Virginia Court Finds for Insurer in the First Climate Change-Related Insurance Coverage Case
The Virginia Supreme Court decided on Friday that an insurer does not have a duty to defend its insured in the face of a climate change nuisance case, because intentional emissions, even if they have unintended results, are not an "accident" under the insurance policy. The case, AES Corp v. Steadfast Insurance Company, had been closely watched as the first of its kind, pitting the new breed of climate change defendants against their insurers.
AES Corporation is a defendant in Native Village of Kivalina v. ExxonMobil Corp., which alleges that the utility's emissions contributed to the rising sea levels that are endangering the Alaskan village, located on a barrier island. That suit was originally dismissed in 2009 on the grounds that regulating greenhouse gas emissions was a political issue that needed to be resolved by Congress, rather than by courts, and an appeal is pending before the 9th Circuit Court of Appeals.
Steadfast Insurance Company, which was defending AES under a reservation of rights, filed this suit, seeking a declaratory judgment that the commercial general liability policies AES held did not require it to provide insurance coverage. The Virginia Supreme Court upheld the decision of the lower court, finding that Steadfast owes no duty to AES because the allegations in the Kivalina complaint do not constitute an "accident" or "occurrence" within the meaning of the policies.
AES had argued that Steadfast's duty was triggered because the plaintiffs in Kivalina accused it of negligence -- the classic event that triggers CGL policies. However, the language of the policy required Steadfast to defend AES against claims for damages of bodily injury or property damage caused by an occurrence or accident, with "occurrence" defined as "an accident, including continuous, repeated exposure to substantially the same general harmful condition." The court found that the Kivalina lawsuit did not meet this definition, because the complaint alleged that the utility intentionally emitted carbon dioxide, and knew or should have known that the impacts of its emissions would lead to global warming and effect vulnerable communities like this coastal Alaskan village.
The Virginia judge found that, even if AES was ignorant of the effect of its actions and did not intend to cause harm, Kivalina still alleges that the damages were a natural and probable consequence, not a fortuitous event or accident, as Virginia law requires for insurance coverage to be triggered. Consequently, the judge concluded that, "whether or not AES's intentional act constitutes negligence, the natural and probable consequence of that intentional act is not an accident under Virginia law."
It is important to remember that, since insurance cases are decided under state law, this decision applies only to Virginia and this particular policy, and it remains to be seen whether other courts will follow the same rationale. As plaintiffs bring new climate change claims under state tort law and based on creative legal theories, other courts may reach different conclusions about whether the unintended effects of intentional emissions can ever be an "accident."
