfer solution for potential defendants.
Furthermore, using these clauses in live contracts demonstrates to all stakeholders that businesses are embracing pioneering solutions to take real climate action and drive systemic change.