NU Online News Service, Feb.10, 1:12 p.m. EST

The insurance industry has the tools and experience to provide needed coverage when the storage of carbon emissions becomes the primary method to prevent build-up of gases in the atmosphere, according to a broker executive.

In a webinar yesterday titled "A Lot of Hot Air or Coming Disaster," two executives from the insurance brokerage firm Marsh joined an attorney with the law firm McGuire Woods to discuss the current legal and insurance implications and remedies for the storage of carbon emissions.

The participants were Peter Mavraganis, senior vice president of global energy practice group for Marsh; Chris Smy, global practice leader of the environmental practice at Marsh; and Colin Hite, an attorney and leader of McGuire Woods insurance coverage counseling and litigation group in Richmond, Va.

Businesses and governments are beginning to experiment with ways to capture and store carbon emissions, noted Mr. Mavraganis.

He advised that many of the processes that will be involved in carbon sequestration are already in use today in other energy fields. And the same can be said for the insurance products that could be brought into play to deal with clients' insurance needs.

Commercial coverage typically purchased to cover power, energy and utility clients could be pressed into service to cover carbon capture and storage clients, he said. The challenge, he added, will be to identify the coverage gaps in the policies and identify the mitigation language to cover those gaps.

He noted that the potential risks of transfer, storage and contamination are similar to coverage that is provided to utilities and energy companies today.

Mr. Smy said coverage for carbon-related litigation would more than likely fall under one of two policies: commercial general liability (CGL) or pollution liability policy.

There is still a lot of uncertainty over questions of liability and the duty to defend under these policies and what the triggers will be, he noted.

For example, CGL policies have exclusions, and there is a question over whether a carbon emission suit brought as a public or private nuisance, negligence or trespass would be indemnified under a CGL policy, he explained.

A pollutions liability policy may provide defense, and if so, defense would be within the limits of the policy. Insurers could also argue that carbon is not a pollutant as defined in the contract and that it occurs naturally in the environment, thereby not providing indemnification. Mr. Smy said some policies could provide coverage outside of the limits, but few, so far, do.

While there have been no definitive rulings on the subject yet, Mr. Hite said there are four major suits that are working their way through the court system that could ultimately decide what liability, if any, carbon producers have for the changes their production of carbon has had on the environment and the plaintiffs' lives.

Still at issue, he said, is if the courts consider it a real event, the severity and how the responsibility for ill effects of carbon emissions should be shared among defendants.

Another issue that has yet to be settled, Mr. Hite noted, is whether such issues are best decided by the judiciary or are political questions that the courts feel should be best decided there.

The webinar was sponsored by McGuire Woods, Marsh and the Association of Corporate Counsels and will be available for replay at the McGuire Woods Web site at www.mcguirewoods.com.

This story was updated Feb. 11, 2:39 p.m. EST