Misleading overstatement of a company's sustainability efforts, become a major ground for litigation and directors' liability claims.
Greenwashing designates 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, it poses a delicate coverage question, depending on whether the misleading presentation is judged negligent, and therefore potentially covered, or intentional, and therefore excluded. The risk no longer arises from the company's acts but from the gap between its words and its acts, which has generated the opposite phenomenon of greenhushing, by which companies keep silent about their commitments for fear of suits.
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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