Tuesday , October 22 2019
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Subrogation

Summary:
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

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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.

John Quiggin
He is an Australian economist, a Professor and an Australian Research Council Laureate Fellow at the University of Queensland, and a former member of the Board of the Climate Change Authority of the Australian Government.

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