Greenwashing
Misleading overstatement of a company's sustainability efforts, now a major ground for litigation and directors' liability claims.
Greenwashing is the practice of overstating or misleadingly presenting one's environmental commitments and performance. It has become a leading ground for legal action, with more than one hundred and fifty class actions recorded in the United States by early 2025, often targeting directors' liability. For the insurer, coverage is a delicate question. If the misleading presentation is judged negligent, it is potentially covered; if it is intentional, it is excluded. The risk no longer arises from the company's acts but from the gap between its words and its acts. That gap has produced the opposite phenomenon, greenhushing, by which companies keep silent about their commitments for fear of suits.
Textbook case: a company claiming carbon neutrality without a credible plan exposes itself to a greenwashing action, whose indemnification under the directors' liability policy will depend on whether the claim was negligent or intentional.
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