THE IMPACT OF GLOBAL WARMING ON INSURANCE LAWYERS

THE IMPACT OF GLOBAL WARMING ON INSURANCE LAWYERS AND THEIR CLIENTS Board of Marine Underwriters of San Francisco May 6 & 7, 2010 AVAILABLE AT Climateofuncertainty. com Amazon. com Bill Stewart |Cozen O'Connor 200 Four Falls Corporate Center | Suite 400 | West Conshohocken, PA 19428 P: 610. 941. 2380 | F: 866. 776. 8917 | wstewart@cozen. com © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

“Climate Claims Are the New Asbestos” National Underwriter (May 29, 2009) © 2009 Cozen

How Climate Change Will Effect Insurers 1) Physical Manifestations of a Warmer World 2) Financial Injury (including litigation) Caused By Governmental Legislation 3) Disclosures to Regulatory Bodies 4) New Insurance Products and Markets © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

© 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www.

Water Vapor Reflecting Heat Warm Air Trapped © 2009 Cozen O’Connor. All Rights Reserved.

Expectations Agreed Upon By the International Panel on Climate Change – – – Rise In Temperatures Increased Storms Higher Sea Levels Widespread Increase in Flooding Aggravated Water Scarcity Increased Range of Malaria Carrying Mosquitoes – Large Scale Famine – Massive Population Movement – Would Likely Provoke Armed Conflict © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Public Nuisance Litigation • Comer v. Murphy Oil, USA, et al. – U. S. District Court for the Southern District of Mississippi • California v. General Motors Corp. – U. S. District Court for the Northern District of California • Connecticut v. American Electric Company, Inc. , – U. S. District Court for the Southern District of New York • Native Village of Kivalina v. Exxon. Mobil Corp. – U. S. District Court for the Northern District of California © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Comer v. Murphy Oil, USA, et al. , U. S. District Ct. , Southern District Of Mississippi • Claims: – Residents and property owners assert public and private nuisance claims against oil, coal and chemical company defendants, alleging defendants contributions to global warming fostered the strengthening of Hurricane Katrina. • 5 th Circuit Finding: – On October 16, 2009, the Court of Appeals reversed the Federal District Court, holding plaintiffs claims do not present nonjusticiable political questions – Rehearing En Banc Granted - May 24, 2010 © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Connecticut v. American Electric Power Co. , U. S. District Ct. , Southern District of New York • Claims: – Plaintiffs, various states and environmental groups sought to abate the “public nuisance of global warming” alleging defendants contributed to elevated levels of CO 2 beach erosion, droughts, and floods. • 2 nd Circuit Finding: – On September 21, 2009 the Court of Appeals reversed the Federal District Court, holding (1) public nuisance claims against greenhouse gas emitters do not present nonjusticiable political questions; and (2) private organizations have standing, upon a showing of injury different in kind from the public at large, to pursue litigation. – Rehearing En Banc Denied – March 5, 2010 © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

California v. General Motors Corp. , U. S. District Ct. , Northern District of California • Claims: – State of California sued six automakers alleging their emission of CO 2 and other greenhouse gases from the combustion of fossil fuels, caused millions of dollars of damage to the State. • Voluntary Dismissal: – The State voluntarily moved to dismiss it’s appeal, citing to the Obama Administration’s public acknowledgement that greenhouse gases. © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Native Village of Kivalina v. Exxon. Mobil Corp. • Federal District Court Finding: – On September 30, 2009, the Federal District Court dismissed plaintiffs claims against the power companies based upon the attenuated nature of the causal link between the claimed injuries and any particular defendants’ conduct, and on the basis that the regulation of greenhouse gas emissions was an issue best left to the political branches of government. • 9 th Circuit – Appeal pending (Briefing Stage) © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Professional Liability Exposure 1) Architects & Engineers 2) Brokers, Lawyers, Fiduciaries & Others 3) Foreseeability Issue © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Coverage Litigation Steadfast Ins. Co. v. AES Corporation • Virginia Circuit Court entered judgment in favor of Steadfast Ins. Co. holding that it has no obligation to defend or indemnify AES in Native Village of Kivalina v. Exxon. Mobil Corp. • Status: Appeal Pending before Virginia Supreme Court © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Coverage Issues Presented Under CGL Policies By Public Nuisance Suits • Occurrence, Fortuity & Known Loss • Trigger & Loss in Progress • Pollution Exclusion • Allocation Among Policy Periods © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

How Climate Change Will Effect Insurers 1) Physical Manifestations of a Warmer World 2) Financial Injury (including litigation) Caused By Government Legislation © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Important UN Climate Change Conferences • Rio de Janeiro (Earth Summit) (1992) • The Kyoto Protocol on Climate Change (COP-3) (1997) • Bali, Indonesia (COP-13) (2007) • Poznan, Poland (COP-14) (2008) • Copenhagen, Denmark (COP-15) (2009) © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Cap and Trade Legislation • Clean Energy Jobs and American Power Act – “A bill to create clean energy jobs, promote energy independence, reduce global warming pollution, and transition to a clean energy economy. ” – Senate – S. 1733 (Kerry/Boxer) – Introduced in Senate on September 30, 2009 • American Clear Energy and Security Act of 2009 – “A bill setting forth provisions concerning clean energy, energy efficiency, reducing global warming pollution, transitioning to a clean energy economy, and providing for agriculture and forestry related offsets. ” – House – H. R. 2454 (Waxman/Markey) – Passed House on June 26, 2009 © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Reducing Fossil Fuel Demand • Energy Conservation – recycling, carpooling, adjusting thermostat, turning lights off • Energy Efficiency – insulation, energy rated appliances, fluorescent light bulbs, smart grid technology © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Wind © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices •

Solar © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices •

Hydrogen © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices •

Nuclear © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices •

Geothermal © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices •

Biofuels © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices •

Hydroelectric © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices •

Wave and Tidal © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24

Carbon Sequestration © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices

Climate Change Litigation Existing • Regulatory Inaction – Suits to compel government action • Public Nuisance – Tort claims Future • Professional Liability • Shareholder Derivative Actions • Regulatory “Cap and Trade” Compliance • Coverage Litigation © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

How Climate Change Will Effect Insurers 1) Physical Manifestations of a Warmer World 2) Financial Injury (including litigation) Caused By Government Legislation 3) Disclosures to Regulatory Bodies © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

Climate Change Risk Disclosure Requirement 1) SEC • No specific “climate” disclosure requirements 2) National Association of Insurance Commissioners • “Climate Risk Disclosure Survey” © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

NAIC Climate Risk Disclosure Requirements 1. 2. 3. 4. 5. 6. 7. 8. Does the company have a plan to assess, reduce or mitigate its emissions in its operations or organizations? If yes, please summarize. Does the company have a climate change policy with respect to risk management and investment management? If yes, please summarize. If no, how do you account for climate change in your risk management? Describe your company’s process for identifying climate change-related risks and assessing the degree that they could affect your business, including financial implications. Summarize the current or anticipated risks that climate change poses to your company. Explain the ways that these risks could affect your business. Include identification of the geographical areas affected by these risks. Has the company considered the impact of climate change on its investment portfolio? Has it altered its investment strategy in response to these considerations? If so, please summarize steps you have taken. Summarize steps the company has taken to encourage policyholders to reduce the losses caused by climate change-influenced events. Discuss steps, if any, the company has taken to engage key constituencies on the topic of climate change. Describe actions your company is taking to manage the risks climate change poses to your business including, in general terms, the use of computer modeling. © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

NAIC Climate Risk Disclosure Requirements 1. 2. 3. 4. 5. 6. 7. 8. Does the company have a plan to assess, reduce or mitigate its emissions in its operations or organizations? If yes, please summarize. Does the company have a climate change policy with respect to risk management and investment management? If yes, please summarize. If no, how do you account for climate change in your risk management? 3. Describe your company’s process for identifying climate change-related risks and assessing the degree that they could affect your business, identifying climate change-related risks including financial implications. and assessing the degree that they could Summarize the current or anticipated risks that climate change poses to your company. Explain the ways that these risks could affect your business. Include identification of the geographical areas affected by affect your business, including financial these risks. implications. Has the company considered the impact of climate change on its investment portfolio? Has it altered its investment strategy in response to these considerations? If so, please summarize steps you have taken. Summarize steps the company has taken to encourage policyholders to reduce the losses caused by climate change-influenced events. Discuss steps, if any, the company has taken to engage key constituencies on the topic of climate change. Describe actions your company is taking to manage the risks climate change poses to your business including, in general terms, the use of computer modeling. © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

NAIC Climate Risk Disclosure Requirements 1. 2. 3. 4. 5. 6. 7. 8. Does the company have a plan to assess, reduce or mitigate its emissions in its operations or organizations? If yes, please summarize. Does the company have a climate change policy with respect to risk management and investment management? If yes, please summarize. If no, how do you account for climate change in your risk management? Describe your company’s process for identifying climate change-related risks and assessing the degree that they could affect your business, 4. Summarize the current or anticipated risks including financial implications. that climate change poses to your Summarize the current or anticipated risks that climate change poses to your company. Explain the ways that these risks could affect your business. Include identification of the geographical areas affected by company. Explain the ways that these risks. Has the company considered the impact of climate change on its could affect your business. Include investment portfolio? Has it altered its investment strategy in response to these considerations? If so, please summarize steps you have taken. identification of the geographical areas Summarize steps the company has taken to encourage policyholders to reduce the losses caused by climate change-influenced events. affected by these risks. Discuss steps, if any, the company has taken to engage key constituencies on the topic of climate change. Describe actions your company is taking to manage the risks climate change poses to your business including, in general terms, the use of computer modeling. © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

How Climate Change Will Effect Insurers 1) Physical Manifestations of a Warmer World 2) Financial Injury (including litigation) Caused By Governmental Legislation 3) Disclosures to Regulatory Bodies 4) New Products and Markets © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

New Products 1) Pay as you go auto 2) Green upgrade 3) Crop insurance and other climate-related micro insurance 4) D & O Extension 5) Carbon captive and storage 6) Growing Renewable Energy Market © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com

THE IMPACT OF GLOBAL WARMING ON INSURANCE LAWYERS AND THEIR CLIENTS Board of Marine Underwriters of San Francisco May 6 & 7, 2010 AVAILABLE AT Climateofuncertainty. com Amazon. com Bill Stewart |Cozen O'Connor 200 Four Falls Corporate Center | Suite 400 | West Conshohocken, PA 19428 P: 610. 941. 2380 | F: 866. 776. 8917 | wstewart@cozen. com © 2009 Cozen O’Connor. All Rights Reserved. 550 Attorneys • 24 Offices • www. cozen. com