A recent German case focusing on the alleged contribution of historic emissions of RWE to changing climate and consequent risks to property has generated a lot of discussion.
Climate change is obviously a significant issue for insurers on many levels
One of the aspects of climate change that occupy them is the question of climate change liability, specifically, whether or not insured’s said to have contributed to the growing concentration of greenhouse gas in our atmosphere could be held liable for damage or injury caused by weather-related extreme events or phenomena.
On the one hand, there are many, many obstacles for claimants to overcome across each of the elements of tort, not least causation and foreseeability. In particular, the likelihood of establishing a plausible causal link between a claimant’s damage/injury suffered from a climate event/phenomenon and an insured’s emissions seems vanishingly small.
But on the other hand, these are the sorts of claim the claimant lawyers will be considering very carefully. The subject matter lends itself to extensive group or class actions, possibly with international reach. If liability sticks, the damages claimed could be colossal, and there must be a risk that historic policies as well as current ones will be triggered.
For most in the insurance industry, the question sits firmly on the horizon, at a safe distance for now but rather too big to completely ignore.
When novel liability cases come to court, insurers are afforded the opportunity to see how far claimants have advanced, in other words whether their arguments and evidence are making real progress or are still to gain traction. Very few cases have considered the question of climate liability however, giving insurers little to go on.
On 28 May 2025 however, judgment was given in case of Lliuya v RWE, a climate liability case brought by a farmer in Peru in the German courts against the German power utility. The case provides much for insurers to ponder about the prospects for claims of this nature.
The claimant (supported by an environmental NGO) alleged that historical greenhouse gas by the defendant contributed to increased global temperatures, which, in turn, caused the glaciers around a specific lake in Peru to melt, with residents in the town below facing an increased risk of severe flooding. Based on the existing German law of nuisance, the claim alleged that RWE was liable for a slice of the cost of flood protection measures based on its 0.47% pro-rata greenhouse gas contribution. The lower court initially dismissed the claim on the basis that there was no "linear causal chain" between the emissions of a single emitter and specific climate change impacts. However, the claim then came before the Higher Regional Court which allowed the claim to proceed to the evidentiary stage.
On examining the evidence, however, the Higher Regional Court dismissed the claimant's appeal. It found that there was no evidence of any real and imminent risk to the claimant’s property from possible flood waters on this occasion. That meant that the claim failed. However, the court found that, were there to have been a relevant and imminent impairment to property somewhere in the world, a single material corporate group emitter in Germany could in principle (if causation were proved) be obliged to pay for preventative measures according to its share of emissions. Further, it would not matter that the emissions were lawful when made.
What do insurers learn from this claim? There might be enough in this claim under German law in the German courts to encourage further international claimants with a more compelling story on actual damage to bring actions in Germany against emitters based there, although their path in any future claim is still not an easy one. The big questions around causal link between defendant’s emission and claimant’s loss still have to be dealt with.
Little of this case, which draws heavily on the law and procedure in Germany, is of direct application to similar claims that might be brought in other jurisdictions against emitters residing there. However, the general thrust of the case and reaction of the court will have been noted by claimant lawyers in other jurisdictions. The UK is a jurisdiction that allows overseas claimants to bring claims against companies residing here in certain circumstances.
The climate liability question remains stubbornly on the horizon for insurers and is not likely to move for some time yet.
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For further information, please contact our environmental law team.
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