'Big Plastic' is an emerging climate risk and a ticking time-bomb for litigation

14 April 2022. Published by Lucy Dyson , Partner

The tangible commitment to plastics regulation and action will likely trigger a new wave of plastics-related litigation.

The new global plastics treaty has been heralded as the most important environmental accord since the Paris Agreement in 2015.

In the same way we have seen an uptick in climate related disputes since 2015, this tangible commitment to plastics regulation and action will likely trigger a new wave of plastics-related litigation.

This includes cases brought in relation to historic plastic pollution, and compelling action by governments and companies as we transition to a greener, more sustainable circular economy. This is all against a backdrop of rising group litigation/collective redress globally in relation to the environment, and social inflation factors.

The plastic pollution crisis the planet faces is intertwined with the race to net zero. Plastic (which derives from fossil fuels) is also thought to significantly contribute to greenhouse gas emissions, both during its production process and incineration.

It is estimated that 75% of the plastic waste (seven billion tonnes) produced since 1950 has been deposited in landfills, on land or at the bottom of the ocean. Across the world, consumer demand for disposable products has seemingly overtaken the waste-management structure, with only 10% of plastics thought to be recycled.

Health concerns 

Plastics contain various chemicals, which, ultimately, leach into the environment and absorb other contaminants with which they come into contact. The effects on wildlife (entangled marine organisms, ingested plastic products) are increasingly well-known and publicised. However, the more insidious, long-term effects of plastics on human health are still relatively unknown.

Plastic does not biodegrade but gradually breaks down into smaller pieces, known as microplastics (plastics smaller than 5 mm). Microplastics (which are in the atmosphere, water table and food chain) are attracting more and more attention, globally.

Although the science is still at a relatively early stage, there is increasing concern the ingestion of microplastics causes damage to human and animal cells, given they contain endocrine disruptors. It is estimated humans are now ingesting a credit card-sized amount each week. They are everywhere – from the bottom of the Mariana trench to the summit of Mount Everest and are now at detectable levels in human blood and lungs.

There is already litigation afoot in the US against plastic manufacturers/major corporations using plastic products, including Crystal Geyser, Coca-Cola and Procter & Gamble. Earth Island Institute seeks to hold “Big Plastic” accountable for historic plastic pollution damage, via remediation payments and forcing change concerning recycling policies.

The allegations include public and private nuisance, trespass and false advertising (including deliberate misinformation and branding of products concerning recyclability). These cases are brought in a similar vein to the Carbon Majors litigation concerning historic greenhouse gas emissions and damage to the environment.

We are yet to see litigation concerning the harmful effects of ingesting microplastics and seeking to hold companies/governments to account. However, the recent spate of lawsuits concerning per- and polyfluoroalkyl substances (PFAs) and other “forever chemicals” has paved the way for these types of suit, as the science (and latency of microplastics) develops further.

There will no doubt be significant interest in the origins and types of plastic entering the ecosystem, their lifecycle, and harmful effects. This presents novel issues of causation and attribution of liability to tortfeasors (and we have already seen courts in the UK and the US flex tortious principles in the wake of the issues presented by mesothelioma and methyl tertiary-butyl ether (MTBE) claims.

Historic claims

As regards single-use plastics, it is expected the companies most responsible for their prevalence (ie, “Big Food”, including supermarkets and consumer goods companies) will face claims both for historic pollution and failure to adapt their businesses to make packaging more sustainable. We have already seen a $10m class action settlement agreed by Keurig Green Mountain concerning coffee pod recyclability and deceptive advertising.

Given the effects of plastic pollution on ecosystems, we can expect claims in relation to damage to biodiversity, in particular. This is against the backdrop of increasing rights-based litigation, where claims are increasingly being brought on behalf of the environment. Oceana Philippines has brought a plastic lawsuit against the Philippines government, for failures in implementing waste-management legislation, to tackle the country’s plastic pollution problem and safeguard the environment.

Public authorities may seek to bring actions concerning pollution of water courses, to seek redress from polluters and improve infrastructure. There have already been several cases in the US involving water authorities concerning the discharge of plastic pellets/nurdles and violations of the Clean Water Act.

In 2019, Formosa Plastics was ordered to pay $50m into a fund to be used for regenerating affected water courses. In 2021, Charleston Riverkeeper agreed a $1.2m settlement with Frontier Logistics, following plastic pellet pollution in Charleston waterways.

We can also expect to see an increase in “value chain” litigation concerning supply chains and the use of plastic, particularly as regulations develop. The life¬cycle of plastic presents significant challenges for businesses globally.

This is against an increased trend for parent companies of multinational companies being targeted by litigation in the English and other European courts, in relation to historic environmental damage abroad and their global value chains, particularly in emerging markets.

As regards the boardroom, we will see litigation against directors and corporations in relation to their response to the plastic pollution crisis (just as we have with climate change) and an uptick of shareholder claims.

For example, in Perri v Defendants of Danimer Scientific, it is alleged that Danimer and its directors made inaccurate statements regarding the biodegradability of the product, Nodax and failed to disclose environmental compliance issues. The action alleges these statements lead to the artificial inflation of the company’s value, from which the directors made a profit.

Plastic-related litigation will particularly affect liability insurers, who will have to grapple with a new wave of “toxic tort” plastic pollution claims. Insurers will need to consider the definition of injury (in the context of microplastic ingestion) and the date on which it occurs, policy trigger and historic exposure, the scope of pollution coverage (particularly for clean-up), together with whether pollution exclusions are fit for purpose.

Directors’ and officers’ insurers can also expect a surge of litigation related to environmental, social and governance (ESG) issues against directors and companies, concerning statements, the “green” status of investments and their management of plastic waste. The costs of defending these types of claims can reach exorbitant levels, not to mention the damage to the reputations of companies, especially in an era where ESG is so high on the agenda.

This was first published in Insurance Day on 14 April 2022.

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