Increased public attention to environmental issues, new regulatory changes, and two recent court rulings combine to raise the risk of lawsuits against directors and officers related to a company's alleged contribution to global warming, attorneys and others warn.

“This is an emerging issue and an issue of increasing focus for directors and officers,” said Lindene Patton, Washington-based climate product officer at Zurich Financial Services Group.

On Oct. 19, the 5th U.S. Circuit Court of Appeals reversed a district court in Ned Comer et al. vs. Murphy Oil USA Inc. et al., ruling that Mississippi residents and landowners had standing to sue energy and chemical manufacturing companies for their alleged contributions to global warming, which the plaintiffs argue intensified Hurricane Katrina and property damage they suffered from the storm.

On Sept. 21, the 2nd U.S. Circuit Court of Appeals reversed a district court in State of Connecticut et al. vs. American Electric Power Co. Inc. et al. and ruled that lawsuits by state attorneys general and other plaintiffs could proceed against the operators of coal power plants that emitted greenhouse gases and allegedly contributed to global warming.

However, a federal judge in California threw out a similar lawsuit by an Alaskan Eskimo village against oil and gas companies in October.

Still, the two cases in which judges sided with plaintiffs—including in the typically conservative 5th Circuit—worry D&O liability underwriters, attorneys and others.

“If the two cases, American Electric and Comer, really do signal a way in which courts are going to treat global warming cases, then by all means there is an increased risk of D&O claims,” said William G. Passannante, a New York-based attorney and shareholder in Anderson Kill & Olick P.C.

Attorneys say such suits must overcome large legal hurdles to prevail. Regardless of the final outcome, the cost of defending against such a suit is substantial and the recent decisions could invite more plaintiffs to file similar litigation, some say.

“Pandora's box has been thrown wide open,” said William Stewart, a New York-based attorney and co-chair of the climate change and global warming practice at Cozen O'Connor P.C., in a recent white paper about the cases. “It will likely take the muscle of either Congress or five U.S. Supreme Court justices to force it shut,” wrote Mr. Stewart and co-author Danielle Willard, a law clerk at the firm.

At the same time, disclosure requirements related to greenhouse gas emissions are increasing, legal observers say. An Oct. 27 bulletin from the Securities and Exchange Commission reversed a previous agency rule and allows shareholders to request information about financial risks from social and environmental issues, including climate change. In addition, the SEC reportedly is considering a rule that would require public companies to disclose climate change risks in their annual financial filings.

“The bottom line is the SEC has put requirements out there that the companies need to pay greater heed to disclosure around environmental issues,” said Michael Speer, who leads the Chicago-based business interruption and fidelity claims investigations unit at SMART Business Advisory & Consulting L.L.C.

The Financial Accounting Standards Board has proposed an accounting standard that would require increased disclosure of a company's contingent liabilities. That rule change is worrisome, Steven L. White, a vp at Arch Insurance Co., said at the conference of the Professional Liability Underwriting Society in Chicago this month.

“If that (passes), much like the mark-to-market changes that occurred a couple years ago, you could have some severe changes in some companies' financials, to the point that they may actually be insolvent by way of greenhouse gases,” Mr. White said.

Meanwhile, the National Assn. of Insurance Commissioners in March adopted a long-debated requirement that insurance companies with $500 million in premiums disclose to state regulators the financial risks they foresee from global warming.

When disclosure requirements increase, the number of lawsuits against companies and their executives for inadequately disclosing emerging or potential risks also increases, attorneys and D&O observers say.

“The risk from the (polluting) acts themselves doesn't necessarily go away; it's always been there,” Mr. Speer said. “But now we're talking about a greater level of risk from disclosure of these risks.”

Shareholders in recent years have filed hundreds of requests for information on companies' responses to such risks, according to CERES, a Boston-based coalition of investors, environmental groups and public interest groups that directs the Investor Network on Climate Risk, an alliance of 80 institutional investors focused on how climate change affects business.

No exclusions in D&O liability policies specifically bar coverage for global warming-related lawsuits, Mr. Passannante said. But he and John G. Nevius, a New York-based attorney and shareholder at Anderson Kill, said they expect insurers to use the pollution exclusion in a D&O liability policy to exclude coverage.

In a case in Virginia state court, Steadfast Insurance Co. maintains the pollution exclusion in its general liability policy—among other reasons—eliminates its duty to defend one of the defendants in the Alaskan Eskimo case, which Mr. Nevius said could have implications for D&O liability pollution exclusions.

Both men say a D&O liability policy's pollution exclusion should not bar coverage for climate change-related lawsuits, because those suits are triggered by the business decision to improperly disclose the risk, not by the actual pollution.

However, Steve Shappell, managing director of Aon Financial Services Group in New York and Denver, said many pollution exclusions are written so broadly that they likely would bar coverage for climate change-related suits.

Still, Mr. Shappell said the soft D&O liability market in recent years has allowed some policyholders to negotiate carve-backs to the pollution exclusion at relatively affordable prices. Those carve-backs would allow coverage for Side A suits against individual directors and officers and, in some cases, shareholder litigation against the company, Mr. Shappell said. But he said they would not cover cleanup costs—for example, where regulators look to tap a bankrupt company's D&O liability policy proceeds to pay for cleanup costs.

Some insurers have begun offering D&O policies that affirmatively cover global warming-related lawsuits. Underwriters are doing a good job of forcing policyholders and brokers to prove why they deserve a carve-back on the pollution exclusion and providing one when merited, Mr. Shappell said.

“There's definitely a bunch of arm wrestling going on with the carriers on how much exposure they're willing to take,” he said.