By James S. Malloy and John M. Sylvester 1 i. introduction By now, - - PDF document

811

INSURANCE COVERAGE FOR GLOBAL WARMING LIABILITY CLAIMS

By James S. Malloy and John M. Sylvester

1

• i. introduction

By now, most of us have heard of the phenomenon called global warming and the ongoing debate over its effects on the planet. Indeed, former Vice President Al Gore’s best-selling book and Academy Award–winning docu- mentary, “An Inconvenient Truth,” have made global warming a part of the popular lexicon. Regardless of one’s beliefs regarding the causes or effects

• f global warming,

2 the debate has now seemingly shifted to the courtroom

with potentially costly consequences to corporate defendants. In the past, courts have typically granted preliminary motions to dismiss suits seeking to impose liability on defendants for damages allegedly caused by global warming on the grounds that the plaintiffs lacked standing to pursue such claims and that the regulation of greenhouse gases (GHGs)

3 was a non-

justiciable issue. Based on recent developments, however, global warming litigation may be turning from a mere inconvenience to something more problematic for companies across a wide array of industries: increased

• 1. The authors are lawyers in the Pittsburgh office of K&L Gates LLP

, a law firm that regularly represents policyholders in insurance coverage disputes, including global warming– related claims. The views expressed herein are those of the authors and not necessarily those

• f the law firm or its clients. The authors would like to thank John Hagan, John Estep, and

Jon Christman of K&L Gates LLP for their assistance on this article. Portions of this article were published previously by James Malloy in Insurance Coverage Alert: Insurance Coverage for Emerging Global Warming Claims , Newsstand (Nov. 18, 2009), www.fmocklaw.com /news stand / Detail.aspx?publication=6023 (a K&L Gates Internet publication).

• 2. Recent polls show that “48% of Americans . . . believe that the seriousness of global

warming is generally exaggerated.” See Frank Newport, Americans’ Global Warming Concerns Continue to Drop , Mar. 11, 2010, www.gallup.com /poll /126560/americans-global-warming- concerns-continue-drop.aspx.

• 3. Carbon dioxide is “the principal anthropogenic [GHG] that affects the Earth’s radiative

balance.” U.S. Envtl. Prot. Agency, Glossary of Climate Change T erms , www.epa.gov/ climatechange /glossary.html (last visited July 18, 2010).

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 812

defense costs and potential liability for damages awards. For example, con- sider the following:

• T

wo federal appellate court decisions in late 2009 ruled that plaintiffs have standing to pursue causes of action against corporate defendants that emit GHGs, seeking to recover damages allegedly caused by global warming.

4

• The Supreme Court in

Massachusetts v. Environmental Protection Agency rec-

• gnized that “the harms associated with climate change are serious and

well recognized” and that “EPA [Environmental Protection Agency] does not dispute the existence of a causal connection between man-made green- house gas emissions and global warming.”

5

• The Obama administration has dramatically increased the government’s

efforts to regulate climate change–related risks, including capping GHG emissions.

6

These developments, among others, have combined to create an increas- ingly hostile litigation environment that appears to be on the verge of heat- ing up in courts across the nation for companies that have emitted GHGs,

• r continue to do so, as part of their ongoing business operations.

Although insurance coverage for global warming liabilities may have been an afterthought for defendants because such cases were routinely dismissed at the preliminary stage, the availability of insurance to cover defense costs and any potential liability is an important factor to consider in the defense of these claims. Allegations that GHGs emitted by the de- fendants contributed to global warming, which in turn caused property damage or bodily injury to plaintiffs, may be sufficient to trigger general liability policies.

7 Consequently, companies that have been sued regarding

global warming claims may have insurance available to cover some or all of the costs of these litigations. This article will focus on the potential issues that policyholders may face in seeking general liability coverage for global warming claims. Although many of the coverage issues will turn on the language of the relevant in-

4. See Connecticut v. Am. Elec. Power Co., 582 F.3d 309 (2d Cir. 2009); Comer v. Murphy Oil USA, 585 F.3d 855 (5th Cir. 2009) (see Section II.A for recent developments in this ap- peal).

• 5. 549 U.S. 497, 521, 523 (2007). The Environmental Protection Agency (EPA) has since

promulgated an endangerment finding related to GHGs that is being challenged in the courts. See 74 Fed. Reg. 66,496 (Dec. 15, 2009); Robin Bravender, 16 “Endangerment” Law- suits Filed Against EPA Before Deadline , N.Y. T imes, Feb. 17, 2010. The EPA has settled some

• f these lawsuits. See Proposed Settlement Agreements, Clean Air Act Citizen Suit, 75 Fed.
• Reg. 42,085 ( July 20, 2010).

6. E.g ., American Clean Energy and Job Security Act of 2009, H.R. 2454, 111th Cong. (2009); see House Passes Historic Waxman-Markey Clean Energy Bill , June 28, 2009, http://energycommerce.house.gov/index.php?option=com_content&view=article&id=1697: house-passes-historic-waxman-markey-clean-energy-bill&catid=155:statements&Itemid=55.

• 7. Depending on the nature of the specific claims alleged and the specific parties named as

defendants, other types of liability insurance, such as directors’ and officers’ liability (D&O) coverage or errors and omissions coverage, may also be implicated by such claims.

Insurance Coverage for Global Warming Liability Claims 813

surance policy, the applicable state law, and the set of facts unique to each policyholder, this article will provide a broad primer on the key liability in- surance issues for companies faced with potential global warming–related

• claims. In examining these issues, this article will cover four main topics:

(1) the current state of litigations over global warming claims and insur- ance coverage for such cases, (2) the duty to defend under general liability policies, (3) the relevant liability policy language that will most likely be the focus of coverage disputes over global warming liabilities, and (4) the current developments by the insurance industry to address climate change liabilities and the impact those changes might have on the availability of coverage for such claims under insurance policies issued in the future.

• ii. history of global warming litigations

and related insurance coverage disputes

• A. The Underlying Global Warming Claims

T

• date, there have been four reported suits seeking to impose liability for

loss arising from corporate defendants’ GHG emissions’ alleged contribu- tion to global warming: Comer v. Murphy Oil USA , Case No. 1:05-cv-00436-LTS-RHW (S.D.

• Miss. Aug. 30, 2007)

This putative class action was filed by residents and owners of property in the Mississippi Gulf Coast against oil and coal companies.

8 Plaintiffs

alleged that defendants’ industrial operations and GHG emissions contrib- uted to global warming, “in turn caus[ing] a rise in sea levels and add[ing] to the ferocity of Hurricane Katrina,” which allegedly destroyed or caused severe damage to plaintiffs’ property.

9 Plaintiffs alleged a number of claims

based on state common law theories, including public and private nuisance, trespass, negligence, unjust enrichment, fraudulent misrepresentation, and civil conspiracy and sought monetary damages.

10 Defendants moved to dis-

miss plaintiffs’ complaint on the grounds of lack of standing to assert their claims and that the claims involved nonjusticiable political questions.

11

The district court, in ruling from the bench, dismissed the complaint on the grounds that it presented a political question.

12

Plaintiffs timely appealed to the U.S. Court of Appeals for the Fifth Cir- cuit, which reversed the district court on October 16, 2009, and reinstated

8. Comer , 585 F.3d at 859–60. 9. Id . at 860–61. 10. Id . at 859; see also Third Amended Class Action Complaint ¶¶ 28–41, Comer v. Mur- phy Oil USA, No. 1:05-cv-00436-LTS-RHW (S.D. Miss. Apr. 19, 2006). 11. Comer , 585 F.3d at 860. 12. Id . at 860 n.2.

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 814

the nuisance, trespass, and negligence claims on the grounds that plain- tiffs did have standing to assert those claims and that those claims did not involve nonjusticiable political questions.

13 Defendants filed a motion for

reargument en banc, which was granted by the Fifth Circuit, thereby va- cating the October 16, 2009, panel decision.

14 On May 28, 2010, the Fifth

Circuit dismissed the appeal because the court could not obtain a quorum for an en banc hearing due to recusal issues.

15 The court’s decision to va-

cate the appeal rather than reinstate the panel decision thereby restores the trial court’s dismissal.

16 Plaintiffs’ remaining redress is a certiorari petition

to the Supreme Court. The strange procedural turn of events in the Fifth Circuit is sure to lead plaintiffs to explore this option. Connecticut v. American Electric Power Co., Inc., Docket Nos. 05-5104-cv, 05-5119-cv (S.D.N.Y. 2005)

17

Eight states, the City of New York, and three private land trusts sued six power company defendants that own and operate fossil fuel power plants in twenty states, seeking injunctive relief to abate defendants’ GHG emis- sions that allegedly contribute to the public nuisance of global warming.

18

Defendants moved to dismiss on the grounds, inter alia, of a nonjusticiable political question and that plaintiffs lacked standing to sue.

19 The district

court dismissed the complaints, holding that plaintiffs’ claims presented a nonjusticiable political question.

20 The U.S. Court of Appeals for the

Second Circuit disagreed and reversed the district court on September 21, 2009, holding that the complaints did not present a political question and plaintiffs had standing to sue.

21 Defendants moved for a reargument en

banc, which was denied on March 5, 2010.

22 Defendants have filed a peti-

tion for writ of certiorari asking the Supreme Court to hear their appeal. Native Village of Kivalina v. ExxonMobil Corp.,

• Civ. Action No. CV 08

1138 (N.D. Cal. 2009) The community of Kivalina, Alaska, brought suit against energy, oil, and utility companies, claiming that global warming is destroying Kivalina

13. Id . at 879–80. 14. See Comer v. Murphy Oil USA, 598 F.3d 208 (5th Cir. 2010). 15. See Comer v. Murphy Oil USA, 607 F.3d 1049 (5th Cir. 2010). 16. Id . at 1055.

• 17. This case was consolidated with

Open Space Institute, Inc. v. American Electric Power Co., Inc ., Civ. Action No. 1:04-cv-05670-LAP (2005), which was filed on the same day in the same court. See Connecticut v. Am. Elec. Power Co., 582 F.3d 309, 316–19 (2d Cir. 2009). 18.

• Am. Elec. Power

, 582 F.3d at 316–19. 19. Id . at 319.

• 20. Connecticut v. Am. Elec. Power Co., 406 F. Supp. 2d 265 (S.D.N.Y. 2005).

21.

• Am. Elec. Power

, 582 F.3d at 392–93. 22. See Order, Connecticut v. Am. Elec. Power Co., No. 05-5104-cv (2d Cir. Mar. 5, 2010).

Insurance Coverage for Global Warming Liability Claims 815

because it is melting the Arctic sea ice that protects the village from winter storms and erosion.

23 Kivalina alleged that “houses and buildings are in im-

minent danger of falling into the sea” when “battered by storms” and when ground underneath it has crumbled and that if the entire village is not relocated, at a cost of hundreds of millions of dollars, it will be destroyed.

24

Kivalina asserted claims of common law nuisance and civil conspiracy and sought monetary damages for defendants’ past and ongoing contributions to global warming.

25 Defendants moved to dismiss the complaint on the

grounds, among others, that it involved a political question. The district court agreed and dismissed plaintiffs’ claims. In doing so, the court distin- guished the recent appellate decision in American Electric Power .

26 Plaintiffs

appealed to the U.S. Court of Appeals for the Ninth Circuit and filed their

• pening brief in March 2010. The appellees filed their briefs at the end of

June 2010. California v. General Motors Corp.,

• Civ. Action No. 3:06-cv-05755-MJJ

(N.D. Cal. 2006) The State of California sued various automobile manufacturers, seeking damages for the automakers’ contributions to global warming, which the complaint alleged were over 20 percent of the human-generated carbon di-

• xide emissions in the United States and over 30 percent of such emissions

in California. California sought to hold defendants jointly and severally li- able for creating, contributing to, and maintaining a public nuisance under federal and state law. Defendants moved to dismiss the complaint on the grounds, inter alia, that it raised a nonjusticiable political question.

27 The

district court agreed and dismissed the case in September 2007.

28 Califor-

nia appealed the decision to the Ninth Circuit but subsequently withdrew its appeal in June 2009.

29

If plaintiffs in Comer seek a writ of certiorari, as is expected, then the remaining global warming claims will all still be in various stages of the appeals process. Whether the Ninth Circuit in Kivalina follows the prior decisions of the Second Circuit in American Electric Power and the panel decision of the Fifth Circuit in Comer could influence whether the U.S.

• 23. Native Vill. of Kivalina v. ExxonMobil Corp., 663 F. Supp. 2d 863, 868–69 (N.D. Cal.

2009). 24. Id . 25. Id . at 869. 26. Id . at 883.

• 27. California v. Gen. Motors Corp., No. C06-05755 MJJ, 2007 WL 2726871, at *2 (N.D.
• Cal. 2007).

28. Id . at *17. 29. See Order, California v. Gen. Motors Corp., No. 07-16908 (9th Cir. June 24, 2009), available at www.globalclimatelaw.com /uploads /file /California%20v%20GM%20dismissal. pdf.

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 816

Supreme Court decides to hear any further appeals on the issue. If the Kivalina claim is reinstated by the Ninth Circuit, then there would be an agreement among the circuits (notwithstanding the en banc opinion in Comer ) that the global warming claims should proceed in the trial courts in the very near future.

• B. Coverage Litigation Regarding Global Warming Liabilities

As of September 2010, there has only been one reported litigation regard- ing insurance coverage for the types of allegations in these four suits. In Steadfast Insurance Co. v. AES Corp ., the insurer, Steadfast, filed suit against the policyholder, AES, seeking declaratory relief that the allegations of the Kivalina claim were not covered under the commercial general liability (CGL) policies that Steadfast had issued to AES during the period 2003 to 2008.

30 Steadfast raised three arguments as to why the

Kivalina claim was not covered: (1) the complaint does not allege property damage caused by an “occurrence,” (2) the loss at issue was a loss in progress, and (3) the pol- lution exclusion bars coverage.

31 Steadfast moved for summary judgment

in March 2009, which the court denied in October 2009, holding that questions of fact existed as to the allegations of negligence versus inten- tional conduct, the definition of pollutant , and the parties’ intent at the time

• f contract formation.

32 AES then moved for summary judgment on the

grounds that the complaint alleged an occurrence, i.e., property damage due to negligence, and that because the Kivalina claim had been dismissed by this time, Steadfast’s request for declaratory judgment on its indemnity

• bligation was moot and should be dismissed. Steadfast cross-moved for

summary judgment in response. On February 5, 2010, the court entered an order declaring that Steadfast had no duty to defend AES in Kivalina because the complaint did not allege an occurrence as that term was de- fined in the Steadfast policies.

33 The order gives no further detail on the

ruling and does not address the pollution exclusion or loss-in-progress ar-

• guments. AES has appealed the trial court’s decision to the Supreme Court
• f Virginia, which granted the petition for appeal on August 2, 2010.

34

In sum, global warming litigation, and especially disputes over insurance coverage for such liabilities, is in its infancy. Whether these claims develop into a burgeoning area of liability for companies or, alternatively, fall by

30. See Complaint for Declaratory Relief ¶ 5, Steadfast Ins. Co. v. AES Corp., No. 2008- 858 (Arlington County, Va. Cir. Ct. July 9, 2008). 31. Id . at 9–12.

• 32. Steadfast Ins. Co. v. AES Corp., No. 2008-858, 2009 WL 5242863, at *1 (Va. Cir. Ct.
• Dec. 3, 2009).
• 33. Steadfast Ins. Co. v. AES Corp., No. 2008-858, 2010 WL 1484811, at *1 (Va. Cir. Ct.,
• Feb. 5, 2010).
• 34. AES Corp. v. Steadfast Ins. Co., Case No. 1000764 (Aug. 2, 2010),

available at Virginia Courts Case Information, http://208.210.219.132/scolar/precaseinq.jsp;jsessionid=0000M ET3RRSOVYAY05DEAMSTCPQ:ulnfn1uq (last visited Aug. 10, 2010).

Insurance Coverage for Global Warming Liability Claims 817

the wayside is yet to be determined and could be decided largely by how the appeals in Comer , Kivalina , and American Electric Power are ultimately resolved in the coming months. Even if the lawsuits proceed, plaintiffs will still have some major hurdles to clear, not the least of which is proving

• causation. Nevertheless, it is against this backdrop that this article will ex-

amine the potential issues that policyholders may face in seeking liability insurance coverage for the cost of defending global warming claims and any liability that may arise from such claims.

• iii. coverage for defense costs: potentially valuable

asset for global warming defendants

• A. Duty to Defend

No court has yet imposed liability on a defendant for damages allegedly caused by GHG emissions’ contribution to global warming, but that has not saved defendants from incurring legal fees in defending such claims. Those fees are likely to become more significant now that at least one appellate court has upheld its ruling that plaintiffs do have standing to pursue global warming liability and, further, that the issue is justiciable. Policyholders are not without recourse, though. A defendant company’s general liability insurance policy may provide coverage for such defense

• costs. Specifically, primary liability insurance policies often impose on the

insurer a duty to defend the policyholder from any claims that arguably may fall within the scope of the policies’ coverage terms.

35 It is generally

recognized that an insurer’s duty to defend is broader than its duty to in- demnify.

36 Thus, an insurer may be required to defend an action for which

it ultimately may not be required to indemnify the insured.

37 The duty to

defend is generally triggered by the tender of a claim that is potentially covered under the policy, which is determined, at the outset, by the allega- tions of the complaint.

38

The basic allegations of the global warming claims to date may be suffi- cient to trigger an insurer’s duty to defend. Plaintiffs have asserted numer-

• us causes of action, including negligence, trespass, and nuisance, seeking
• 35. Similarly, umbrella and excess policies often impose on the insurer an obligation to

reimburse the policyholder for its legal fees and costs in defending a claim.

• 36. Intex Plastics Sales Co. v. United Nat’l Ins. Co., 23 F.3d 254, 256 (9th Cir. 1994);

Burroughs Wellcome Co. v. Commercial Union Ins. Co., 632 F. Supp. 1213, 1218 (S.D.N.Y. 1986); First Ins. Co. of Haw., Inc. v. Minami, 665 P.2d 648 (Haw. 1983); Conway v. Country

• Cas. Ins. Co., 442 N.E.2d 245, 247 (Ill. 1982); Westchester Fire Ins. Co. v. G. Heileman

Brewing Co., 747 N.E.2d 955, 964 (Ill. App. Ct. 2001); D’Auria v. Zurich Ins. Co., 507 A.2d 857, 859 (Pa. Super. Ct. 1986); Fire Ins. Exch. v. Estate of Therkelsen, 27 P.3d 555, 560 (Utah 2001); see also 1 Peter J. Kalis et al. , Policyholder ’ s Guide to the Law of Insurance Coverage § 4.02, at 5 (Supp. 2007). 37. Kalis et al., supra note 36, § 4.02, at 5. 38. Id . § 4.03, at 5–6.

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 818

damages for property damage and bodily injury. As discussed more fully below, these allegations should be sufficient to trigger coverage or, at a minimum, the duty to defend the policyholder in the global warming liti- gations.

39 Most courts will impose a duty to defend on an insurer as long

as one basis of potential liability in a multicount complaint would be cov- ered.

40 Thus, the insurer typically must provide a defense to the policy-

holder until such time as the insurer proves that the entire claim is outside the scope of coverage.

41 Any doubts regarding whether the duty to defend

is triggered will be resolved in favor of the policyholder receiving a defense from the insurer.

42 As a result, a liability policy’s defense duty may provide

coverage for all or part of a company’s defense costs, including expert fees, incurred in defending global warming claims. This could prove to be a very valuable asset to a defendant in these litigations, which may involve very complex discovery and litigation processes due to the circuitous causation and proof issues in dispute.

• B. Notice to Insurers

In an effort to preserve a policyholder’s right to a defense and indemnity, the policyholder may be well advised to give notice of a global warming claim to its insurer(s). Most policies have specific procedures and conditions for reporting a claim, which may incorporate time deadlines and other specific

• requirements. Insurers will likely argue that failure to comply strictly with

such procedural requirements for notice precludes coverage for an otherwise covered claim. Thus, a policyholder should be mindful of all of the provi- sions and conditions in its policies, including any stated condition to provide timely notice and to cooperate with the insurer in the defense of the action.

39. See Travelers Indem. Co. v. Summit Corp. of Am., 715 N.E.2d 926, 937 (Ind. Ct. App. 1999) (finding that nuisance and trespass claims were covered claims); Atl. Cement Co. v. Fid.

• Cas. Co. of N.Y., 459 N.Y.S.2d 425, 428 (App. Div. 1983) (holding that nuisance claim was

an occurrence under policy). 40. See , e.g ., Health Care Indus. Liab. Ins. Program v. Momence Meadows Nursing Ctr., Inc., 566 F.3d 689, 694 (7th Cir. 2009); Fair Operating, Inc. v. Mid-Continent Cas. Co., 193

• F. App’x 302, 306 (5th Cir. 2006); Traders State Bank v. U.S. Fid. & Guar. Co., No. 91-35764,

1992 U.S. App. LEXIS 28087, at *5 (9th Cir. Oct. 26, 1992); Providence Hosp. v. Rollins Burdick Hunter, Inc., No. 92 C 8096, 1993 U.S. Dist. LEXIS 9873, at *9–10 (N.D. Ill. July 20, 1993); Potomac Ins. Co. of Ill. v. Corporate Interiors, Inc., No. 01C-01-54, 2001 Del.

• Super. LEXIS 430, at *8 (Super. Ct. Nov. 1, 2001).

41. See , e.g ., Wimberly Allison T

• ng & Goo, Inc. v. Travelers Prop. Cas. Co., No. 08-2976,

2009 U.S. App. LEXIS 25294, at *11 (3d Cir. Nov. 18, 2009); City of Sandusky v. Coregis

• Ins. Co., 192 F. App’x 355, 361 (6th Cir. 2006); Scottsdale Ins. Co. v. MV Transp., 115 P.3d

460, 466 (Cal. 2005); Conduit & Found. Corp. v. Hartford Cas. Ins. Co., 746 A.2d 1053, 1061 (N.J. Super. Ct. App. Div. 2000). 42. See , e.g ., Ferro Corp. v. Cookson Group, PLC, 585 F.3d 946, 951 (6th Cir. 2009); Indian Harbor Ins. Co. v. Valley Forge Ins. Group, 535 F.3d 359, 363 (5th Cir. 2008); Danby

• f N. Am., Inc. v. Travelers Ins. Co., 25 F. App’x 186, 190–91 (4th Cir. 2002); RAD Source

T echs., Inc. v. Essex Ins. Co., 902 So. 2d 264, 265 (Fla. Dist. Ct. App. 2005).

Insurance Coverage for Global Warming Liability Claims 819

A policyholder should consider providing notice and seeking coverage under every policy that possibly may be triggered by the factual allegations

• f the given lawsuit (e.g., time period of the alleged injury or damage at

issue) and the amount of potential damages sought (e.g., the amount of potential damages exceeds the limits of the policyholder’s primary policies and therefore implicates excess layers of coverage). T

• determine which

particular insurance policies may provide coverage for a claim, both the policyholder’s current liability insurance program, including excess cover- age, as well as historical liability policies should be reviewed. As discussed in more detail below, many historical general liability policies were written

• n an occurrence basis and could provide coverage if the plaintiff’s claim

alleges property damage taking place during a long-since-expired policy period, regardless of when the claim is subsequently asserted. As such, it is important for a policyholder to conduct a detailed review of the allega- tions in the complaint for the purpose of notifying any and all potential insurers.

• iv. potential coverage issues for global warming

liabilities under cgl policies

Determining whether a general liability policy ultimately will indemnify a policyholder for damages imposed in a global warming claim requires an analysis of a host of issues, including the following:

(1) Which policies are potentially triggered by a given claim? (2) Do the global warming claims seek to impose damages for property dam- age or bodily injury? (3) Are the alleged damages caused by global warming and GHG emissions “fortuitous”? (4) Will pollution exclusions operate to bar coverage for global warming claims?

How those questions are resolved by courts in the future will dictate the course of insurance coverage for global warming claims.

• A. Triggering Current and Historical Policies
• 1. Claims-Made Policies

Many commercial liability policies currently in effect are written on a “claims-made” basis, meaning that they provide coverage for claims made against the policyholder during the policy period of the insurance poli- cy.

43 Therefore, a policyholder that is sued for alleged injury arising from

• 43. Some policies also require that in addition to the claim being asserted during the policy

period, notice of the claim must be reported to the insurer during that period.

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 820

GHG emissions may seek coverage under the claims-made policy on the risk when the claim is asserted against the policyholder even if the alleged damage predated the policy period. Some claims-made policies, however, may contain a retroactive date, which states that the claim must be based

• n acts or damage occurring after a specified date. The retroactive date

could be a key policy provision in analyzing coverage for global warming liabilities under claims-made policies because the underlying complaints allege acts and damages over several decades leading up to the claim. De- pending on the timing of the retroactive date, the acts and damages may have occurred entirely before or after the date. Although the retroactive date will not be an issue in the latter situation, the policyholder will have to rebut the argument that the retroactive date bars coverage in the former. In cases in which the wrongful acts and damages have spanned time frames both before and after the retroactive date, policyholders have been success- ful in obtaining coverage for some or all of the claim, but the courts have not been unanimous on the issue.

44

• 2. Occurrence-Based Policies

Depending on the factual allegations of the complaint, the policyholder may also be able to obtain coverage from its current and /or historical oc- currence-based liability policies. Under occurrence-based policies, a claim may be covered if some part of the alleged property damage or bodily injury

• ccurs during the policy period regardless of when the claim is asserted.

Thus, if the underlying plaintiff alleges that the policyholder’s GHG emis- sions have caused property damage over the last thirty years, the policy- holder may be able to seek coverage from every occurrence-based policy in effect from the late 1970s through the date of the last such policy, based

• n the argument that property damage allegedly had occurred in each of

those policy periods. T wo main issues will impact a policyholder’s ability to access historical insurance coverage: (1) the allegations of the underlying complaint and (2) the governing jurisdiction’s law regarding trigger of coverage. With regard to the allegations in the underlying complaint, examples from the global warming complaints to date give policyholders a reasonable argu- ment that historical occurrence-based policies are triggered by these cur- rent claims because the alleged damage caused by GHG emissions has been ongoing for decades. For example, in Kivalina , plaintiffs alleged that

44. Compare Spinx Oil Co. v. Federated Mut. Ins. Co., 427 S.E.2d 649, 650–51 (S.C. 1993) (finding coverage where pollution seepage began prior to retroactive date but was not dis- covered until after), with Evans v. Med. Inter-Ins. Exch., 856 A.2d 609, 615 (D.C. 2004) (holding that medical malpractice policy did not provide coverage for injuries resulting from pre-retroactive date surgery irrespective of fact that injuries did not fully develop until after retroactive date).

Insurance Coverage for Global Warming Liability Claims 821

“[a]ll Defendants directly emit large quantities of greenhouse gases and have done so for many years.”

45 The historical, continuous nature of the

damage in Kivalina also was recognized by the insurer in Steadfast , which argued that the damage had been ongoing for decades prior to the Stead- fast policies’ issuance in 2003. Additionally, in Comer , plaintiffs alleged that defendants’ activities led to the substantial increase in hurricane ferocity

• ver the past thirty years.

46 Likewise, in

American Electric Power , plaintiffs alleged that “[d]efendants and their predecessors in interest have emitted large amounts of carbon dioxide from their combustion of fossil fuels for many years,” and cited to some defendants’ continuous operations dating back to 1837.

47 Thus, the allegations of the global warming complaints

could provide grounds to argue for the triggering of historical occurrence- based policies. Given the factual allegations present, the governing law on what is com- monly referred to as the “trigger” of coverage might ultimately determine which policies are called on to insure the given claim. In cases where prop- erty damage or bodily injury was alleged to occur over several policy periods, courts have employed several different trigger theories: (1) the “manifesta- tion” trigger, (2) the “injury-in-fact” trigger, and (3) the “continuous” trig-

• ger. The manifestation trigger triggers a single policy period, i.e., the one
• n the risk when the injury or damage manifests itself for the first time.

48

The injury-in-fact trigger holds that coverage is triggered by actual injury

• r property damage during the policy period and is not limited to the first

policy period in which that damage manifests itself.

49 This trigger requires

proof of actual injury during the policy period and does not rely on a pre- sumption of continual injury from first exposure through the discovery of damage as is the case with the continuous trigger theory.

50 The application

• f these trigger theories will vary among jurisdictions, with some providing
• 45. Complaint for Damages ¶ 3, Native Vill. of Kivalina v. ExxonMobil Corp., No. 4:08-

cv-01138-SBA (N.D. Cal. Feb. 26, 2008).

• 46. Third Amended Class Action Complaint,

supra note 10, ¶ 6.

• 47. Complaint ¶ 102, Connecticut v. Am. Elec. Power Co., No. 1:04-cv-05669-LAP

(S.D.N.Y. July 21, 2004).

• 48. Eagle-Picher Indus., Inc. v. Liberty Mut. Ins. Co., 523 F. Supp. 110, 111 (D. Mass.

1981); Boardman Petroleum v. Federated Mut. Ins. Co., 498 S.E.2d 492, 498 (Ga. 1998); Cor- duroy Rubber Co. v. Home Indem. Co., No. 191846, 1997 Mich. App. LEXIS 1723, at *14 (Ct. App. May 23, 1997); see also Kalis et al., supra note 36, § 2.02[C][2], at 13–14.1.

• 49. Montrose Chem. Corp. of Cal. v. Admiral Ins. Co., 913 P.2d 878, 895 n.16 (Cal.

1995); Sentinel Ins. Co. v. First Ins. Co., 875 P.2d 894, 915 (Haw. 1994); Boston Gas Co. v. Century Indem. Co., 910 N.E.2d 290, 301 n.21 (Mass. 2009); see also Kalis et al., supra note 36, § 2.02[C][4], at 16–17.

• 50. Associated Aviation Underwriters v. Wood, 98 P.3d 572, 600 (Ariz. Ct. App. 2004);

Benjamin Moore & Co. v. Aetna Cas. & Sur. Co., 843 A.2d 1094, 1096 (N.J. 2004); T

• wns v.
• N. Sec. Ins. Co., 964 A.2d 1150, 1164–65 (Vt. 2008);

see also Kalis et al., supra note 36, § 2.02[C][4]–[5], at 16–19.

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 822

more coverage options depending on the trigger applied.

51 In the context

• f global warming claims, the injury-in-fact or continuous trigger would

seem to maximize coverage for a policyholder, but that conclusion would depend on a full analysis of the policyholder’s insurance program, includ- ing the existence of self-insured retentions, deductibles, insurer insolven- cies, prior exhaustion of limits, and other similar issues.

• B. Damages Resulting from Property Damage or Bodily Injury

Whether claims-made or occurrence-based, most general liability poli- cies insure damages that the policyholder is legally obligated to pay aris- ing from property damage or bodily injury. Policyholders should be able to establish that the allegations in the global warming complaints to date satisfy those requirements.

• 1. Definition of

Property Damage and Bodily Injury

52

Under most general liability policies, property damage is often defined as “physical injury to tangible property, including all resulting loss of use of that property.”

53 Many current general liability policies define

bodily injury to mean “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.”

54

The complaints in the global warming claims to date are replete with al- legations of property damage or bodily injury. For example, the complaint in Comer sought damages for, among other things, loss of property, loss of the use and enjoyment of property, loss of loved ones, and personal injury.

55

Additionally, examples from the current complaints provide fertile grounds for policyholders to argue that the underlying plaintiffs are seeking dam- ages for property damage or bodily injury: Comer

The Defendants’ GHG emissions have contributed to sea level rise, which has a number of severe consequences including, but not limited to the following: (a) Direct loss of private property as land is subsumed under rising sea levels and destroyed by saltwater intrusion; (b) Loss of use and quiet enjoyment

• 51. For a listing of each state’s application of the various trigger theories, see the charts

provided in Kalis et al., supra note 36, § 2.02[E], at 26–53 (Supp. 2009).

• 52. The allegations of the global warming complaints may also constitute personal injury

under some CGL policies. Historic policies defined personal injury to encompass “wrongful entry or eviction or other invasion of the right of private occupancy.” See Kalis et al., supra note 36, § 8.02, at 4–12. Policyholders should also explore any coverage options for this type

• f harm.

53. See ISO Commercial General Liability Form No. CG 00 01 12 07 , at 15, § V.17.a (2007) [hereinafter ISO Form] . 54. Id .

• 55. Third Amended Class Action Complaint,

supra note 10, ¶ 40.

Insurance Coverage for Global Warming Liability Claims 823

• f private property caused by rising sea levels, saltwater intrusion, increased

water temperatures, increased tropical storm activity, loss of habitat used for hunting and fishing and other recreation, and numerous other forms of prop- erty damage; (c) Loss of the use and enjoyment of public property caused by the subsumption and erosion of public beaches; (d) Loss of the use and enjoyment of public trust resources caused by subsumption of and saltwater intrusion into habitat for fish and wildlife . . . ; and (e) Increased risk of prop- erty damage and loss as a result of hurricane activity in the Gulf of Mexico. Coastal wetlands and beaches act as a natural buffer and barrier to cyclonic storms in the Gulf of Mexico, and to the extent that they are being destroyed by rising sea levels, coastal residents have become much more prone to storm damage.

56

Kivalina

Global warming is destroying Kivalina through the melting of Arctic sea ice that formerly protected the village from winter storms. . . . The result of the increased storm damage is a massive erosion problem. Houses and buildings are in imminent danger of falling into the sea as the village is battered by storms and its ground crumbles from underneath it.

57

American Electric Power

The threatened injuries to the plaintiffs and their citizens and residents from continued global warming include increased heat deaths due to intensified and prolonged heat waves; increased ground-level smog with concomitant increases in respiratory problems like asthma; beach erosion, inundation of coastal land, and salinization of water supplies from accelerated sea level rise; reduction of the mountain snow pack in California that provides a critical source of water for the State; lowered Great Lakes water levels, which impairs commercial shipping, recreational harbors and marinas, and hydropower gen- eration; more drought and floods, resulting in property damage and hazard to human safety; and widespread loss of species and biodiversity, including the disappearance of hardwood forests from the northern United States.

58

In sum, a policyholder should be able to establish that damages awarded

• n the basis of such allegations satisfy the property damage or bodily injury

requirement of general liability policies.

• 2. Definition of

Damages Most standard general liability policies cover sums that the policyholder is “legally obligated to pay as damages” because of property damage or bodily injury.

59 However, standard policy language does not define the word

dam-

56. Id . ¶ 30.

• 57. Complaint for Damages,

supra note 45, ¶¶ 3– 4.

• 58. Complaint,

supra note 47, ¶ 3. 59. See ISO Form , supra note 53, at 1, § I.1.a.

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 824

ages , leaving the courts to interpret this term in the context of insurance disputes.

60 Insurers typically argue that the term limits their coverage ob-

ligations to only compensatory relief sought by an underlying plaintiff. Even under the insurers’ restrictive definition, complaints such as those in Comer and Kivalina that seek monetary damages for property damage or bodily injury meet this definition. Policyholders, however, may argue for a broader interpretation that would not draw a distinction between typi- cal compensatory and equitable relief and would insure injunctive relief as sought in cases like American Electric Power . Not surprisingly, environ- mental claims provide a broad background for much of this dispute in the GHG context. In that context, the majority of courts have rejected the insurers’ narrow reading of as damages and have found that government- mandated environmental remediation costs are damages under a general liability policy.

61 Thus, in cases such as

American Electric Power , where plaintiffs are seeking to impose restrictions on defendants’ GHG emis- sions, the costs that would be incurred in complying with a court order imposing such restrictions could be covered depending on the particular jurisdiction’s law on this issue.

• C. Fortuitous Events and Damage

Most liability policies contain some provision that excludes damage inten- tionally caused by the policyholder.

62 Insurers therefore frequently contend

that liability policies have an express or implied “fortuity” requirement, i.e., the policy insures only fortuitous occurrences or events. Insurer-side com- mentators have already argued that damage caused by a policyholder’s GHG emissions may not arise from a fortuitous occurrence because companies have long known that they were emitting GHGs and nonetheless contin- ued to do so.

63 Indeed, one insurer has apparently already successfully relied

• n an intentionality argument to deny coverage (subject to appeal) in the
• ne coverage case to date. Thus, policyholders seeking coverage for global

warming claims can expect to face fortuity defenses from their in surers, which could appear in several forms, including arguments that (i) there is no occurrence under the policy because the alleged damage was not the result of an accident but rather was caused by deliberate actions, (ii) the

60. See, e.g ., id . at 1–16. 61. See Kalis et al., supra note 36, § 5.03, chart 5-1, at 12–13. But see Cinergy Corp. v. Associated Elec. & Gas Ins. Servs., Ltd., 865 N.E.2d 571, 581–83 (Ind. 2007) (distinguishing between remediation costs and prophylactic measures). 62. See ISO Form , supra note 53, at 2, § I.2.a. 63. See Seth A. Ribner & Deborah L. Stein, The Costs of Climate Change: Why Industry Should Not Look to Liability Insurance to Bear Them , 17:7 Committee on Ins. Coverage Litig., Sept./Oct. 2007, at 13, 15–17; Max H. Stern & Jessica E. La Londe, Keep It Cool: Potential Coverage Defenses to “Global Warming” Lawsuits , 19 Coverage , July/Aug. 2009, at 3.

Insurance Coverage for Global Warming Liability Claims 825

policyholder expected or intended the damage caused by GHG emissions, and /or (iii) the damage caused by GHG emissions was a known loss to the policyholder at the time that the policy was purchased. Policyholders have potentially successful responses to each of these defenses.

• 1. Damages Constituting an Occurrence

Most occurrence-based liability policies cover property damage or bodily injury during the policy period that is caused by an occurrence. Occur- rence is generally defined in liability policies as “an accident, including continuous or repeated exposure to substantially the same general harm- ful conditions.”

64 The focus of this definition is the word

accident , which usually requires an unexpected, unforeseen, or unintended happening or

• event. Most jurisdictions require that both the act and the resulting dam-

ages be intended by the insured in order for the event not to be classified as an accident for occurrence purposes.

65 Thus, an event will be considered

an accident when the resulting damage was fortuitous and not intentional, regardless of whether the act giving rise to the damage was intentional.

66

Courts are split over whether the required showing of intent is the policy- holder’s subjective intent or an objective standard.

67 The majority view

supports the use of a subjective standard, which is consistent with the typi- cal

• ccurrence definition that the damage not be expected or intended from

the standpoint of the insured.

68 Regardless of the standard, intent is viewed

at the time of the alleged act giving rise to the damage at issue.

69 As a result,

insurers should not be able to rely solely on the argument that policy- holders were intentionally emitting GHGs and, therefore, are precluded from coverage for the unexpected damage or injury that has resulted from global warming. Most jurisdictions place the burden on an insurer to come forward with evidence that a policyholder intended for its act to cause the resulting harm.

70 In the global warming context, given the alleged causal

chain between GHG emissions and the alleged result of global warming, which, in turn, allegedly causes its own set of unique harms, it would seem

64. See ISO Form , supra note 53, at 14, § V.13.

• 65. Prime TV, LLC v. Travelers Ins. Co., 223 F. Supp. 2d 744, 751 (M.D.N.C. 2002);
• Ind. Farmers Mut. Ins. Co. v. N. Vernon Drop Forge, Inc., 917 N.E.2d 1258, 1270–71 (Ind.
• Ct. App. 2009); T

erre Haute First Nat’l Bank v. Pac. Employers Ins. Co., 634 N.E.2d 1336, 1338 (Ind. Ct. App. 1993); Atl. Cement Co. v. Fid. Cas. Co. of N.Y., 459 N.Y.S.2d 425, 429 (App. Div. 1983); N.C. Farm Bureau Mut. Ins. Cov. v. Stox, 412 S.E.2d 318, 325 (N.C. 1992); Haimbaugh v. Grange Mut. Cas. Co., 2008 Ohio 4001, at *29–36 (Ct. App. Aug. 7, 2008). But see Collin v. Am. Empire Ins. Co., 21 Cal. App. 4th 787, 810 (Ct. App. 1994) (holding that deliberate conduct is not an accident regardless of whether the damage was intended). 66. See cases cited in note 65. 67. Kalis et al., supra note 36, § 6.03[A], at 5–8 (Supp. 2009). 68. Id . 69. See cases cited in note 65. 70. Id .

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 826

that insurers would have an uphill battle to establish that industrial defen- dants intended that their business operations would cause global warming, which in turn would cause stronger hurricanes or the erosion of Kivalina’s island. Timing also is a key issue with respect to knowledge regarding global

• warming. Although global warming may be a hot topic in the popular

media of late, the injury-producing events alleged in the global warming complaints span into past decades when that was certainly not the case. The state of knowledge today (whatever that may be) cannot be imposed

• n a policyholder for acts that occurred decades ago. Because the subjec-

tive intent of the policyholder at the time of the injury-producing act must be shown in the majority of jurisdictions, each case will be a unique set of facts with respect to the policyholder’s historical state of knowledge. Notwithstanding the foregoing arguments, the recent decision in Stead- fast found that the Kivalina Complaint did not allege an occurrence under general liability policies. In that case, Steadfast argued that the Kivalina Complaint asserts that the damages sustained were a known and fore- seeable consequence of AES’s operation of fossil fuel–fired electricity- generating plants, and, thus, the damages were not caused by an accident. The court apparently found this argument persuasive and held that “Stead- fast has no duty to defend AES in connection with the underlying Kivalina litigation because no ‘occurrence’ as defined in the policies has been al- leged in the underlying Complaint.”

71

The impact of the Steadfast decision on future coverage claims is unclear, but any impact will certainly be influenced by several key aspects of the rul-

• ing. First, there is no written opinion from which to gather any insight into

the court’s analysis of the issues at hand. The lack of detail in the reasoning

• f the court gives the opinion limited precedential value in other situations.

Second, Steadfast argued that Virginia law used an objective standard to examine whether the damages were the natural and probable consequences

• f an intended act and did not require proof that the policyholder actually

intended the damage. If the court found that this is indeed the state of Vir- ginia law, then it is in the minority of states on this issue.

72 Third, it appears

that the court based its decision on Steadfast’s argument that Virginia’s “eight corners” rule (i.e., wherein the court looks at the four corners of the complaint to see if the allegations, if proven, would provide a basis for coverage under the four corners of the insurance policy) dictated summary judgment because the nature of the Kivalina Complaint was based on AES’s

• 71. Order, Steadfast Ins. Co. v. AES Corp., No. 2008-858 (Arlington County, Va. Cir.
• Ct. Feb. 5, 2010),

available at www.insurancelawforum.com /uploads/file /Steadfast%20SJ%20 Order%202-5-2010.pdf. 72. See notes 65–69 and accompanying text.

Insurance Coverage for Global Warming Liability Claims 827

intentional acts and foreseeable consequences. The Kivalina Complaint, however, arguably provides a basis for liability grounded in negligence, not intentional conduct, and at least raises issues of fact on the policyholder’s intent or forseeability that would preclude summary judgment on that

• basis. For example, both the federal and state nuisance causes of action are

based on defendants’ acts that were “intentional or negligent” in creating, contributing to, or maintaining a public nuisance.

73 Negligent conduct, and

even intentional conduct with unintended results as discussed above, can be covered claims.

74 Indeed, the court had previously denied the insurer’s mo-

tion for summary judgment on the exact same issue only two months ear- lier on the grounds that questions of material fact existed on issues such as the allegations of negligence, nuisance, and intentional conduct.

75 Fourth,

to the extent that the Steadfast decision has any precedential value, it would be, at best, very limited. The decision is arguably limited to the factual al- legations against AES and does not apply to other defendants in Kivalina because the allegations as to knowledge about GHG emissions and global warming differ among defendants. For example, the Kivalina Complaint alleged certain facts about specific statements regarding global warming and GHG emissions in AES’s annual reports, statements that presumably had not been made by other defendants. Further, the decision is limited to the Kivalina case and is not applicable to the other global warming claims, which should provide sufficient grounds for the finding of an occurrence under most general liability policies. For example, the Comer Complaint has a count based on negligence, and neither the trespass nor the nuisance claim alleges that defendants intentionally caused the resulting damage.

76

Similarly, the nuisance claims in American Electric Power are based on al- legations that defendants negligently or intentionally created and contrib- uted to the nuisance of global warming.

77 Finally, AES has appealed the

Steadfast ruling to the Virginia Supreme Court. Thus, the final word on these coverage issues has not yet been rendered by Virginia courts.

• 2. Expected or Intended

Coupled with the lack of an occurrence argument, insurers also are likely to allege that policyholders expected or intended the damage for which they seek coverage. Older liability policies contained language in the defi- nition of

• ccurrence requiring that the damages not be expected or intended

by the insured. More recent policies usually contain a similar provision as

73. See Complaint for Damages, supra note 45, ¶¶ 252, 265. 74. See notes 64–69 and accompanying text. 75. See Steadfast Ins. Co. v. AES Corp., No. 2008-858, 2009 WL 5242863 (Va. Cir. Ct.

• Dec. 3, 2009).
• 76. Third Amended Class Action Complaint,

supra note 10, ¶¶ 28–35.

• 77. Complaint,

supra note 47, ¶¶ 153, 167–86.

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 828

an exclusion. In either situation, the debate is very similar to that discussed in the occurrence section above, and the insurer generally has the burden

• f proving the policyholder’s intent or expectation in this regard.

78 As pre-

viously discussed, the majority rule is that the policyholder must expect or intend the resulting damage, with the focus being the subjective intent of the policyholder at the time of the injury-causing act.

79 Most jurisdictions

also require that the insurer prove that the exact damage was intended, and it does not suffice to show that the policyholder intended a different result

• r some portion of the actual damages in question.

80 One additional con-

sideration when the policyholder is a corporation is who in the corporation must intend or expect the damage. Policyholders would argue that such intent must be formed by senior management or the control group and not just any employee of the company, which is the broad standard that the insurers would most likely prefer. The case law is split on the issue.

81

• 3. Known Loss

The known loss or loss-in-progress doctrine is typically an extracontrac- tual doctrine based on the argument that an insurer should not be required to cover losses that were not truly contingent at the time the policyholder

78. See, e.g ., Nationwide Mut. Ins. Co. v. Gaskill, No. COA05-538, 2006 N.C. App. LEXIS 498, at *3 (Ct. App. Mar. 7, 2006); Allstate Ins. Co. v. Campbell, 2009 Ohio 6055, at *19–20 (Ct. App. Nov. 17, 2009). 79. See, e.g ., State Farm Fire & Cas. Co. v. Chestang, 952 So. 2d 1101, 1104–05 (Ala. 2006); Vt. Mut. Ins. Co. v. Walukiewicz, 966 A.2d 672, 682 (Conn. 2009); Tri-S Corp. v.

• W. World Ins. Co., 135 P.3d 82, 103 n.8 (Haw. 2006); Auto-Owners Ins. Co. v. Harvey, 842

N.E.2d 1279, 1290 (Ind. 2006) (analyzing policyholder’s actions from subjective perspective but permitting such intent to be inferred from conduct as matter of law); United Fire & Cas.

• Co. v. Shelly Funeral Home, Inc., 642 N.W.2d 648, 653–54 (Iowa 2002); Spivey v. Safeco Ins.

Co., 865 P.2d 182, 189 (Kan. 1993); Great Am. Ins. Co. v. Gaspard, 608 So. 2d 981, 985 (La. 1992); Auto-Owners Ins. Co. v. Churchman, 489 N.W.2d 431, 434 (Mich. 1992); RAM Mut.

• Ins. Co. v. Meyer, 768 N.W.2d 399, 405 (Minn. Ct. App. 2009); N.C. Farm Bureau Mut. Ins.
• Co. v. Stox, 412 S.E. 2d 318, 323–24 (N.C. 1992); Allstate Ins. Co. v. Garth, No. 02A01-

9409-CV-0020, 1995 T

• enn. App. LEXIS 656, at *5–6 (Ct. App. Oct. 10, 1995); Farmers &
• Mechs. Mut. Ins. Co. v. Cook, 557 S.E.2d 801, 807 (W. Va. 2001) (noting that the language

“from the standpoint of the insured” compels application of subjective test); Davidson v. Hoke, 532 S.E.2d 50, 57 (W. Va. 2000). 80. See, e.g ., Linemaster Switch Corp. v. Aetna Life & Cas. Corp., No. CV91-0396432S, 1995 Conn. Super. LEXIS 2229, at *76–77 (Super. Ct. July 31, 1995); James Graham Brown Found., Inc. v. St. Paul Fire & Marine Ins. Co., 814 S.W.2d 273, 278–79 (Ky. 1991); N.C. Farm Bureau Mut. Ins. Co. v. Stox, 412 S.E.2d 318, 322–25 (N.C. 1992); Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., 769 N.E.2d 835, 844 (Ohio 2002). But see PSI Energy,

• Inc. v. Home Ins. Co., 801 N.E.2d 705, 728 (Ind. Ct. App. 2004) (declaring that coverage will

be barred even if the insured did not intend the “precise injury or severity of damage that in fact occurs”) (citation omitted). 81. See , e.g ., Olin Corp. v. Ins. Co. of N. Am., 762 F. Supp. 548, 551–52, 564 (S.D.N.Y. 1991) (focusing on intent of executives); Bituminous Cas. Corp. v. Kenway Contracting, Inc., 240 S.W.3d 633, 639 (Ky. 2007) (holding corporation “can act only through its officers”); Upjohn Co. v. N.H. Ins. Co., 476 N.W.2d 392, 400–01 (Mich. 1991) (imputing knowledge of employees acting within the scope of business).

Insurance Coverage for Global Warming Liability Claims 829

purchased the insurance policy.

82 These doctrines were developed, and are

typically applied, in the context of first-party property insurance where the property damage is known prior to the policy period. These doctrines are applied differently in the third-party liability insur- ance context, though. The loss covered by general liability policies is the legal obligation to pay damages; and, thus, to the extent that these doc- trines even apply in the third-party insurance context, the issue is whether the policyholder was aware of the legal liability at the inception of the policy.

83 Many jurisdictions require that an insurer prove that there was a

“certainty of legal liability” before the policy was issued to make the liabil- ity a known loss.

84 On the other hand, some jurisdictions employ a lesser

standard examining whether the policyholder was, or should have been, aware of a substantial likelihood of the loss at the time of purchasing the insurance policy.

85 Under either standard, the insurer would seem-

ingly have to prove what the defendant company knew about potential global warming liabilities and when it knew it (i.e., before the policy was written).

86 Although this issue will be a fact-specific inquiry about what

each policyholder knew about the global warming claims and when, policy- holders generally can point to a couple of facts to show that such claims were not known losses when the policies, especially historical ones, in- cepted, namely, (1) global warming claims are only of a recent vintage, and

• 82. Some policies may contain an exclusion (sometimes referred to as a

Montrose endorse- ment) relating to property damage that is ongoing or has occurred prior to the inception of the policy, which presents different issues than addressed in this section. The insurer would have the burden of proving the application of such an exclusion, and the focus is typically on whether a loss is in progress without regard to the policyholder’s knowledge of the loss. See, e.g ., Stern & La Londe, supra note 63, at 3. 83. See, e.g ., Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178, 1214–16 (2d Cir. 1995); City of Johnstown, N.Y. v. Bankers Standard Ins. Co., 877 F.2d 1146, 1152–53 (2d Cir. 1989); UTI Corp. v. Fireman’s Fund Ins. Co., 896 F. Supp. 362, 376–77 (D.N.J. 1995). 84. See, e.g ., Pittston Co. Ultramar Am. Ltd. v. Allianz Ins. Co., 124 F.3d 508, 518 (3d Cir. 1997) (stating that “certainty of legal liability” is required for the known loss doctrine to bar coverage); Montrose Chem. Corp. of Cal. v. Admiral Ins. Co., 913 P .2d 878, 906 (Cal. 1995) (holding that coverage is not barred “as long as there remains uncertainty about damage or injury that may occur during the policy period and the imposition of liability upon the in- sured, and no legal obligation to pay third party claims has been established”); Ins. Co. of N.

• Am. v. Kayser-Roth Corp., 770 A.2d 403, 415 (R.I. 2001) (declaring that as long as “ ‘there is

uncertainty about the imposition of liability and ‘no legal obligation’ to pay yet established,’ ” the claim is insurable notwithstanding the known loss doctrine (quoting Montrose Chem ., 913 P .2d at 905)). 85. See, e.g ., Mo. Pac. R.R. v. Am. Home Assurance Co., 675 N.E.2d 1378, 1381 (Ill. App.

• Ct. 1997); Atchison, T
• peka & Santa Fe Ry. Co. v. Stonewall Ins. Co., 71 P

.3d 1097, 1136 (Kan. 2003); State v. Hydrite Chem. Co., 695 N.W.2d 816, 831 (Wis. Ct. App. 2005); see also Turnkey Landfill of Danbury Inc. v. CIGNA Ins. Co., No. 85-E-98 (N.H. Super. Ct. Nov. 12, 1992), reprinted in 7-5 Mealey ’ s Litig. Rep.: Ins. 10 (Dec. 1, 1992); Astro Pak Corp. v. Fireman’s Fund Ins. Co., 665 A.2d 1113, 1116 (N.J. Super. Ct. App. Div. 1995). 86. See supra notes 83–85 and accompanying text.

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 830

no liability has ever been imposed; and (2) no court has yet to establish the causal link between GHG emissions and the injury and damages alleged in the global warming complaints.

• D. Applicability of the Pollution Exclusion

If the policyholder establishes that global warming liabilities fall within the terms of the basic insuring agreement of the policy, the primary area

• f contention will then likely shift to the application and interpretation of

widely used pollution exclusion clauses. As more than one court has noted, “the scope of [the pollution] exclusion has been described as one of the most hotly litigated insurance coverage questions to arise over the past three decades. . . . [R]arely has any issue spawned as many court decisions, and as variant in rationales and results.”

87 Initially, it is important to note

not only that the insurer bears the burden of proving that the pollution exclusion in a policy bars coverage but also that ambiguous language in the exclusion will be construed in favor of coverage.

88 Because there has

yet to be a published decision regarding the application of the pollution exclusion to GHG liabilities (the Steadfast decision did not address the pol- lution exclusion), whether the insurers can satisfy that burden will depend

• n several factors: (1) the language of the pollution exclusion, if any, in the

policy; (2) whether GHG emissions are pollutants as encompassed within the language of the exclusion; and (3) how the reasonable expectations of the policyholder apply to the pollution exclusion.

• 1. Historical Development of the Pollution Exclusion

Policyholders that are sued in global warming cases should first determine if the insurance policies at issue contain any type of pollution exclusion that the insurers will likely contend serve as a bar to coverage. Prior to 1970, most general liability policies did not contain any provision purporting to exclude coverage for damage allegedly caused by pollution. Beginning around 1970, however, many liability policies contained what has been called the “qualified pollution exclusion.” Although the language of these exclusions varied to some degree, they essentially purported to preclude coverage for property damage or bodily injury allegedly resulting from

• 87. Apana v. TIG Ins. Co., 574 F.3d 679, 680 (9th Cir. 2009) (citing Madison Constr. Co.
• v. Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999); Porterfield v. Audubon Indem.

Co., 856 So. 2d 789, 800 (Ala. 2002)) (internal quotations omitted). 88. See, e.g ., Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 614 (Colo. 1999); PSI Energy, Inc. v. Home Ins. Co., 801 N.E.2d 705, 726–27 (Ind. Ct. App. 2004); Shelter Mut.

• Ins. Co. v. Williams, 804 P.2d 1374, 1383 (Kan. 1991); Andrew Robinson Int’l Inc. v. Hartford

Fire Ins. Co., 2006 Mass. Super. LEXIS 236, at *8–9 (Super. Ct. 2006); Travelers Cas. & Sur.

• Co. v. Ribi Immunochem Research, Inc., 108 P.3d 469, 476 (Mont. 2005); Charles Beseler
• Co. v. O’Gorman & Young, Inc., 911 A.2d 47, 49 (N.J. 2006); TIG Specialty Ins. Co. v. Ko-

ken, 855 A.2d 900, 908 (Pa. Commw. Ct. 2004).

Insurance Coverage for Global Warming Liability Claims 831

pollution, unless the release, dispersal, escape, etc., of the pollution was “sudden and accidental” or “sudden, unexpected, and unintended.”

89 The

sudden or accidental language served as a substantial limitation on the exclu- sion’s scope.

90

Around 1985, many insurers, seeking to again narrow coverage, deleted the “sudden and accidental” exception to the pollution exclusion.

91 The

1985 version also removed language requiring the pollutants to be de- posited “into or upon land, the atmosphere or any watercourse or body

• f water.”

92 The 1985 version still is used in a large proportion of CGL

policies today and is often referred to as the “absolute pollution exclu- sion” because it purports to exclude coverage for any liability arising from pollution-caused damage regardless of whether the pollution incident was sudden and accidental. If a policyholder is seeking coverage under a policy that contains a qual- ified pollution exclusion, it may be able to avoid the exclusion if it can establish that the alleged contamination of the environment was sudden and accidental. Courts in various jurisdictions have interpreted this phrase differently.

93 Although many courts have agreed that the word

accidental means “unintended,” courts disagree regarding the proper meaning of the word sudden .

94 Some courts have ruled that

sudden means “instantaneous.”

95

Thus, under this interpretation, the policyholder can only avoid the quali- fied pollution exclusion if it can prove that the seepage or release incident

• ccurred abruptly, not gradually. Many other courts have interpreted

sud- den to mean “unexpected.”

96 Under this view, a policyholder may be able

to obtain coverage notwithstanding the presence of the qualified pollution exclusion in the policy if the policyholder can establish that it did not ex-

89. See Kalis et al., supra note 36, § 10.04[B][1]. 90. See id . chart 10-1, at 38.2–.4. 91. See id . § 10.04[C][1]. 92. Id .

• 93. For an analysis of each state’s handling of the qualified pollution exclusion, see

Kalis et al., supra note 36, § 10.04[B], chart 10-1, at 38.2–.4. 94. Compare Waste Mgmt., Inc. v. Peerless Ins. Co., 340 S.E.2d 374, 382 (N.C. 1986) (stating that “[t]he exception also describes the event—not only in terms of its being un- expected, but in terms of its happening instantaneously or precipitantly”); Hybud Equip.

• Corp. v. Sphere Drake Ins. Co., 597 N.E.2d 1096, 1101 (Ohio 1992) (declaring that “ ‘sudden’

would not have any meaning in the exception if it were not interpreted to also mean ‘quick’ or ‘abrupt’ ”), with Ala. Plating Co. v. U.S. Fid. & Guar. Co., 690 So. 2d 331, 334–35 (Ala. 1996) (construing sudden and accidental to mean “unexpected and unintended”); Lansco, Inc. v. Dep’t

• f Envtl. Prot., 350 A.2d 520, 524 (N.J. Super. Ct. Ch. Div. 1975) (stating that “ ‘sudden’

means happening without previous notice or on very brief notice; unforeseen; unexpected; unprepared for”). 95. See, e.g ., Shell Oil Co. v. Winterther Swiss Ins. Co., 12 Cal. App. 4th 715, 754–55 (Ct.

• App. 1993); N. Am. Philips Corp. v. Aetna Cas. & Sur. Co., No. 88C-JA-155, 1995 Del. Su-
• per. LEXIS 359, at *19–21 (Super. Ct. Mar. 10, 1995).

96. See Kalis et al., supra note 36, § 10.04[B], chart 10-1, at 38.2–.4.

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 832

pect or intend the alleged discharge, release, or escape of alleged global warming–contributing GHGs.

• 2. GHGs: Pollutants for Purposes of the Pollution Exclusion?

If a relevant policy contains a qualified or absolute pollution exclusion, a fundamental issue to be resolved is whether GHGs are pollutants. Many standard CGL policies define pollutant as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

97 Thus, for insurance purposes, a pol-

lutant must be an irritant or contaminant. No court has yet to rule directly

• n the issue of whether GHGs are pollutants in the context of liability

coverage for global warming claims. Carbon dioxide, which is typically the most prevalent of the regulated GHGs emitted, arguably falls outside those categories because it has not traditionally been considered an irri- tant, contaminant, or pollutant. Carbon dioxide is a naturally occurring, colorless, odorless substance that is exhaled by every human being every second of every day, is used by plants and humans alike, and is generally harmless to human health.

98 Based on these facts, carbon dioxide cannot be

neatly classified into any of the specified forms of irritants and contami- nants such as smoke, vapor, soot, fumes, acids, alkalis, chemicals, or waste. Thus, the most prevalent GHG would not appear to fit within the defini- tion of pollutant .

99

Insurers have already made several arguments in support of the conten- tion that GHGs are pollutants, including reference to (1) the averments of the complaints involving global warming claims; and (2) the Massachusetts decision, which held that emitted carbon dioxide was a pollutant under the Clean Air Act.

100

The relevant insurance policy language controls whether GHGs consti- tute pollutants under a pollution exclusion. Also, contrary to the insurer’s argument in Steadfast , the global warming complaints do not allege that the damages were caused by pollution, nor do they characterize GHGs as pollutants.

101 In fact, the complaints in

Kivalina , Comer , American Electric Power , and General Motors never once allege that GHGs are pollutants.

97. See ISO Form , supra note 53, at 15, § V.15. 98. See, e.g ., Donaldson v. Urban Land Interests, Inc., 564 N.W.2d 728, 732 (Wis. 1997).

• 99. Moreover, most jurisdictions interpret any ambiguity in insurance policy language in

favor of coverage. See infra notes 112–14. 100. See, e.g ., Complaint for Declaratory Relief, supra note 30, ¶¶ 50–54; see generally Stern & La Londe, supra note 63. 101. See generally Complaint for Damages, supra note 45; Third Amended Class Action Complaint, supra note 10; Complaint, supra note 47; Complaint for Damages and Declara- tory Relief, California v. Gen. Motors, Corp., No. 3:06-cv-05755-MJJ (N.D. Cal. Sept. 20, 2006).

Insurance Coverage for Global Warming Liability Claims 833

The Massachusetts ruling is also not dispositive. First, the Massachusetts decision had nothing to do with the application of the pollution exclusion in a liability insurance policy but instead was focused on EPA’s ability to regulate GHGs. The focal issue for the Court was whether EPA had the statutory authority to regulate GHG emissions from new motor vehicles and, if so, whether its stated reasons for refusing to do so were valid.

102 The

Court held that EPA had the authority to regulate GHG emissions for new motor vehicles and could not fail to take action unless it determines that GHGs do not contribute to climate change or provides another reasonable explanation for not doing so.

103 The Court did not address insurance cov-

erage for third-party liabilities resulting from global warming claims, let alone the applicability of so-called pollution exclusions to such claims. This same reasoning would apply to EPA’s recent endangerment finding relating to GHGs in response to the Massachusetts decision. Second, most insurance policies define pollutant more narrowly than does the Clean Air Act. As the Court in Massachusetts stated,

The Clean Air Act’s sweeping definition of “air pollutant” includes “ any air pollution agent or combination of such agents, including any physical, chemi- cal . . . substance or matter which is emitted into or otherwise enters the ambient air.” On its face, the definition embraces all airborne compounds of whatever stripe, and underscores that intent through the repeated use of the word “any.”

104

As Justice Scalia pointed out in his dissent, “it follows [from the majority

• pinion’s holding] that everything airborne, from Frisbees to flatulence,

qualifies as an ‘air pollutant.’ ”

105 Thus, the Court interpreted a broad defi-

nition of air pollutant in favor of broad regulatory agency action, which does not translate to holding that GHGs meet the more narrow definition

• f

pollutant contained in the pollution exclusion in general liability policies. The pollution exclusion was clearly not meant to apply to “all airborne compounds of whatever stripe.” Finally, courts that have been faced with the issue of whether carbon dioxide is a pollutant for insurance purposes outside the context of global warming claims have reached a different conclusion than the Massachusetts

• case. For example, in

Donaldson v. Urban Land Interests, Inc ., the Supreme Court of Wisconsin addressed whether carbon dioxide was a pollutant in a case where plaintiff claimed injury from exhaled carbon dioxide overexpo-

• 102. Massachusetts v. Envtl. Prot. Agency, 549 U.S. 497, 505 (2007).

103. Id . at 528, 534. 104. Id . at 528–29 (emphasis in original). 105. Id . at 558 n.2.

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 834

sure caused by inadequate ventilation in a “sick building.”

106 The court first

recognized that the terms irritant and contaminant were overbroad when viewed in isolation because “there is virtually no substance or chemical in existence that would not irritate or damage some person or property.”

107

However, the court held that “carbon dioxide from human respiration would not ordinarily be characterized as a ‘pollutant’ ” and that although carbon dioxide can cause injury in high concentrations, it would not neces- sarily be understood by a reasonable insured to meet the policy definition

• f a pollutant, either.

108 The court also found it “significant that, unlike the

nonexhaustive list of pollutants contained in the pollution exclusion clause, exhaled carbon dioxide is universally present and generally harmless in all but the most unusual instances.”

109 As a result, the court concluded that the

policy definition of pollutant was ambiguous and that the pollution exclu- sion would not bar coverage because the policyholder could reasonably expect coverage for the injuries arising from carbon dioxide.

110

In sum, policyholders will have to contend with not only the common, imprecise verbiage that GHGs constitute air pollution but also the many current climate change efforts that use such terms outside of the context

• f the general liability policy’s definition of

pollutant . Nevertheless, the rel- evant policy’s definition of the term pollutant is paramount, and policyhold- ers have several counterarguments in response to insurer allegations that GHGs are pollutants.

• 3. Policyholder’s Reasonable Expectations as to Coverage

In considering application of the pollution exclusion, courts may find that a policy’s definition of pollutant is not clear one way or the other. As the Don- aldson decision illustrates, most courts addressing the application of the pol- lution exclusion to carbon dioxide or other similar gases have held that the pollution exclusion is ambiguous when applied to these types of claims.

111

If a court is satisfied that the language of the exclusion is not sufficiently clear, the court may ask whether the policyholder reasonably expected the injuries at issue to be covered or, alternatively, to be excluded under the policy at the time of contracting and what the policyholder’s reasonable

• 106. 564 N.W.2d 728, 730–31 (Wis. 1997).

107. Id . at 732 (citing Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037 (7th Cir. 1992)). 108. Id . 109. Id . 110. Id . at 732–33.

• 111. Langone v. Am. Family Mut. Ins. Co., 731 N.W.2d 334, 338 (Wis. Ct. App. 2007);

Richardson v. Nationwide Mut. Ins. Co., 826 A.2d 310, 332–33 (D.C.), decision vacated on other grounds , 832 A.2d 752 (D.C. 2003) (en banc).

Insurance Coverage for Global Warming Liability Claims 835

expectations as to coverage were at the time as well.

112 Additionally, insur-

ance policy language is to be construed strictly against the insurer.

113 And

if policy language is ambiguous, the language, particularly the language of exclusions, is given an interpretation most favorable to the insured.

114 Thus,

the one court to have addressed the application of the pollution exclusion in the context of carbon dioxide emissions found the exclusion ambiguous and construed the exclusion in favor of coverage.

115

Policyholders will likely argue that the pollution exclusion was never intended to apply in the context of global warming claims.

116 Some courts

have refused to apply the pollution exclusion outside the context of tra- ditional environmental pollution.

117 Is the harm alleged to be caused by

GHG emissions the kind of harm intended to fall within the pollution exclusion? In response to that question, policyholders would focus on the type of alleged pollution at issue in the global warming claims, i.e., pollu- tion that has as its primary component a gas that is typically not dangerous to humans, is necessary for the survival of many living organisms on earth, and is not the kind of inherently dangerous substance that served as the impetus behind the pollution exclusion.

118 The driving force behind the

introduction and subsequent amendments to the pollution exclusion was insurer liability for injuries and costs caused by traditional environmental pollution from hazardous waste. Thus, courts have often not extended the

112. See, e.g ., Donaldson , 564 N.W.2d at 731. Some courts consider the reasonable expecta- tions of the parties irrespective of any ambiguity. See Reg’l Bank of Colo. v. St. Paul Fire & Marine Ins. Co., 35 F.3d 494, 497 (10th Cir. 1994). 113. See, e.g ., Acadia Ins. Co. v. Vt. Mut. Ins. Co., 860 A.2d 390, 394 (Me. 2004); RAM

• Mut. Ins. Co. v. Meyer, 768 N.W.2d 399, 404 (Minn. Ct. App. 2009); Grange Ins. Co. v. Bros-

seau, 776 P .2d 123, 126 (Wash. 1989). 114. See, e.g ., Royal Indem. Co. v. Soneco / Ne., Inc., 183 F. Supp. 2d 526, 531 (D. Conn. 2002); Compass Ins. Co. v. City of Littleton, 984 P .2d 606, 613 (Colo. 1999); Charles Beseler

• Co. v. O’Gorman & Young, Inc., 911 A.2d 47, 49 (N.J. 2006); TIG Specialty Ins. Co. v. Ko-

ken, 855 A.2d 900, 908 (Pa. Commw. Ct. 2004). 115. See Donaldson , 564 N.W.2d at 731.

• 116. Some courts have also held that the pollution exclusion does not apply to coverage

under a separate grant of products and completed operations in a policy. See W. Am. Ins. Co. v. Tufco Flooring E., Inc., 409 S.E.2d 692, 696 (N.C. Ct. App. 1991) (holding that where dam- ages occurred on the insured’s premises and resulted from its work, the pollution exclusion did not preclude coverage),

• verruled in part by Gaston County Dyeing Mach. Co. v. North-

field Ins. Co., 524 S.E.2d 558, 564–65 (N.C. 2000). But see, e.g ., Bituminous Cas. Corp. v.

• St. Clair Lime Co., No. 94-6436, 1995 U.S. App. LEXIS 30948, at *17 (10th Cir. Oct. 27,

1995) (holding that pollution exclusion was not overridden by completed operations coverage where claim was not based on products liability); Crescent Oil Co. v. Federated Mut. Ins. Co., 888 P .2d 869, 873–74 (Kan. Ct. App. 1995) (same). 117. See Gamble Farm Inn, Inc. v. Selective Ins. Co., 656 A.2d 142, 145–47 (Pa. Super. Ct. 1995); Kent Farms, Inc. v. Zurich Ins. Co., 998 P.2d 292, 295 (Wash. 2000); see also Apana v. TIG Ins. Co., 574 F.3d 679, 682–83 (9th Cir. 2009) (detailing numerous such holdings in various jurisdictions). 118. See Noel C. Paul, The Price of Emission: Will Liability Insurance Cover Damages Resulting from Global Warming? , 19 L

• y

. C

• nsumer L. R

ev . 468, 496 (2007).

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 836

application of the pollution exclusion to alleged pollutants beyond those situations for which the exclusion was originally intended.

119

Policyholders could also argue that the type of claims alleged in the American Electric Power , Comer , and Kivalina cases (i.e., those alleging that the release of various gases into the atmosphere causes a worldwide atmo- spheric imbalance that, in turn, leads to certain dangerous climate changes) almost certainly was not on the minds of either insurers or policyholders at the time of contracting for historical policies as such suits are only of the most recent vintage.

120 Indeed, some insurer-side commentators have

recognized that the current editions of the pollution exclusion do not apply, and were not contemplated to apply, to global warming claims and have lobbied for new policy provisions directly addressing GHG emission claims and climate change liabilities.

121 In response, and as discussed in the

next section, insurance companies are already in the process of developing new products and provisions to deal with global warming claims and cli- mate change risks. In the meantime, policyholders have strong grounds to argue that pollution exclusions in policies issued to date do not bar cover- age for GHG emission claims.

• v. developments in the insurance industry

in response to climate change risks

Given the possibility for third-party liability claims, as well as directors’ and

• fficers’ insurance and property insurance claims, insurers are responding

to the potential impact of climate change–related losses in several ways. Insurers have become wary of the potential large-scale insured losses that

119. See Nav-Its, Inc. v. Selective Ins. Co. of Am., 869 A.2d 929, 930 (N.J. 2005); Mac- Kinnon v. Truck Ins. Exch., 73 P.3d 1205, 1208–09, 1216 (Cal. 2003); Belt Painting Corp. v. TIG Ins. Co., 795 N.E.2d 15, 18–21 (N.Y. 2003); Keggi v. Northbrook Prop. & Cas. Ins. Co., 13 P.3d 785, 790 (Ariz. Ct. App. 2000); Nautilus Ins. Co. v. Jabar, 188 F.3d 27, 31 (1st Cir. 1999); Apana v. TIG Ins. Co., 574 F.3d 679, 682–83 (9th Cir. 2009); Am. States Ins. Co. v. Koloms, 687 N.E. 2d 72, 81 (Ill. 1997); Doerr v. Mobil Oil Corp., 774 So. 2d 119, 126–28 (La. 2000); Donaldson v. Urban Land Interests, Inc., 564 N.W.2d 728, 732 (Wis. 1997).

• 120. The date of purchase of the relevant policies will impact the effectiveness of this argu-

ment because awareness of global warming has arguably increased over time. 121. See Alex Hamer, Climate Change and the Liability Insurer: In Light of Recent Developments in the Debate Concerning Climate Change Liability, Is It Time for a Climate Change Exclusion? , Reynolds Porter Chamberlain LLP Legal Update ( July 11, 2008) (“[I]t is anticipated that insurers will in due course, seek to place some reliance upon the pollution exclusion in response to climate change claims. However, there are real doubts that the language of such clauses will be effective to meet the specific risks of climate change, of which the draftsmen were not even conscious when the current exclusions were formulated. Whilst, for example, certain greenhouse gases . . . may be regarded as pollutants, others, such as carbon dioxide, may not.”), available at www.rpc.co.uk / Default.aspx?sID=787&lID=0 (select “Legal Update 11 July 2008”).

Insurance Coverage for Global Warming Liability Claims 837

may arise from global warming–related claims. Swiss Re published a re- port in 2009 that stated, “We expect . . . that climate change–related li- ability will develop more quickly than asbestos-related claims and believe the frequency and sustainability of climate change–related litigation could become a significant issue within the next couple of years.”

122 Accordingly,

insurers appear to be intent on limiting their exposure to climate change– related losses. Although insurers generally have not yet added to their policies exclusions specifically applicable to climate change–related losses, policyholders should be aware that as the risk of climate change–related losses increase, in terms of both third-party liability and first-party perils, insurers may change their policy terms in the future to limit exposure to such losses.

123

Numerous insurers, including ACE, AIG, Allstate, Chubb, Travelers, and Zurich, as well as brokers such as Aon and Willis, have established dedi- cated teams or task forces charged with setting forth their strategies related to global warming.

124 Additionally, insurers have sought to minimize their

exposure to climate change risks by encouraging environmentally sound behavior by their policyholders.

125 Some insurers are also considering the

introduction of “green” insurance products that offer reduced premiums to policyholders as a reward for sustainable business practices.

126

Insurance regulators have taken note of emerging climate change– related risks as well. The National Association of Insurance Commission- ers (NAIC) has adopted an annual survey to collect information from the largest insurers on their exposure to climate change risks, although require- ment of completion of the survey is at the discretion of each state. NAIC suggests that, beginning with the 2009 reporting year, states require prop- erty/casualty and health / life insurers with annual premiums in excess of $500 million to answer the annual survey.

127 NAIC would have states lower

the survey’s premium threshold to $300 million for the 2010 reporting year and thereafter.

128 At the time that the new requirement was introduced,

122. See Urs Leimbacher et al., The Globalisation of Collective Redress: Consequences for the Insurance Industry , Swiss Re 3 (2009), www.swissre.com. 123. See Dave Lenckus, Insurers Have Yet to Restrict Climate Change-Related Losses ,

• Bus. Ins.

,

• Nov. 17, 2008, at 23. Aon has reported that at least one insurer has inserted a climate change

exclusion into an automaker’s pollution liability policy. Id . 124. See Evan Mills, From Risk to Opportunity: Insurer Responses to Climate Change 13 (Ceres 2009). Bermuda-based insurer Catlin Group Ltd. even sponsored a re- search expedition to the Arctic to gather data on the effect of global warming on Arctic sea ice. See Sarah Veysey, Catlin Backs Expedition to Measure Arctic Ice ,

• Bus. Ins.

, May 25, 2009, at 3. 125. See Mills, supra note 124, at 13. 126. Id . 127. See Nat ’ l Ass ’ n of Ins. Comm ’ rs, Insurer Climate Risk Disclosure Survey (Mar. 28, 2010), www.naic.org. 128. Id .

Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) 838

Pennsylvania Insurance Commissioner Joel Ario, who chairs the NAIC Climate Change and Global Warming T ask Force, said, “Climate change will have huge impacts on the insurance industry and we need better infor- mation on how insurers are responding to the challenge.”

129 Through the

surveys, regulators hope to understand the insurers’ exposure to coverage claims related to global warming, climate-related risks to the insurers’ own investments, and any steps that may be taken to mitigate losses for the in- surers themselves and their policyholders.

130

Policyholders should continue to monitor these changes as well as the insurers’ efforts to address climate change risks because they will likely impact the purchase and renewal of insurance policies in the future, par- ticularly if global warming claims become a mainstay litigation risk.

• vi. conclusion

In conclusion, whether liability ever will be imposed on defendants for claims that GHG emissions contribute to global warming is yet to be

• determined. Moreover, whether recent pro-plaintiff decisions permit-

ting plaintiffs to proceed with their GHG emission lawsuits will open the floodgates of global warming litigation, as many commentators predict, remains to be seen. Nonetheless, companies that are named defendants in such lawsuits should carefully consider whether their current and historical CGL policies may help respond to such claims.

129. See Meg Fletcher, NAIC Requires Disclosure of Climate Change Risks ,

• Bus. Ins.

, Mar. 23, 2009. 130. Id .