Virginia high court rules insurance companies not liable for global warming

Virginia high court rules insurance companies not liable for global warming

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[JURIST] The Virginia Supreme Court [official website] ruled [opinion, PDF] Friday that the effects of global warming [JURIST news archive] are not covered by a standard liability insurance policy. The AES Corporation [corporate website], a power company, is facing a suit, Kivalina v. Exxon Mobil Corp., for its contributions to global warming. AES expected that its insurance company, Steadfast, would defend this suit as part of their liability coverage. The Virginia Supreme court ruled that they are under no duty to do so, due to no single “accident” or “occurrence” forcing the suit, but intentional actions.

We have held that an “accident” is commonly understood to mean “an event which creates an effect which is not the natural or probable consequence of the means employed and is not intended, designed, or reasonably anticipated.” Kivalina alleges that AES intentionally released tons of carbon dioxide and greenhouse gases into the atmosphere as part of its electricity-generating operations. We have held that “[a]n intentional act is neither an ‘occurrence’ nor an ‘accident’ and therefore is not covered by the standard policy.” … If a result is the natural and probable consequence of an insured’s intentional act, it is not an accident. However, even though the insured’s action starting the chain of events was intentionally performed, when the alleged injury results from an unforeseen cause that is out of the ordinary expectations of a reasonable person, the injury may be covered by an occurrence policy provision. In such a context, 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, resolution of the issue of whether Kivalina’s Complaint alleges an occurrence covered by the policies turns on whether the Complaint can be construed as alleging that Kivalina’s injuries, at least in the alternative, 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 Kivalina v. Exxon Mobil Corp. appeal was filed in the US Court of Appeals for the Ninth Circuit [official website] in November 2009 after a district court’s dismissal [opinion text] on standing. The district court ruled that, being a political question, the courts could not intervene. Kivalina, an Alaskan village, is alleging that their village is being destroyed due to rising sea levels, a consequence of global warming.

In July, the UN Security Council [official website] made its first official statement [JURIST report] implicating climate change as a serious threat to world peace and security. At the urging of Germany, which released a Concept Note [text] to lead the discussion, the Security Council debated global warming for the first time since 2007. The US Supreme Court [official website] ruled [JURIST report] in American Electric Power Co. v. Connecticut [Cornell LII backgrounder] that the Environmental Protection Agency (EPA) [official website] and the Clean Air Act [text] displace claims made under the federal common law of nuisance regarding whether electric utilities contributed to global warming. All eight justices agreed in rejecting the claims by eight states, New York City and three private land trusts invoking the federal common law for public nuisance against four power companies and the Tennessee Valley Authority (TVA) [official website]. The plaintiffs sought to control greenhouse gas emissions by creating a annually declining cap on emissions. The court held that to challenge greenhouse gas emissions the plaintiffs may file petitions for rulemaking with the EPA to set emissions standards. Currently, the EPA is undergoing rulemaking on the issue and is set to issue new standards by May 2012.