I always like finding new and useful words. Subrogation is what happens when someone who has suffered harm assigns to their insurer the right to sue the person who caused the harm (or their insurer) for damages.

As suggested in this Law360 article (free 1-week registration required, this will soon be happening in relation to climate change. I mentioned the possibility in this article a few weeks ago (citing Adani and AIG as possible examples), but wasn’t up on the technical details.

In particular, Law360 points to the Liluya vs RWE case, in which a Peruvian farmer is suing Germany’s biggest power company in the German courts, and winning the opening rounds.

Of particular importance is the Carbon Majors Study, which calculates the shares of RWE, and other major emitters, in total emissions since 1988 (at which point the risk of climate change had become widely known). That undermines the claim that no one emitter can be held responsible, and allows an allocation of the shares of damage (I did a back-of-the-envelope exercise for this in relation to Adani, and the numbers are big enough to make lawsuits against individual companies worthwhile.

To recall my very limited forays into law, emitters would, in English common law be called joint tortfeasors, and would be jointly and severally liable, which means that any one can be held accountable for the entire damage. I suspect that courts will prefer an approach based on pro rata allocation.

Last week, I raised the point at the Suncorp AGM, as part of a push to get Suncorp to get completely out of fossil fuels (it’s already phasing out coverage of coal). Given the prevalence of natural disasters in Queensland, and Suncorp’s already limited exposure, the rise of subrogation claims should be a big win for Suncorp and its customers. Not such good news for shareholders in coal companies (or coal-fired power stations), of course.

15 thoughts on “Subrogation

  1. Here are some other words you might like:-

    – Barratry.

    – Champerty.

    – Lawfare.

    Oh, and subrogation can also happen under other circumstances than those you outline, e.g. when there is a claim for such damages, even if the courts eventually rule that there never was any harm.

  2. Looks from his choice of terms like Mr. Lawrence objects to the concept of fossil fuel corporations being held accountable by the civil justice system for the damages that they cause to others (or, put another way- having externalities their actions cause internalised back onto theirs own or their insurers’ books).

    Subrogation claims are of course commonplace. The occur whenever an insurer pays one of its insured’s for damages- and follows it up with ts own claim against those who caused the loss or contributed to it. If you’ve ever had a major auto accident where you were not at fault, chances are that claim’s been subrogated, and your insurer is chasing someone else for the amounts they’ve paid to you.

  3. Thanks, PM. I know all those words. Did you mean to suggest, as Jexpat infers, that encouraging legal action against polluters constitutes an offence of this kind? If so, you might want to look up “defamation”.

    Jexpat, as you say, subrogation is commonplace. I knew the fact, but not the word.

  4. No, JQ, Jexpat is seeing faces in clouds and reading things that aren’t there.

    For what it’s worth, my only interest in this area is that nobody enter such contests without suitable preparation and understanding – here, without awareness of the other side of such tactics.

    More specifically, you are building in your conclusion (“begging the question”) by stating that your contemplated targets are polluters and that harm was done. At the extreme where they weren’t, that is what court proceedings ought to bring out. And if they are polluters and did harm, that too is what should emerge. We ought not to build in either answer, not if what we are after is truth and justice.

  5. “More specifically, you are building in your conclusion (“begging the question”) by stating that your contemplated targets are polluters and that harm was done.” Say what?? We are talking about climate change here. Are you suggesting there are important open questions here?

  6. How are courts supposed to determine, case by case, how much damage, let’s say, caused by a cyclone caused was due to climate change? Some, presumably, but in awarding damages they are going to have to be precise in saying how much. No climate modellers are that precise, at least not the ones whose work is reported by the IPCC. Are there really people who will swear an oath and tell a court that the cyclone that hit Townsville would have been a Cat 4 rather than a Cat 5 but for the emissions of the Kogan Creek Power Station?

    Seems like a big ask.

  7. There are other precedents, lead in petrol and asbestos being prominent.

    Climate change affects everyone so expect a shipload of claims. Sure, a lot won’t succeed, but eventually one will and then the heavens will open.

    No good relying on deniers in court, they have no expertise and run the risk of being humiliated and discredited.

    Reinsurers can avoid claims by including climate change as uninsurable risk, along with nuclear war etc. This then puts the risk back onto the source, something that shareholders would not be happy with.

    It’s no good expecting politicians to do anything, the power lies in the law.

  8. @Smith9 IANAL, but I’d say that if human action substantially exacerbates a natural disaster, the humans are on the hook for a lot. If my speeding causes a car crash, I can’t reduce my liability on the basis that the impact would have been less severe if the road hadn’t been wet

  9. “the humans are on the hook for a lot”

    Humans in general, yes, but a court has to decide about the particular humans who are being sued in the case at hand. This will be much harder than a tobacco case, where a dying smoker who smoked the cigarettes manufactured by a particular tobacco company sues that company.

  10. I think you need to study the facts before making these assessments.

    The campaign against tobacco was long but eventually won on a multitude of small cases. Often the argument was to assessing the degree to which tobacco contributed to the cancer. A very subjective view, but over a number of cases opinions were developed to the point that eventually the consensus was overwhelming.

    Now it’s not an issue “for debate”.

  11. @Smith9 As I mentioned, the necessary work on “which humans” has already been done by the Carbon Majors study. it’s actually much more straightforward than for smoking (where an individual might have smoked several different brands, because CO2 mixes perfectly in the atmosphere in a couple of years. So, everyone’s responsibility is directly proportional to their emissions, and there are plenty of emitters, like RWE, whose share is large enough to make it worth suing them individually. There’s still the issue of whether emitters can shift liability to fossil fuel producers, but that’s between them.

  12. The evidence is out there, the latest IPCC report (AR5) is based on 9,200 peer-reviewed studies, nobody can reasonably plead ignorance.

    There is now potential for company directors to be held responsible for actions that ignore the foreseeable risk associated with climate change.

    From ASIC

    ‘Climate change is a foreseeable risk facing many listed companies in the Australian market in a range of different industries. Directors and officers of listed companies need to understand and continually reassess existing and emerging risks (including climate risk) that may affect the company’s business – for better or for worse.

    ‘Climate risk disclosure practices are still evolving, not only in Australia but also globally. We intend to monitor market prctice as it continues to evolve and develop in this area.’

    Mining companies are not exempted from the consequences of their actions.

  13. “Lloyd’s of London insurer Axis Capital drops bid to cover Carmichael mine: source

    “Adani coalmine: Axis Capital withdraws bid to insure Carmichael rail line

    “Investor action group says the insurer joins 57 other companies refusing to support the Queensland coal project

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