Amid his blather during the Chiefs-Bills game on Sunday night, Tony Romo made an insightful comment. The top quarterbacks in the playoffs excel at risk management, he explained. They see risks developing before others do and make decisions that protect the ball.

Because I’m an insurance risk nerd, Romo's comment made me think about the proliferation of climate change litigation and how proactive leaders are getting out in front of this developing risk. I know, I can’t help myself. According to the United Nations Environment Programme, more than 2,000 climate change lawsuits were filed by the end of 2022, with the annual number doubling since 2017.

Much of the exposure in these suits centers on a real or perceived failure to plan. The authors of the paper “Climate Litigation Risk – Is there shelter from the storm?” helpfully group climate litigation into three categories: (1) mitigation claims for contributing to emissions, (2) adaptation claims for failure to plan and adapt, and (3) governance and regulatory claims for breach of an established legal duty. (This paper is a good resource if you're interested in a deeper dive.)

Although the majority of claims thus far have been brought against governmental entities, companies in the fossil fuel industry are common targets of mitigation claims, and less obvious targets like engineering and architectural firms have been defendants in adaptation claims. Think here of an alleged failure to account for increasing risk of, say, flooding or wildfire in design and construction.

Business leaders, like good quarterbacks, need to get out in front of these risks. Here are some ideas. First, assess the litigation exposure of your operation. Some companies will indeed dodge this storm, but not all climate-related claims are obvious. Second, for those affected, seize the opportunity to improve processes to recognize and deal with climate shifts. Not only might this planning create competitive advantage, but documenting the process may also provide evidence to combat allegations that a company failed to reasonably plan and account for climate change. Third, stay on top of insurance coverages for climate change litigation. Insurance companies have already developed greenhouse gas emission exclusions and broader climate change litigation exclusions, and these exclusions will likely become more common in the coming years. If insurance companies are making plans to control this risk through exclusions, you should be planning too.

“Given the serious uncertainties surrounding climate litigation and the potential scale of climate damages, many (re)insurers may want to entirely exclude climate claims from coverage. Several organizations have developed exclusionary language designed to limit (re)insurer exposure to various kinds of climate liability risk.

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