Global Warming Claims Are Not Occurrences
The general liability insurer for a generator/distributor of electricity brought an action seeking a declaratory judgment that it had no duty to defend an insured on a civil complaint filed against the insured based on the insured's contribution to global warming through emission of greenhouse gases. The Supreme Court of Virginia issued its ruling on this in The AES Corporation v. Steadfast Insurance Company, 2011 WL 4139736 ( Va. ).
AES is a Virginia-based energy company that holds controlling interests in companies specializing in the generation and distribution of electricity in numerous states. AES paid for a general liability policy issued by Steadfast from 1996 to 2000 and from 2003 to 2008.
The native village of Kivalina and the city of Kivalina, Alaska, filed a lawsuit against AES and others for allegedly damaging the village by causing global warming through the emission of greenhouse gases. AES requested Steadfast to provide a defense and insurance coverage for these claims. The insurer did provide a defense under a reservation of rights and then filed a declaratory judgment action to determine its duties. The circuit court in Virginia entered judgment in the insurer's favor and this appeal followed.
The Supreme Court of Virginia said that the question before it was whether the lower court erred in ruling that the complaint filed against AES did not allege an occurrence as that term is defined in the general liability policy. Occurrence is defined as an accident, including continuous or repeated exposure to substantially the same general harmful condition.
The complaint against AES charged that AES engaged in energy-generating activities using fossil fuels that emit carbon dioxide and other greenhouse gases, and that the emissions contributed to global warming that caused land-fast sea ice protecting the village's shoreline to form later or melt earlier in the annual cycle. This allegedly exposed the shoreline to storm surges, resulting in the erosion of the shoreline and rendering the village uninhabitable. The complaint alleges that AES intentionally emits millions of tons of carbon dioxide and other greenhouses gases into the atmosphere and that AES knew or should have known of the impacts of its emissions.
AES argued that the complaint alleged negligent acts and that the consequences of its intentional emissions were unintentional and so, the policy applied. Steadfast disagreed.
The Supreme Court noted that, in Virginia, the dispositive issue in determining whether an accidental injury occurred is not whether the action undertaken by the insured was intended, but rather whether the resulting harm is alleged to have been a reasonably anticipated consequence of the insured's intentional act. Thus, the resolution of the issue here turns on whether the complaint can be construed as alleging that Kivalina's injuries resulted from unforeseen consequences that a reasonable person would not have expected to result from AES's deliberate act of emitting carbon dioxide and greenhouse gases.
The court did take note of the fact that the complaint alleges that AES intentionally released carbon dioxide into the atmosphere as a regular part of its energy-producing activities. The complaint also alleges that there is a clear scientific consensus that the natural and probable consequence of such emissions is global warming and damages such as Kivalina suffered. And, the Court went on, the natural and probable consequence of an intentional act is not an accident under Virginia law. Moreover, even if AES were negligent and did not intend to cause the damage that occurred, the gravamen of Kivalina's claim is that the damages it sustained were the natural and probable consequences of AES's intentional emissions. Therefore, Kivalina did not allege that its property damage was the result of an occurrence, that is, a fortuitous event or accident, and such loss is not covered under the general liability policy of Steadfast.
The ruling of the circuit court was affirmed.
Editor's Note: The Supreme Court of Virginia did not weigh in on whether global warming exists and is caused by human activities with its decision in this case. The point made by the court was that an occurrence, as defined, has to happen before the general liability policy applies. In this instance, the complaint did not allege an occurrence and so, the coverage was not activated.