Farmers Insurance has filed nine class action lawsuits against dozens of municipalities around Chicago, and everyone from local governments to other insurers has taken notice. The charge? Failing to prepare adequately for heavy rains and flooding caused by increasingly warmer temperatures—in short, by climate change.
The insurer, a subsidiary of Zurich Insurance Group, says that the municipalities should pay for damage that was caused by a massive April rainstorm back in 2013 that was so heavy it overwhelmed the storm drain and sewage systems, resulting in evacuations, sewage backups into more than 600 homes and other damage. Why should they do that? Farmers says that the municipalities should have anticipated the downpour and taken action in advance of the storm.
The municipalities are expected to argue that they cannot be held liable because of government immunity. However, the insurance company has cited in its suit the Chicago Climate Action Plan as an example that municipalities “should have known that climate change in Cook County has resulted in greater rainfall” volume, intensity and duration than pre-1970 rainfall history.
Because of the existence of the Chicago Climate Action Plan, the Farmers suit claims, the onus was on municipalities to act more aggressively. In fact, Farmers says the Climate Action Plan indicates that the reclamation district was cognizant of the risks posed by climate change; it has also characterized the damage as “completely preventable.”
In 2009, Swiss Re issued a report that compared the potential financial damage to the insurance industry from future claims for climate change losses to that from asbestos claims. In suits brought against the industry regarding asbestos, one argument was that because insurers had handled so many asbestos claims, that gave them expert knowledge of its risks. Therefore they should have issued warnings about how dangerous the substance could be.
Whether or not the lawsuits are won by Farmers, they could affect not just the industry, but also the public, municipalities, any business that might be exposed to climate change and, in the long run, even the federal government.
With insurers seeking to protect themselves against future damage claims from climate change-related events, coverage could be unavailable or claims denied, leaving property owners and policyholders to seek redress elsewhere—or perhaps bear the costs of losses themselves.