Risk Management for Black Swan Risks: Planning for Nuclear Catastrophe, Fracking Problems and Other Environmental Disasters

May 2012Articles ABA In-House Counsel Committee Newsletter
The purpose of this article is to assist counsel in planning for and responding to the increasing risk of catastrophic loss. Traditionally, risk management fell within corporate accounting or financial departments and only indirectly required input from corporate counsel. The days of relegating risk management to an outside broker or to the financial department are numbered as today’s risk management involves complex legal concepts, cuts across corporate departments, and particularly for catastrophic loss requires detailed knowledge of New York insurance law. Both the magnitude and frequency of catastrophic risks are increasing. This article addresses in order: (1) planning for a catastrophic event, including an overview of risk; (2) a discussion of the various forms of insurance coverages, indemnity agreements, and other risk management tools that respond to those risks; and (3) a checklist of immediate action items that a company experiencing catastrophic loss must immediately implement even while in the midst of the disaster.