‘More of the same, only worse’ on negligence claims

A barrister has warned professionals working in the property and construction sector about the increased risks of professional-negligence claims arising from climate change.

Peter O’Brien was speaking at a conference last week hosted by law firm Holmes, together with the Professional Negligence Lawyers’ Association (PNLA), that examined the evolving landscape of professional-negligence claims in Ireland and Britain.

He told the event that, while the timeframe and the extent of climate-change risks as they emerged over the next 15 to 20 years was up for debate, the fact that there would be “dramatic changes” was well accepted by all.

The barrister broke down the potential risks into three categories:

• Physical risks,
• Transition risks, and
• Liability or litigation risks.

O’Brien cited figures from the European Environmental Agency that estimated €738 billion in environmental damage from 1980 to 2023, noting that one-quarter of this amount occurred in the final three years.

He noted also, however, that separate figures from property professionals rated Dublin as the European city with the lowest climate risk.

Physical risks

O'Brien listed physical risks such as the increased frequency and severity of flooding and storm damage, which could lead to more frequent high-value claims.

The barrister said that, while the duty of care for professionals such as surveyors or engineers remained the same, there was an increased level of risk.

“It's more of the same, but only worse,” he remarked, adding that a changing climate meant that there was also the potential for ‘exotic’ risks such as wildfires.

O’Brien noted that the Law Society of England and Wales had introduced a professional-practice direction that made climate-risk analysis one of the steps for a conveyancing transaction.

Meanwhile, the RIAI and Engineers Ireland have both produced voluntary codes and design guides in relation to what should be done to mitigate climate risk.

“While that's voluntary at the moment, you can easily see in years to come how a failure to comply with a voluntary code might give rise to a professional-negligence action against those experts,” the barrister stated.

Transition risks

He described transition risks as those arising from the mitigation steps being taken in relation to climate change, such as significant changes to policy, legislation, regulations, reporting requirements, and markets.

“There are going to be new requirements coming down the tracks for professionals involved in the design, construction, or renovation of buildings to integrate environmental efficiency measures, climate resilience into new building stock,” O’Brien stated.

On the other side of the property transaction, lawyers, estate agents, and financial advisors would also have to consider the implications of climate-change transition.

Changes ‘well-flagged’

He also pointed out that section 75 of the Automatic Enrolment Retirement Savings System Act 2024 required contractual provision for investment advisors to have regard to environmental matters – including climate risks.

Accountants, he said, also faced new requirements on the management and disclosure of climate risks in annual reports and accounts.

While describing these as “bare-bones measures”, the barrister added that there were anxious litigants “looking to put flesh on those bones”, and that could give rise to a lot of litigation in the future.

O’Brien told the conference that the legislative model for a transition to a low-carbon economy was clear, adding that a failure by a professional to anticipate what those “well-flagged” changes were would lead to risks in relation to any failure to comply with those changes.

He referred to the EU’s Energy Performance of Buildings Directive, which sets new standards for energy ratings, warning that this was something that solicitors involved in the conveyancing or leasing of buildings for terms into the 2030s would have to be aware of.

There was the added risk, O’Brien warned, of a non-compliant building becoming a ‘stranded asset’, leading to “very high-value" claims.

‘Forward-looking mindset’

On emerging liability risks, the barrister spoke about the “evolving duty of care” facing professionals, stressing that climate change meant that the past was no longer a good guide to the future.

“That introduces the issue of whether adherence to current standards is sufficient in the context of an evolving climate risk,” he stated.

O’Brien said the US courts, in some recent cases, had indicated an openness to examining existing codes or standards in the light of emerging or changing climate risks.

“As the risks become greater and larger, then you have increasing obligations on professionals to warn about all those risks, and a failure to warn giving rise to a potential for further litigation,” he stated, adding that ‘greenwashing’ allegations were a potentially significant new area of litigation.

Overall, O’Brien concluded, professionals would need to adopt a forward-looking mindset, both in terms of what the regulations are, but also how they will change.