Farmers Insurance Drops Climate Change Lawsuits Against Chicago-Area Cities

Who should pay for the impacts of climate change? This conundrum was at the center of nine class action lawsuits filed by Farmers Insurance in April against dozens of cities in the Chicago area for failing to prepare for the floods that hit Illinois last spring. The insurance company argued that local governments should have known that rising global temperatures would result in heavier rains and did not do enough to secure sewers and storm drains. But, in a surprising turn of events, Farmers withdrew the suits last week, the Chicago Tribune reported.

In a statement, company spokesman Trent Frager said that Farmers initiated the lawsuits to recover money on behalf of its policyholders for losses that could have been avoided by municipalities, as well as to encourage cities and counties to take more preventative actions to reduce the risks of future natural disasters. But it seems the threat of legal action was enough to accomplish the insurance giant’s goals.

“We believe our lawsuit brought important issues to the attention of the respective cities and counties, and that our policyholders’ interests will be protected by the local governments going forward,” Frager said in the statement. “Therefore, we have withdrawn the suit and hope to continue the constructive conversations with the cities and counties in Chicagoland to build stronger, safer communities.”

Many analysts in the environmental law and insurance industry thought the lawsuits were both ambitious and problematic – but represented the first in a wave of legal actions against municipalities for the impacts of climate change.

"It's a long shot for the insurance companies, but it's not completely implausible, and if you have enough cases like this going forward it might build some helpful precedent," Robert Verchick, former member of President Barack Obama’s Climate Change Adaptation Task Force, told Reuters last month.

The irony of the lawsuits, of course, was Farmers’ claim to recoup damages for its policyholders, but these policyholders – residents of the localities named in the suit – would be paying the costs of any money awarded to Farmers through their taxes.

The city of Chicago defended its disaster preparation and climate adaptation efforts, pointing to its comprehensive Climate Action Plan and its recent infrastructure investments, Reuters reported. But Farmers cited the city’s plan as evidence that officials were aware of the risks and did not adequately prepare for them.

Attorneys for the jurisdictions named in the suit had planned to argue that government immunity protects them from such prosecution, Daniel Jasica from the Lake County State’s Attorney’s Office told Reuters. The immunity defense has worked before, Reuters reported, resulting in the the dismissal of several class action lawsuits against the Army Corps of Engineers for failing to secure levees that breached during Hurricane Katrina.

While these Chicago-area cities may be off the hook for the costs of last year’s flood, industry observers think we may see more lawsuits from the insurance industry debating the question of who pays for the effects of climate change. Michael Gerrard, director of the Center for Climate Change Law at Columbia Law School, told Environment and Energy Publishing that future legal actions may include professional malpractice claims against architects and engineers who build structures that don’t withstand predictable weather events or breaches of contract like a farm that can’t deliver oats to a cereal company because of a drought or flood.

Other experts think Farmers' lawsuits represent a growing tension between insurance companies and governments over who is liable for the costs of natural disasters – at a time when damage from such calamities is on the rise, Environment and Energy Publishing reported. Insurers have been lobbying Congress to fund disaster readiness efforts for years, such as building hurricane shelters. But politicians are more willing to spend money to clean up a natural disaster that has already happened, rather than fund projects that seek to prevent damage from future catastrophes. Maxine Burkett, associate professor at the University of Hawaii Law School, told the publication that government agencies and private developers may be found negligent in the future for building developments that can’t withstand the effects of climate change – rising sea levels, storm surges and heavier rain.

Even though Farmers withdrew its case, Burkett thinks the company’s message was received by cities and the building community.

"Lawsuits like this are really good at putting municipalities and other entities that are building in dangerous areas on notice with regards to the impacts of climate change," she said.

Image credit: Flickr/U.S. Army Corps of Engineers

Passionate about both writing and sustainability, Alexis Petru is freelance journalist based in the San Francisco Bay Area whose work has appeared on Earth911, Huffington Post and Patch.com. Prior to working as a writer, she coordinated environmental programs for Bay Area cities and counties. Connect with Alexis on Twitter at @alexispetru