Insurance coverage for Global Warming?

This is from Rough Notes magazine, a periodical for insurance agents. This is a record of a court case decided in Alaska.

This issue at hand is, is there insurance coverage for liability from creating greenhouse gases? The court sanely decided that there is not, but for a tenous reason. There is an exclusion for intentional acts, so the court denied the claim. However, this leaves the door open for for rendering coverage for unintentional acts that create greenhouse gases.

Given this, it isn't too hard to imagine a person or entity getting sued for creating greenhouse gases, even if it is incidental to the situation, and having an insurance policy pay for the "loss." Since people emit carbon dioxide simply by breathing, it isn't outside the realm of possibility that they could be found liable for damaging the environment.

Troubling indeed.
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Were greenhouse emissions an "occurrence"?

AES Corporation was in the business of generating and distributing electricity. It was insured under commercial general liability policies issued by Steadfast Insurance Company. In 2008, a small village called Kivalina, located on the northwest coast of Alaska, sued AES for allegedly damaging the village by intentionally conducting activities that caused global warming. According to the lawsuit, AES engaged in activities using fossil fuels that emit carbon dioxide and other greenhouse gases. The emissions allegedly caused sea ice that protected the village's shoreline to form or melt earlier or later than it had in the past, causing storm surges and resulting in shoreline erosion.

AES asked Steadfast to provide a defense, which it did under a reservation of rights. The insurer then filed a declaratory judgment action claiming it did not owe AES a defense or indemnification. The lower court found that the Kivalina lawsuit did not allege an "occurrence" within the meaning of the policy and that, therefore, the allegations in the complaint were not covered by the policy. AES appealed.

The Steadfast policies provided coverage for damage that resulted from an "Occurrence." "Occurrence” was defined as "an accident, including “continuous or repeated exposure to substantially the same general harmful conditions."

On appeal, the Supreme Court of Virginia noted that when a complaint alleges only intentional acts, if the resulting harm is a natural and probable consequence of those acts, there is no accident. However, if the injury resulted from an unforeseen cause, it may be an accident. Therefore the issue on appeal was whether the lawsuit could be construed as alleging that Kivalina's damages 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.

Kivalina's complaint alleged that AES intentionally released carbon dioxide into the atmosphere as a regular part of its energy-producing business. It also alleged that there was scientific agreement that these emissions could cause damage such as that suffered by Kivalina. Given these facts, the court found that AES knew or should have known the consequences of its actions, and that therefore there was no occurrence within the meaning of the policy.

The decision of the lower court was affirmed.

AES Corporation vs. Steadfast Insurance Company-No. 1007764 – Supreme Court of Virginia – September 16, 2011-2011 WI, 4139736 (Va. ).