Court finds insurance policy pollution exclusion applies to claims involving liability for greenhouse gas emissions | Hogan Lovells

Overview

In the US, cities and states are filing climate-related lawsuits against fossil fuel companies, accusing them of misleading the public about fossil fuel risks. These companies seek coverage from insurance companies to defend such claims and manage potential financial risks. status Aloha Petroleum Limited v. Pittsburgh National Association Fire Insurance Company and American Home Assurance Company. It is the first decision of its kind to consider insurance policy coverage in the context of this type of case.

This claim

This case involved Aloha seeking defense costs from insurance companies for lawsuits filed against Aloha by the City and County of Honolulu and the County of Maui for climate change-related damages. The underlying lawsuits allege that “the defendants had actual knowledge that their products were defective and dangerous” and that they “acted with conscious disregard for the potentially dangerous consequences of their conduct and the foreseeable impact of their products on the rights of others.”

In its decision, the court answered two questions regarding Aloha’s insurance coverage:

1. Whether careless conduct constitutes an “accident” under Aloha’s insurance policies (required to trigger policy coverage); And
2. If greenhouse gases are considered “pollutants” under the pollution exclusion clause of insurance policies (in which case insurers may deny coverage).

Aloha argued that insurance companies had a duty to defend themselves in the underlying lawsuits because the lawsuits alleged careless conduct and that should be treated as an “accident” under the policies. Aloha also argued that greenhouse gases should not be considered pollutants under the pollution exclusion because they are different from traditional pollutants such as industrial wastes. The insurers argued that: (i) the lawsuits did not involve accidents but intentional and foreseeable damages resulting from Aloha’s activities; and (ii) the claim is excluded because greenhouse gases fall within the definition of pollutants and therefore the pollution exclusion applies.

Judgment

The court determined that “when the insured perceives a risk of harm, his conduct is an ‘accident’ unless he intends to cause harm or a practically certain harm is expected.” The court noted that carelessness does not necessarily involve the intent or expectation of injury, which is consistent with the definition of accident in similar cases. Accordingly, the court decided that Aloha’s behavior amounted to an ‘accident’ in terms of triggering coverage under the relevant insurance.

But – and perhaps more interestingly – the court ruled in favor of the insurers on the second question, concluding that greenhouse gases fell within the definition of “traditional environmental pollutants.” As a result, the pollution exclusion kicks in and insurers are not obligated to defend Aloha against climate-related claims.

The reasons why the court reached this conclusion regarding the dismissal were as follows.

• Climate heating gases are an example of the “conventional environmental pollution” that pollution exclusions are designed to exclude.
• On a plain reading, greenhouse gases fit the exception’s definition of “pollutant.”
• The applicable “legal uncertainty” rule in the Hawaii court should not affect the outcome because greenhouse gases are “pollutants” under any reasonable interpretation.
• The court found that there were no two reasonable interpretations of the term ‘pollutant’ and therefore the exclusion was not ambiguous.

Comment

While this decision is specific to the language and applicable law in question, it is nevertheless of broad interest given the widespread use of pollution exclusions in liability coverage and their particular relevance to climate liability claims. Given the number of ‘live’ climate cases involving similar issues around the world (a trend that shows no signs of slowing down), defendant insureds and their insurers will closely scrutinize the relevant policy wording and any findings of liability or recourse. exceptions, as in this case. This is likely to be just the first of many decisions considering insurance wordings and exclusions in the context of climate litigation and potentially nature and biodiversity litigation.