Chapter 8

The Multifaceted Role of Insurance in Environmental Disasters and Climate Change

Insurance steps onto center stage whenever a business encounters a weather-related or environmental disaster. Many types of insurance policies come into play.

The main attraction is the property policy, which provides coverage for losses far beyond structural repairs. Property policies also protect against (1) loss of income when a business is closed or impaired; (2) extra expenses, such as relocation and operating temporarily out of an alternate location; (3) costs incurred while preparing for the event; and more.

Many other insurance policies play supporting roles. General liability and pollution-specific policies protect against environmental or weather-related events that release substances into surrounding locations. Directors’ & Officers’ policies protect directors and officers accused of negligently failing to protect their businesses from catastrophes. Cyber policies come into play when environmental or weather-related events interfere with computer operations or cause leaks of confidential data from businesses’ files.

This chapter reviews coverage from each type of policy, as well as issues that apply to all insurance policies, no matter the type. One example is causation, as every policyholder seeking coverage must prove that its losses were caused by covered events. Another is the process for seeking coverage, such as how to give notice, when to do so, whether a lawsuit is allowed, and when a suit can commence. Finally, this chapter reviews the X factor of climate change, which is already impacting and could alter the entire insurance industry.

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