Climate Change Effects

Negligent Operation of a Storm Sewer: A New Theory of Climate Change Liability

May 2, 2014 00:08
by J. Wylie Donald

We have written many times about the flawed design of the nation's flood maps in an era of climate change.  And spoken about the potential for claims against professionals for failure to consider the effects of climate change in what they do.  On April 16, 2014 those two ideas manifested in a 143 page lawsuit filed in Cook County, Illinois asserting that local governments are at fault for flood damage that insurance companies had to pay for.  Illinois Farmers Insurance Co. v. The Metropolitan Water Reclamation District of Greater Chicago (attached).  Let us explain.

Flood maps are based on the historical record. Lots and lots of data over lots and lots of years, with one major underlying assumption:  the past is a reasonable basis for predicting the future. But what if it is not?  In that case a 100-year flood plain may actually be a 50-year or 25-year flood plain, or perhaps a 200-year flood plain. One can't know, absent some effort to predict the future.

This issue is not limited to FEMA flood maps. Storm water systems are sized based on the predicted 20-year or 50-year or even 100-year storm event. We have seen that terminology before and it signifies a similar result:  culvert sizing and flood protections suffer from the same defect as flood plain mapping - a retrospective view is not enough.  One might theorize that civil engineers, planners, and others involved in the design, construction and operation of stormwater systems have a duty to recognize this state of affairs and incorporate climate change effects into their activities.

On April 18 and 19, 2013 heavy rains in Cook County and elsewhere resulted in flooding.  Insurance companies paid millions on the claims.  Now Illinois Farmers Insurance Co. and others are seeking to recover those millions in the form of a class action on behalf of other insurers and property owners against the water reclamation district and municipal and county governments.  Of itself, that would not be particularly interesting.  But the allegations vault this case, and six other similar cases, to the top of the climate change litigation pantheon. 

The central theme in the complaint is that the local governments are at fault for flooding caused by mis-operated stormwater systems:  the “common, central and fundamental issue in this action is whether the Defendants have failed to safely operate retention basins, detention basins, tributary enclosed sewer and tributary open sewers/drains for the purpose of safely conveying storm water within Defendants' territorial jurisdictions"  ¶ 27. 

The defendant governments allegedly knew their systems were undersized.  In anticipation of heavy rains, they would pump down reservoirs and tunnels.  Climate change set the context:   "During the past 40 years, climate change in Cook County has caused rains to be of greater volume, greater intensity and greater duration than pre-1970 rainfall history evidenced, rendering the rainfall frequency return tables employed by the Reclamation District and each Named Municipal Defendant inaccurate and obsolete." ¶ 48. Plaintiffs assert that the climate change effects are admitted:  "In or around 2008, the Reclamation District, the County of Cook, the City of Chicago and other Municipal Defendants adopted the scientific principle that climate change has caused increases in rain fall amount, intensity and duration during a rain in Cook County as evidenced by their adoption of the Chicago Climate Action Plan. " ¶ 49.  

Next comes the allegation of knowledge of the specific hazard:  "This defendant knew that because of climate change causing increased rainfall, this defendant had to increase stormwater storage capacity of its stormwater sewer system(s) to prevent sewer water invasions." ¶ 51.  Thus, the local governments were alleged to be on notice that their infrastructure was insufficient to prevent harm to individuals and businesses.  The final point was that, notwithstanding this notice, in the face of a heavy rain (heavy, but not out of the ordinary based on either the historical record or a climate model), the governments failed to take steps to remedy the defect (i.e., the lack of storage capacity and conveyance capacity to address the rainfall).

With that prelude, plaintiffs allege three counts:  negligent maintenance of the stormwater system by failing to utilize temporary stormwater protection systems, failure to remedy a known dangerous condition (where stormwater invasions had occurred before), and an unlawful “taking” in that the governments had (it is alleged) appropriated the property of others for diversion and retention basins, etc.

This is a complaint we knew was coming, although we will candidly admit that we did not anticipate the plaintiffs. An insurance company as the plaintiff raises an interesting question.  Is the insurance industry intent on cannibalizing itself?  If Illinois Farmers prevails, it will start to establish a standard of care for both design professionals whose work is impacted by climate change, and for those who rely on such professionals.  Third parties injured by the failure of a stormwater system may bring claims against entities responsible for the systems.  So we will have theories of liability that will trigger liability policies, errors and omissions policies, and even directors and officers policies.  If all of them subrogate, like Illinois Farmers did, it takes no imagination to see the mess that will be created.  Even without subrogation, if the theory is successful, it will cut wide and deep.  It is surprising that an insurer would advocate for it.  

 

20140416 Illinois Farmers Ins. v. Metro. Water Reclamation Dist. of Greater Chicago.pdf (4.58 mb)

Climate Change Effects | Regulation

A Slow-Burning Fuse: Climate Change from the Risk Management Trenches

April 29, 2014 23:02
by J. Wylie Donald

This morning was the only professional session on climate change at the 2014 annual conference of RIMS, the Risk and Insurance Management Society, the preeminent risk management trade group in the country. Over 9,000 individuals from insurers, policyholders, brokers and vendors are in attendance.  In a different conference room, my partner made a presentation on "additional insured" coverage with 400+ in attendance.  About 30 showed up for climate change.

The disinterest was not due to the quality of the presenters.  Climate Change: How to Stress Test Your Organization was presented by  Jeffrey Bray, Senior Vice President, Global Risk Management of Prologis, Inc. and John Marren, Director, Global Risk and Insurance Management of CSL Behring and also Business Insurance's Risk Manager of the Year.  Both are engaged in climate change risk management; they were here to give a view from the trenches on practical ways to address climate change issues.

Both companies were new to me. CSL Behring is the American subsidiary of CSL Australia, whose core business is the manufacture of vaccines and plasma protein biotherapies with $5 billion in revenue.  Prologis is a global operator of industrial real estate with 3000 facilities and 569 million sq. ft. under management. 

CSL Australia, in addressing a need for transparency in line with its corporate social responsibility goals, concluded that it needed to include climate change in its risk assessments.  Assessing climate change risk was also required in order to accurately respond to inquiries by the Carbon Disclosure Project, which sought information on the effect of climate change on business.

CSL already had a risk framework in place.  They wanted to treat climate change just like every other risk.  If it was material it needed to be addressed.  If not, it still needed to be on the radar so they could do more than just react if and when it surfaced.  Fortunately, senior management was intimately involved with corporate social responsibility and including climate change in that area was not difficult. 

The methodology of bringing climate change into the risk management framework was relatively simple.  First, the context needed to be established.  Environmental, social and economic impacts would be considered on a 25-year time horizon.  Second, information needed to be gathered as to where CSL's concerns would arise.  Workshops were held with every business unit.  Research was conducted.  Third, the data needed to be analyzed.  Last the findings needed to be reported. 

The result was the identification of six key vulnerabilities:
1.  Would there be enough potable water and where would it come from?
2.  Would their sole source suppliers comply with environmental requirements?
3.  Could time-sensitive biological raw materials be delivered timely?
4.  Would energy supply reliability decrease?
5.  Would resulting new diseases impair the availability of plasma donors?
6.  Would resulting new diseases provide an opportunity for new vaccines?

CSL utilized their corporate risk framework to guide the assessment of risks for the risk management process.  Climate change risks were integrated with all of the corporation's other risks for a relative comparison.  None of the six risks were considered material; nevertheless, they are being evaluated every two years on a Zero Basis risk review for their business unit.

Prologis concedes it is not as far along in the evaluation process as CSL.  It noted that there are significant impediments to making that evaluation.  The accuracy of the data is varied and data is not available for many circumstances.  The modelers provide estimates with significant long-term variation.  Accounting for various exposures (inland flooding, storm surge, temperature change, storm severity) is variable.  For example, flood protection in Amsterdam is much better that it is in New York. 

Despite these data and analyses challenges, Prologis recognized that climate change will affect it.  Ten of its markets (ports) ranked in the OECD top 15 for climate change  vulnerability.  Those potential impacts included  increased physical damage and business interruption, which would lead to more restrictive and costly insurance coverage.  Recognition that property concentrations in vulnerable areas would exacerbate event impacts, has led to risk mitigation in the form of more stringent construction requirements, new site selection criteria, and enhanced disaster management.

A key question was raised during the presentation by the moderator, Andrew Thompson, the Global Lead, Risk and Insurance Practice, for the engineering firm, Arup.  How does one integrate a slow-burning risk like climate change into risk planning, which typically has much shorter time horizons.  Mr. Marren of CSL acknowledged that CSL's typical risk horizon is 12-24 months.

The answer, at least for these two billion dollar companies, was in a nutshell:  strategic long-range thinking.  They concluded the presentation with four key points:
1.  Companies should focus on increasing resilience;
2.  Climate change risk is manageable;
3.  While ongoing analysis is recommended, there need be no direct change in current business activity; and
4.  It is important to be proactive to reduce costly future solutions.

This is not profound.  What is profound, is that at least two substantial business entities are stepping around the rhetoric and addressing climate change as simply another business risk (like interest rates, or workforce training, or raw material sourcing) that must be addressed in the short-term and in the long-term.  That short-term results have not yet been identified, does not say anything about the need for long-term consideration, integration and planning.  Others seeking long-term business success should follow.

Climate Change | Climate Change Effects

Dust in the Wind – A "Silent Epidemic" Rises in the Southwest

January 20, 2014 10:31
by J. Wylie Donald

Statisticians call it a correlation when two sets of data are strongly linked.  Last Friday, the governor of California declared a state of emergency arising from the persistent drought that resulted in 2013 being the driest year on record.  In June of last year, a federal judge in the Northern District of California ordered the implementation of certain policies relating to the epidemic of Coccidioidomycosis (aka Valley Fever or cocci) in the California prison system, including the transfer of certain prisoners from certain prisons.  Is there a connection?

Governor Brown’s emergency order addresses climate change only once.  It notes California’s snowpack, a crucial element to future reservoir levels, is at record lows and “that extremely dry conditions have persisted since 2012 and may continue beyond this year and more regularly into the future, based on scientific projections regarding the impact of climate change on California’s snowpack.”  The impact of the drought is being felt all across California.  Specific provision is made in the order for communities that run out of drinking water, endangered species that are further at risk, groundwater level monitoring, and state agency projects.  Noteworthy are the specific effects on agricultural communities:  emergency food supplies, financial assistance, and unemployment services.  And the listed actions will not necessarily be all; the order provides: “The Drought Task Force will monitor drought impacts on a daily basis and will advise [the governor] of subsequent actions that should be taken if drought conditions worsen.”

With California’s drought there simultaneously has been an explosion in the incidence of cocci cases in California and the Southwest.  So much so that a cottage industry of pro se litigation has sprouted against the California prison system asserting violation of the Eighth Amendment prohibition on cruel and unusual punishment.  Plata v. Brown, No. C01-1351 TEH (N.D. Cal. June 24, 2013), lays out the details.  The fungus (Coccidioides) “lives in the soil of dry, low rainfall areas. It is spread through spores that become airborne when the dirt they reside in is disturbed by digging, construction, or strong winds.” Most people infected with cocci are unaffected.  However, “[a]pproximately 10 percent of individuals infected with cocci develop severe disease.”  This can include “severe pulmonary or disseminated disease, affecting soft tissues, joints, bones, and the meninges (the membranes surrounding the brain and spinal cord). Illness may persist for months or longer, and in some cases result in death.” 

As it turns out, Coccidioides is endemic to the American Southwest (as well as certain regions of Mexico, Central and South America) and in California the hot spot is the southern San Joaquin Valley, where California has sited eight prisons.  In 2011, 85% of the reported cocci cases in the California prison system came from two of these facilities, Avenal and Pleasant Valley State Prisons.  Following litigation and the involvement of the Centers for Disease Control and the California Department of Public Health, an order was entered excluding and transferring certain identified high-risk prisoners from Avenal and Pleasant Valley. 

Outside of prisons, what has been going on?  Plata v. Brown provides some interesting statistics:  “The rate of [Pleasant Valley State Prison] cocci cases was 38 times the rate of cocci in residents of Coalinga, the city in which PVSP is located, and 600 times the rate of Fresno County.”  This might suggest that this is a prison problem, not something of concern to the general population.  That would be a mistake.  A recent article, Death Dust:  The Valley Fever Menace, by Dana Goodyear in The New Yorker sets out the big picture.  “In 2012, valley fever was the second-most-reported disease in Arizona; two-thirds of the country’s cases occur in the state.”  African-Americans and Filipinos are very susceptible.  As are immune-compromised and the elderly.  A specialist stated: “if you breathe and you’re warm-blooded, you can get this.” 

The Centers for Disease Control give Valley Fever its own web page; Ms. Goodyear reports the data as indicating a 10-fold increase in incidence between 1998 and 2011 and that CDC personnel refer to the disease as a “silent epidemic.”  Other scientists do as well:  An Epidemic of Coccidioidomycosis in Arizona Associated with Climatic Changes, 1998–2001, Park et al., J. Infect. Dis. 191 (2005).  Moreover, the science attributes the epidemic to climate changes. “Climatic variables describing hot, dry conditions had the strongest association with incidence.”

Hot, dry conditions are what we can expect more of in the Southwest.  A study by Allianz Insurance concluded: 

Aridity in Southwest North America is predicted to intensify and persist in the future and a transition is probably already underway and will become well established in the coming years to decades, akin to permanent drought conditions. Levels of aridity seen in the 1950s multiyear drought or the 1930s Dust Bowl are robustly predicted to become the new climatology by mid-century, resulting in perpetual drought.

Will this lead to more litigation, besides that of prisoners?  In our view, that is likely.  Indeed, at least two suits have been brought in California alleging liability by contractors for failing to control dust which allegedly caused a plaintiff’s injury from Valley Fever.  See Miranda v. Bomel Const. Co., Inc., 115 Cal.Rptr.3d 538 (Ct. App. 2010); Wilson v. Alstom Power, Inc., F051673 (Cal. Ct. App. May 29, 2008).  Although in both cases the defendants prevailed, as public awareness of Valley Fever increases, the likelihood of additional suits and successful suits can only increase.

All of which takes us back to the original question:  in the Southwest is there a connection between the increase in Valley Fever cases and changing climate?  Some will claim causation is present.  Although we suspect that is correct, one does not need to go that far.  Above we called it a correlation and we will stick with that.  In guiding clients, pointing out correllations is important; they are ignored at significant risk.

Allianz, Fund for Nature, Major Tipping Points in the Earth's Climate System (2009).pdf (1.28 mb)

Plata v. Brown (N.D. Cal. June 24, 2013).docx (61.37 kb)

Climate Change Effects

Battles over Stormwater: Maryland Counties Fight the 'Rain Tax'

November 7, 2013 23:22
by J. Wylie Donald

It's not secession like Colorado but three Maryland counties are staging their own Fort Sumter. This past Tuesday the Carroll County Council  received a notice from the State that the County did not appear to be meeting its obligations under the 2012 Stormwater Management – Watershed Protection and Restoration Program Act.  Penalties of $10,000 per day were threatened. Frederick and Harford Counties have received similar letters.  The County fathers (and mothers) have been nonplussed. As quoted in the Baltimore Sun, Frederick County Commissioner Billy Shrive responded:  "I've been dealing with bullies since I was in kindergarten, and I don't tolerate it."

Under the Act (Md. Env. 4-202.1) Baltimore City and the 9 Maryland counties and with the most significant runoff into the Chesapeake Bay were obligated to take steps to mitigate their stormwater discharges. One requirement was to put in place a funding mechanism for such improvements (the stormwater remediation fee, or the rain tax, depending on your perspective). Carroll County declined to establish any mechanism. Frederick County set a fee of one cent per real estate parcel. Harford County set what appeared to be a reasonable fee, but then whacked off 90% of it pending further study. The State was not amused - hence the letters and threats.

What is this so-called rain tax?  Each county is permitted to set up its own parameters but basically the idea is to address the amount of stormwater runoff a property generates and assess a fee accordingly.  As set forth in the statute, the fee is to be "based on the share of stormwater management services related to the property and provided by the county or municipality."  A county may set a flat fee, set a fee based on impervious surfaces, or use some other method. 

In Baltimore City the essential element is the amount of impervious surfaces on a property. Simply stated, that is roofs and pavement, but it also could include gravel roads and decks, but not include graveled settling basins or decks that drain to landscaping below.  The City is using aerial photographs as the basis for calculation of impervious surface square footage. This is converted to Equivalent Residential Units to establish the fee.

There are lots of things knowledgeable Maryland practitioners can do to help their clients navigate the intricacies of the Act. Indeed, they can make their clients real money.  At a Maryland Bar Association Environmental Law Section meeting yesterday a consultant explained how over $100,000 was saved for one client in pushing for exemptions, credits and applicable definitions.

But there was a larger lesson as well that would apply to any jurisdiction where storm sewers exist. A representative of Blue Water Baltimore noted that with climate change, the 100-year storm is now the 25-year storm. This is a common mantra and useful to keep in mind even if inaccurate. The 100-year storm is now the 25-year storm in some places. In other places it is now the 200-year storm. This is because with climate change some places will become drier and some wetter.  For practitioners counseling their clients, in becoming-wetter locales one should be paying attention to the age of the storm sewer infrastructure and considering whether it is sized for increased flows; also of importance is the effect of an infrastructure failure on the business plan. In becoming-drier locations one should apply converse thinking and further be skeptical of assessments or assertions of the need for oversized storm sewers. 

Creedence Clearwater Revival asked "Who'll Stop the Rain?" We submit it is the wrong question.  Stormwater creates problems because of its velocity and its volume.  Modern society packs down and covers the earth so that rain cannot percolate in and thus, for example, a small stream carrying stormwater is greatly amplified.  To mitigate velocity and volume is going to cost money.  Thus a better question would be:  Who'll Pay for the Rain?   

Climate Change Effects | Regulation

Fourth Circuit Rejects Manipulation of Judicial Process As Ocean Manhandles Homes

August 19, 2013 22:56
by J. Wylie Donald


Can a community condemn shorefront cottages where the beach has eroded at 8 feet per year and the cottages interfere with emergency responders traveling along the beach?  Based on the Fourth Circuit's decision at the end of last month in Sansotta v Town of Nags Head we just don't know. What we do know is that a municipality cannot play both ends of the law against the middle to address the problem.

Let us explain.  Nags Head is a shore community of about 2500 souls (soaring to 40,000 in the summer) on North Carolina's Outer Banks. Municipal ordinances provide that a building suffering storm damage or erosion damage may be a public nuisance where it is in danger of collapsing, where there is a likelihood of personal or property injury, or where the structure is on public trust or public land.  Nags Head Ordinance 16-31(6) (a), (b), (c).  A 2009 storm washed away much of the sand around six cottages leaving their septic tanks exposed. The Town declared the cottages nuisances under Ordinance 16-31(6)(b) and (c) and required their abatement. Demolition was the only way to satisfy the ordinance but the homeowners did not comply and the Town assessed fines accruing at $100 per day.  The homeowners sued. (Twenty other cottages were also declared nuisances resulting in at least two other suits. See Town of Nags Head v. Toloczko, 863 F. Supp. 2d 516 (E.D.N.C. 2012); Town of Nags Head v Cherry, Inc., 723 S.E.2d 156 (N.C. Ct. App. 2012).)
 
The suit was originally filed in state court with claims sounding in both state and federal law. The Town removed to federal court.  Both parties moved for partial summary judgment.  The trial court dismissed and the homeowners appealed.

The Fourth Circuit affirmed the trial court's dismissal of the equal protection and procedural due process claims; however, the court of appeals reversed the trial court's dismissal of the takings claim.

Fourteenth Amendment Procedural Due Process.  Due process requires that before one is deprived of life, liberty or property, a constitutionally fair process must be imposed. Here, while the homeowners asserted constitutionally protected interests in the money to pay the fines and the cottages themselves, the Town never deprived them of those interests. First, the fines were never paid. Second, the Town's "regulatory actions do not constitute a deprivation of property because they represent limitations on the use of property that 'inhere in the title itself, in the restrictions that background principles of the State's law of property and nuisance already place upon land ownership.'" Sansotta at 14.  "By acting to abate what it believed was a nuisance, the Town simply kept the Owners from using their property in a way that was prohibited by law." Id. at 15. 

Fourteenth Amendment Equal Protection. The homeowners asserted that they were treated differently than the 14 other cottages that were also located in the public trust area. This was true but it did not matter. The Town had a valid reason for treating the cottages differently:  they were closer to the ocean and obstructed the passage of emergency vehicles to a greater extent.  "Notwithstanding the Owners' contentions about all parts of the beach being valuable, different parts of the beach may present different issues with regard to public safety.  Hence, the difference in the locations of the cottages on the beach is a legitimate basis for treating them differently."  Id. at 20. 

Fifth Amendment Takings. The homeowners asserted that their property was taken without just compensation. However, the homeowners had not completed the process of pursuing their compensation claim under state law. This was fatal to a federal claim, which required that a "plaintiff must first have sought compensation 'through the procedures the State has provided for doing so.'" Id. at 21.  In state court, however, the homeowners could assert a taking, even though they had not completed the compensation process.  "[U]nder San Remo Hotel[, L.P. v. City & Cnty. of San Francisco, 545 U.S. 323, 346 (2005)], a plaintiff may bring a takings claim in state court without having already been denied compensation by the state, if he also brings his state-law claim for just compensation." Id. at 23.  And here was the rub:  the Town had removed the case from state court, where the homeowners takings claim was ripe. But in so doing, the Town asserted the claim became unripe in federal court. Id. at 24.

The Court of Appeals was not willing to "judicially condone[] manipulation of litigation." Id. at 25.  The requirement for a federal court to wait until the state court has ruled on a just compensation claim, was a "prudential" not a "jurisdictional" requirement.  State courts have more experience in land use matters than federal courts, but that "does not mean that federal courts are incapable of handling them."  Id. at 25.  "A defendant implicitly agrees with this conclusion when he removes a case involving such a state or municipal law to federal court."  Id. at 25-26. Thus, the court refused to apply the state court litigation requirement and reversed the trial court's dismissal of the takings claim. "Based on our conclusion that a state and its political subdivisions waive the state-litigation requirement by removing a case to federal court, the district court erred in dismissing the Owners' takings claim as unripe." Id. at 35.

We find three things of moment in this case and its decision:

First, Nags Head is just one small community on the Atlantic littoral beset by rising sea levels. Yet it has spawned at least three cases that have been litigated to the appellate level.  We can expect many more.

Second, the issues in the rising sea level cases are going to get right down to fundamentals. Constitutional rights will be invoked. This of course suggests the Supreme Court will get involved. We note that it already has.  See Stop the Beach Renourishment, Inc. v. Florida, 560 U.S. 2606 (2010).

Third, one of the homeowners' takings claim was based on "redefining private property as public land." Id. at 21 n.16. Observe that the states own the land below mean high water (or mean low water in some cases). As the oceans rise, the states' claims to more and more of the current landowners' shorefront will increase. Is it the case, then, that that is a taking?  If it is, then states better start setting aside some substantial funds to pay just compensation that they cannot avoid. 

The front cover of this month's National Geographic premiers Rising Seas, How They Are Changing Our Coast Lines.  In North Carolina, they are living (and litigating) that.

Climate Change Effects | Climate Change Litigation | Regulation | Rising Sea Levels

Harvey Cedars v. Karan: Condemnation at the Shore and the Evolution of the Common Law

July 29, 2013 23:46
by J. Wylie Donald

If you were a municipality that had to take action and condemn private property for the public good to avert disaster, before you got to court you would be particularly pleased to be able to say, "See, I told you so," pointing to an avoided calamity.  When one New Jersey beachfront community, the Borough of Harvey Cedars, took such action, the longed-for serendipity avoided both the trial and intermediate appellate courts. But then fortune smiled and the Borough enjoyed a favorable result before the New Jersey Supreme Court in Borough of Harvey Cedars v. Karan, decided just this month and setting the stage for condemnation actions up and down the New Jersey coast (and potentially elsewhere).

In 1973 the Karans acquired a beachfront home on a small lot (11,868 sq. ft.)  in Harvey Cedars.  It’s a lovely three-story home, the kind of place where one can sit on the porch on the second story and watch the children playing on the beach. Except that is, if there is a 22-foot dune between the home and the water. In that case, to see the little ones one would need to climb up to the third floor. One might, then, be a little incensed if the Borough came and offered $300 for a quarter of the property to put up such a dune.  And the fact that the dune would protect the home from the ravages of a rising and violent ocean, such as that delivered by Superstorm Sandy, might not ameliorate the unjustness of it all. 

That story is pretty much what happened to the Karans.  With funding from the New Jersey Department of Environmental Protection and the U.S. Army Corps of Engineers, the Borough planned to construct a $25 million, 22-foot-high sand dune along its shoreline; it would be placed on private property where necessary by way of an easement. Such a barrier, it was hoped, would protect local homes and businesses from future storm surges. Many beachfront homeowners saw the benefit of a protective dune and voluntarily accepted the easement. Others, including the Karans, did not. The asserted benefits did not sit well with Harvey Karan, who argued that, in nearly four decades of owning the home, he had not seen “a lick of water” reach its living quarters.  We note that this was not a particularly surprising result as the living quarters were on the second and third floor.  In any event, in November 2008, the Borough moved to acquire a portion of the Karans’ property by eminent domain. Unsurprisingly, the Karans rejected the Borough’s offer of $300 “just compensation” and took legal action.

In an evidentiary proceeding, the Karans moved to prevent the Borough’s appraiser, Donald M. Mollier, Ph.D.,  from testifying that the dune’s storm protection increased the value of their home—thus decreasing the amount of compensation to which they were entitled. Instead, they maintained that the project provided “general benefits” to all Harvey Cedar residents, ones that could not be taken into account when determining compensation. Relying on prior New Jersey precedent, Sullivan v North Hudson County Railroad Co., 51 N.J.L. 518 (E. & A. 1889), the court supported this view, instructing the jury:  “the Borough is not entitled to any credit nor should the amount of just compensation to the Karans be reduced by virtue of any general benefit which they may receive along with other property owners in the Borough as a result of the dune and beach replenishment project.”

The jury returned an award to the Karans of $375,000, for the taking of a quarter of their lot and the loss of their view. In early 2012 the Appellate Division affirmed, reasoning "that the advantage accruing to the Karans from the newly constructed dune was not a special benefit but rather 'a classic example of a general benefit,' which cannot be used to offset the loss from a partial taking."

The Borough persisted nonetheless and filed an appeal to the New Jersey Supreme Court. And then came Sandy with its unprecedented devastation up and down the Shore. Over 100 killed, sixty-two billion dollars in damage (much of it uninsured) in the New York-New Jersey metropolitan area. Places like Mantoloking, without a protective dune, were shredded. Places like Harvey Cedars came through relatively unscathed. Hmmmm.  Maybe there's something to the protective dune idea.

The Jersey Shore Partnership thought so and filed a motion seeking leave to be allowed to submit out of time a brief amicus curiae, which the Court granted. Rather than get caught up in an analysis of general and specific benefits, the Partnership took a different tack. Lead counsel, Dave Apy, crafted an argument based on the modern method of any condemnation award:  fair market value.  (Full disclosure:  Mr. Apy mentored me as a younger associate; he has a knack for cutting through legal clutter.)  Rather than staying "mired in technical, nonsensical arguments" over general and special benefits, the courts should look to a simple test:  "whether the benefits, however characterized, are ascertainable and directly enhance the remaining property."  The other amicus, the New Jersey Department of Environmental Protection, likewise advocated for a fair market value approach.   

 The New Jersey Supreme Court bought the Partnership's and the NJDEP's argument. In its ruling, it cited a wide body of case law, dating back to the Magna Carta, and supporting the notion that when private property is taken, the State must pay just compensation. In a complete taking, just compensation is measured by fair market value. The Court saw no reason not to apply the same concept to a partial taking. After laying out the history that led to Sullivan (the basis for the trial court's decision), the Court turned to Mangles v. Hudson County Board of Chosen Freeholders, 55 N.J.L. 88 (Sup. Ct. 1892), decided only a few years after Sullivan and by the same judge. "'Just compensation' could not 'be ascertained without considering all the proximate effects of the taking."  Id. at 92.  "'Any benefit arising from the taking and public use of the property 'which admits of reasonable computation may enter into the award.'" Id.

The remainder of the Court's opinion in Karan bolsters the position of fair market value. It concludes that the general/special benefit distinction "is at odds with contemporary principles of just-compensation jurisprudence."

Thus, there would be a new trial, where “the Borough will have the opportunity to present evidence of any non-speculative, reasonably calculable benefits that inured to the advantage of the Karans’ property at the time of the taking.” "In short, the quantifiable decrease in the value of their property -- loss of view -- should have been set off by any quantifiable increase in its value."

Justice Holmes said in The Common Law, "The life of the law has not been logic; it has been experience."  In Karan, logic required that Sullivan’s hoary general and special benefit distinction would carry the day, as it did before the trial court and the Appellate Division.  Experience (bearing the nom de guerre Sandy), however, led to a different result.

Climate Change | Climate Change Effects | Rising Sea Levels | Weather

Walking on Eggshell Skulls: Louisiana's Levees Take on the Oil and Gas Industry Over Coastal Land Degradation

July 24, 2013 23:20
by J. Wylie Donald

Ground zero for climate change and rising sea levels in the United States is not a status to which any state aspires.  Florida distastefully remembers 2005 when 4 hurricanes – Charley, Frances, Ivan, and Jeanne - roared ashore, all within six weeks.   Delaware worries that 8-11% of the state will be submerged by 2100.  Today we learned that Louisiana’s concerns over rising sea levels and hurricanes have resulted in an enormous lawsuit, Board of Commissioners v. Tennessee Gas Pipeline Co LLC, against 100 oil and gas companies based on their activities in Louisiana’s coastal lands over the last century, and the lands' ongoing demise.  “Unless immediate action is taken to reverse these losses and restore the region’s natural defense, many of Louisiana’s coastal communities will vanish into the sea.“  Complaint at 2.

The plaintiff, the Southeast Louisiana Flood Protection Authority – East, is a governmental entity whose ”mission is to ensure the physical and operational integrity of the regional flood risk management system.”  To accomplish that end, it concluded that in order for Louisiana's coastal communities to survive into the next century it needed to restore and rejuvenate Louisiana’s coastal lands.  Its complaint explains how the system is supposed to work:

5.2 Coastal lands, including wetlands and marshes, are an integral natural complement to the Authority’s man-made flood protection system. 
5.2.1.  Coastal lands are the first line of defense for south Louisiana’s communities against the destructive force of hurricanes. 
5.2.2. Those lands form a buffer that reduces the height and energy of hurricane storm surge and waves, thereby aiding the Authority in its mission to protect south Louisiana.
5.2.3. Hurricanes lose intensity as they travel over land.  Hence, the more land that a given hurricane must traverse before reaching Louisiana’s coastal cities, the weaker that hurricane’s impact on those communities, and concomitantly, the more effective the levee system.

Notwithstanding the coastal lands’ importance, they had been (allegedly) substantially degraded by the activities of oil and gas companies.  These companies had built a network of canals that was alleged to continue "to introduce increasingly larger volumes of damaging saltwater, at increasingly greater velocity, ever deeper into Louisiana’s coastal landscape and interior wetlands.  The increasing intrusion of saltwater stresses the vegetation that holds wetlands together, weakening – and ultimately killing – that vegetation.  Thus weakened, the remaining soil is washed away even by minor storms.”  Id. ¶¶ 6.7.1-7.2

With the loss of coastal lands, the levees stand to become “de facto sea walls,” a function the levee system is not designed for. Id. ¶ 5.11.

The Authority’s complaint sets forth the regulatory framework for commercial work in the coastal lands.  First, there is the Rivers and Harbors Act of 1899, which forbids “any person to … in any manner whatever impair the usefulness of any … work built by the Uniteds States for the preservation and improvement of any of its navigable waters or to prevent floods.”  As noted above, the loss of coastal lands would lead to impairment of the levees struggling to serve as seawalls.  Second, Clean Water Act permits impose obligations for the maintenance and abandonment of canals, and for the minimization of environmental harm.  The permits, it was alleged, had not been complied with.  Third, the Louisiana State Land Office granted rights-of-way, which carried with them maximum right-of-way widths and obligations to minimize environmental effects and to indemnify the State for third-party damages.  The defendants' rights-of-way had all allegedly eroded and now exceeded their permitted size.  Last, state and federal Coastal Zone Management Acts imposed additional obligations.  Id. ¶¶ 9.1-9.4. 

From that framework, the Authority argues a duty of care arises, breach of which by the energy companies supports a claim for negligence.  That claim is joined with claims for strict liability, public and private nuisance, third-party beneficiary rights, and a local favorite, natural servitude of drain.  Under the last claim it is asserted, damages and injunctive relief are owed because “Parties, such as Defendants, may not take actions that increase the flow of water across another party’s land, as the Defendants’ activities in Louisiana’s coastal lands certainly and demonstrably have done.”  Id. ¶ 23.

Commentary already circulating quotes the plaintiff's attorneys on the potential damages at  “many billions of dollars.”  Although the damages are very large, many will look at this as just another wetlands preservation lawsuit. 

We take a different perspective.  The destruction alleged took place over a very long time, by hundreds of entities, with the support of the commercial and political establishments of Louisiana.  The status quo in Louisiana was ongoing energy development in conjunction with degradation of coastal lands.  No one asserted that billions of dollars were owed.  What changed? 

A fundamental tenet of this blog is that climate change will create winners and losers.  The losers are not going to go quietly; instead, they will look around and see if they can be made whole by someone else.  The first wave of climate change liability cases sought to tag the emitters of greenhouse gases with liability; they were uniformly unsuccessful.  Is Board of Commissioners the vanguard of the next wave targeting for liability those entities whose activities make defending against climate change much harder?

There is a theory in tort about the eggshell skull.  As stated by the Seventh Circuit in Schmude v. Tricam Industries:  “If a tortfeasor inflicts a graver loss on his victim than one would have expected because the victim had some pre-existing vulnerability, that is the tortfeasor's bad luck; you take your victim as you find him.” 

Here the Authority might not have done anything, or done it much later, had climate change not exacerbated the dire conditions faced by Louisiana.  Will Louisiana’s eggshell skull be a model for others seeking to be made whole for their losses from climate change?  Only time will tell.  In the meantime, visiting practitioners may wish to practice saying coquille d'oeuf.     

Climate Change | Climate Change Effects | Climate Change Litigation | Rising Sea Levels

Climate Change Legal Work: Changing the Paradigm Does Not Come Easily

May 8, 2013 08:18
by J. Wylie Donald

I learned the other day that for $3995 I can download nearly a 1000 page report on the climate change industry.  The Ah Hah moment was at hand.  The President’s promise at his inauguration and then again at the State of the Union was upon us.  Here it would be revealed what the small group of lawyers focused on climate change law were looking for:  where is the legal work?  But I am a cautious consumer.  The publisher anticipated my skepticism and offered the table of contents for my review for free.  I didn’t even have to give my email address.  It was an offer hard to turn down.

The TOC was extensive.  Pages and pages chronicled the following industry segments:  Solar Energy, Wind Energy, BioEnergy, Geothermal Energy, Wave & Tidal, Carbon Capture & Storage, Energy Efficiency & Demand Response, Energy Storage, The Green Building Industry, Carbon Markets, Adaptation, Climate Change Consulting, and Transportation.  And under each of these segments one can find pages of company "profiles", presumably businesses with expertise in Wind Energy or Adaptation or Green Buildings.  Even lawyers were able to claim a niche.  Seven firms filled out “Law Firms and Climate Change Practices.”

But as we all know, saying you’re doing something, and actually doing it, can be two entirely different things.  Here’s a different measure:  how many clients attend climate change legal seminars?  I have a bird’s eye view on this topic:  I gave one at the end of last month, Climate Change and Insurance:  Recent Litigation and Regulatory Developments.  The attendance was astounding:  2 insurance companies, 29 law firms (but including none of those "profiled" – maybe that should tell us something), and NO ONE ELSE. 

Could it be that most insurers and all non-insurers have all the climate change related insurance issues already figured out?  Would they get 100% on this little quiz:

What is the atmospheric public trust doctrine and how is it being used to address regulation of greenhouse gas emissions?
Are there any decisions in support of finding that carbon dioxide is not a pollutant within the meaning of a pollution exclusion in a general liability policy?
How do building height restrictions affect rebuilding after Superstorm Sandy?
Do pollution exclusions negate coverage for improper climate change disclosures?
Does a title policy insure against rising sea levels?
Are insurers of last resort (wind pools, beach pools) increasing market share and what are the implications of that?

Anecdotally, I know that most, if not all, would struggle merely to get a C.  But so what?  One can’t sell ice in the wintertime or neckties in a nudist colony.  As lawyers we provide a service to clients with the need for that service.  It is not what we want to sell, but rather what they want to buy.  And there is the secret.  Thomas Kuhn wrote a magnificent work explaining how scientific paradigms shift (think the change from a Ptolemaic universe (the sun revolves around the earth) to a Copernican one (the earth revolves around the sun)).  Presently, the received wisdom is that while climate change is happening (I acknowledge that some still have not received even this idea), it is incidental to the larger issues and can be addressed accordingly. 

I submit that that is, like Ptolemy’s world-view, a paradigm that can be improved.  For example, if one is intent on acquiring property at the Shore, one can buy in fee simple, take a ground lease, or take a shorter term commercial lease.  If one is not actively considering the implications of sea level rise in the fundamental choice of the form of the transaction, one is at risk of finding oneself literally under water with no succor. If in contract documents one is making representations and warranties identifying all releases  of “hazardous materials” (broadly defined to be any substance regulated under environmental laws (a common approach)), without scheduling one’s HVAC systems, one is almost assuredly making inaccurate warranties because virtually all entities are emitting carbon dioxide.  If one relies on a flood plain map for planning purposes, without recognition that all flood plain maps are flawed because they only look backward (i.e., they assume the past accurately predicts the future, which is emphatically not the case in a world of climate change), one is again assuming a large risk.  I could go on. 

The point is that the risks and possibilities of climate change are ubiquitous.  Our job as advocates and wise counsel to our clients is to assist the change to a perspective Copernicus might have adopted, one that incorporates climate change in the larger view.  As demonstrated by the attendance at my seminar, we have a long way to go in that regard.

Carbon Dioxide | Climate Change | Climate Change Effects | Insurance | Rising Sea Levels

Who Says Catastrophe Bond Payouts Are Not Correlated With the Stock Market?

March 27, 2013 08:54
by J. Wylie Donald

Here is some food for thought:  Catastrophe bond payouts are correlated with climate change.  Climate change is correlated with stock market returns.  Therefore catastrophe bond payouts are correlated with the stock market.   See Aristotle, Prior Analytics.  We did not study philosophy but Aristotle’s syllogism seems difficult to refute.

The March 2013 Best’s Review reports on investors’ current heightened interest in catastrophe bonds; demand in 2012 was up 37% over the previous year and was the second highest level ever.  See Ron Panko, Behind the Cat Bond Surge, Best’s Review 56 (March 2013).   The “allure of cat bonds” is four-fold:

1.  “They are one of the few assets that are uncorrelated to the broader financial markets.”
2. Their return can be very strong (although if the bond is triggered its investors can lose everything).
3. They are liquid.
4. They are trackable against an index.  

It doesn’t take a lot of insight to note that all of these factors but the first are common to many things investors put their money into.  So the interest in cat bonds is fundamentally the idea that they are not correlated with the stock market.  When the market goes up, down or sideways, cat bond values pay no heed.

The article then provides some interesting data concerning the perils considered by 2012’s catastrophe bonds for property and casualty related risks:  earthquakes, hurricanes, severe thunderstorms, winter storms, and wildfires.  It does not take a climate scientist to notice that four of the five perils are perils exacerbated by climate change.  If one tallies up the 26 transactions, 22 of them consider a climate-related risk (albeit 8 of those also consider earthquakes).  The major premise is satisfied:  catastrophe bond payouts correlate with climate change.

We figured documenting the financial impact of climate change would be easy.  It was.  As scientist Adam Frank put it on NPR:

“Like it or not, the climate system is the underpinning of the economic system. Production and trade do not occur in a vacuum. They occur in the real world of soil and oceans, rainfall and atmospheric flows. Our most basic economic assumptions — the foundations of our way of life — are challenged when the conditions in this real world change.”  

As an example he cited a noted liberal, left-wing, environmentalist publication – the Wall Street Journal – which covered the effects of last year’s drought:  $8 billion in gross domestic product lost.  Archer Daniel Midland’s stock price last summer was not pretty to look at.  Neither was Tyson Foods’.  Thus, and assuming the drought  was caused or aggravated by climate change, the minor premise is satisfied.

Therefore, the conclusion, catastrophe bond payouts are correlated with the stock market, is established.  We realize this flies in the face of conventional wisdom.  The effects of climate change have a tendency to do that.

Climate Change | Climate Change Effects | Insurance | Weather

In Response to Sea Level Rising At Double the Global Rate, Delaware Debates Whether to Accommodate, Avoid, Protect or Retreat

February 20, 2013 17:07
by J. Wylie Donald  & Jameson Tweedie

On February 19, 2013, the Delaware Sea Level Rise Advisory Committee ("DSLRAC") held the second of three "public engagement sessions" to solicit public comment on a list of 61 "Options for Preparing Delaware for Sea Level Rise". These public engagement sessions are part of the second phase -- focusing on adapting to sea level rise -- of the DSLRAC's mission.

The first phase focused on the preparation of a comprehensive assessment of Delaware's vulnerabilities to sea level rise. The Vulnerability Assessment modeled the effects of three potential sea level increases by the end of the century - 0.5 meters (1.6 feet), 1.0 m (3.3 feet) and 1.5 m (4.9 feet) from mean higher high water - and identified state resources that were vulnerable to sea level rise. The state resources considered were broadly divided into three categories: natural resources; society and economy; and public safety and infrastructure. Within these broad categories, the vulnerability of 79 specific resources to sea level rise was examined, of which 16 were determined to be of high concern statewide: dunes and beaches; coastal impoundments; dams, dikes and levees; evacuation routes; freshwater tidal wetlands; future development areas; habitats of conservation concern; heavy industrial areas; the Port of Wilmington; protected lands; roads and bridges; railways; tidal wetlands; tourism and coastal recreation; U.S. Fish and Wildlife Service Refuges; and wells. The models did not include any effects from storm surge or increased storm intensity, and thus the effects are arguably conservative for each of the three modeled sea level increases. Even so, the Vulnerability Assessment found that all three of Delaware's counties would be directly affected by sea level rise, and 8-11% of the entire state's land area would be permanently flooded (at the public engagement session a tax assessed value of $1.5 billion was estimated for the land which will potentially be flooded). (Full Vulnerability Assessment).

Delaware's vulnerability to sea level rise is a function not only of its coastal location and economy, but also because sea level rise is occurring faster in Delaware than elsewhere. Currently the global rate of sea level rise used by the DSLRAC (from the International Panel on Climate Change (IPCC) estimates) is 0.07 inches per year, or 7 inches per century (not considering any increase in that rate in the future). However, in Delaware the sea is currently rising at a rate of 0.13 inches per year (13 inches per century), or almost double the global average. This is occurring, in part, because the part of the earth's crust under Delaware is sinking. (Simplistically, during the last ice age some regions were depressed by the weight of the glaciers, while Delaware was not depressed by such heavy glacial coverage and as a result was raised up relative to other regions. This process is now reversing as other regions rebound upward, while Delaware settles downward.) Thus, in Delaware not only are the seas rising, but the land is literally - although slowly - sinking. (See Vulnerability Assessment at 7-8).

With the key vulnerabilities identified, the second phase of the DSLRAC's mission is focused on strategies for adapting to the effects of sea level rise. The DSLRAC has identified four broad strategies: to accommodate sea level rise; to avoid sea level rise; to protect resources form sea level rise; or to retreat from sea level rise. Within these broad strategies - which the DSLRAC does not view as mutually exclusive - are 61 specific options. These range from the very broad - "Increase opportunities for technology transfer and regional coordination for transportation issues affected by sea level rise" (Option 2); "Create new partnerships to increase resources for research and development of adaptation options" (Option 6); "Create a coordinated effort to provide technical assistance to local governments" (Option 56) - to the relatively specific - "Provide sea level rise information to the Delaware Agricultural Land Preservation Program" (Option 7); "Encourage the establishment of a sea level rise group within the American Association of State Highway Transportation Officials (Option 9); "Add additional tidal observation stations in Delaware" (Option 54).

Some of the original proposed options have already proven controversial. For example, Option 33 - "Develop a comprehensive outreach strategy to educate public about sea level rise" - was revised to eliminate a reference to educating public school students about climate change and sea level rise. This revision was reportedly made after objections from the Positive Growth Alliance (which is reported as having described such education as "brainwashing") and the Homebuilder's Association of Delaware (which is reported as questioning the "targeting" of children). Another option would require property owners selling property inside zones predicted to be inundated under a specific sea level rise scenario to disclose that vulnerability to potential buyers (also discussed here). This was met with concern that it might negatively affect sales of or the availability of mortgages for such properties, particularly as some stakeholders questioned the three modeled sea level rise scenarios (0.5 m, 1.0 m, 1.5 m) as "speculation" (click here). (It is worth noting that the scenarios modeled by the DSLRAC are generally in line with the recently issued National Climate Assessment (see National Climate Assessment.)

As Delaware considers whether to accommodate, avoid, protect or retreat from the consequences of sea level rise, the Options put forward by the DSLRAC serve as an excellent point of discussion. Option 24 - "Develop a statewide retreat plan" - will undoubtedly contribute to that discussion, if not controversy. Given recent retreat oriented developments in other jurisdictions, such as the recent proposal of Governor Andrew Cuomo of New York to use federal disaster funding in the wake of "Superstorm Sandy" to buy out certain willing homeowners (click here) or the determination in the Netherlands - experts in keeping the sea out - to begin letting the sea back in (click here), an honest and complete discussion of how to engage in retreat, before any retreat is necessary, may be entirely prudent. Whether such a discussion is politically palatable is another question entirely.

Climate Change | Climate Change Effects | Insurance | Rising Sea Levels


McCARTER & ENGLISH CLIMATE CHANGE AND RENEWABLE ENERGY PRACTICE GROUP

The business case for the development of renewable energy projects, from biodiesel and ethanol to wind, solar, and distributed generation, is more compelling than ever as tax and regulatory incentives combine to attract investments. Emerging issues in environmental law and increasingly recognized principles of corporate social responsibility are encouraging public companies to voluntarily reduce greenhouse gas emissions, install clean energy alternatives, and invest overseas in projects under the Kyoto Protocol to respond to climate change concerns.

Click here for more information and a list of our group members.
© McCarter & English, LLP. All Rights Reserved. disclaimer
navbottom image