States Test New Solutions to Address the Climate Insurance Crisis
Three states are considering bills that would let citizens and insurers recover damages directly from major polluters. If passed, these new bills would create a mechanism for property owners to sue fossil fuel companies directly for their damages.
Understanding the Climate Insurance Crisis
Climate-related disasters are creating financial strain on the property insurance industry. Premiums have been rising in many regions as insurers respond to increasing disaster losses and other market factors. As premiums rise alongside climate risk, property insurance becomes harder and more expensive to obtain.
For example, one Louisiana homeowner saw her home insurance premiums increase over 45 percent but saw her home’s value drop. Insurers have also reported that disaster-related losses in some regions are outpacing the premiums they collect.
These rising premiums are causing lawmakers to ask who should bear the cost of climate-related damage. Dave Jones, the former California insurance commissioner, suggests that the fossil fuel industry should be compensating communities for climate-related property damage. However, the fossil fuel industry has pushed back saying that this is an issue for Congress, not the courts, to decide. Over the past two years, three states have translated this idea into legislation.
How States are Responding
Currently three states are considering bills allowing citizens to sue fossil fuel companies directly for damages. California, Hawaii and New York have all introduced legislation which, if passed, would establish a new right to recovery. This legislation includes:
- California SB 982, which would allow the attorney general to sue responsible parties after climate disasters to recover damages and make it more difficult for responsible parties to escape liability.
- Hawaii SB 1166, which would allow property owners and insurers to sue fossil fuel companies for damages. Insurers have raised concern about the structure of this bill because it would establish that insurers must seek subrogation before factoring losses into rate calculations. The insurance commissioner testified that this could cause market destabilization. Despite opposition related to the subrogation portion of this bill, the bill has also received strong support from groups like the Sierra Club.
- New York AB 72 and SB 4799, which would create broad liability for polluters but allow reduced damages if companies show reasonable efforts to control emissions.
These bills allow direct financial recovery from polluters.
While environmental citizen suits are not a new concept, in the past victims have not been able to recover money damages directly. These bills would change that by allowing victims to be compensated directly for their losses. However, these bills face opposition from the insurance industry and overcoming this opposition will be an uphill battle.
FOCUS will continue to monitor developments on the climate insurance crisis in state legislatures across the country.
by Juliana Walsh 3/9/26
