In
its recent decision in AES Corporation v.
Steadfast Ins. Co., 2012 Va. LEXIS 81 (Va. Apr. 20, 2012), the Supreme
Court of Virginia revisited its 2011 ruling concerning whether a general
liability carrier had a duty to defend an underlying lawsuit pertaining to its
insured’s alleged responsibilities for climate change.
The
insured, AES, was named as one of several defendants in the suit brought by the
Native Village of Kivalina, alleging that defendants’ direct and indirect emissions
of greenhouse gases contributed to climate change. Plaintiffs allege that climate change will
result in the melting of polar ice caps, which will cause sea levels to rise
and ultimately cause their lands to be permanently flooded. While the underlying suit was dismissed by
the United States District Court for the Northern District of California (and
while the viability of climate change was called into serious doubt as a result
of the United States Supreme Court’s decision in AEP v. Connecticut, 131 S. Ct. 2527 (2011)), a coverage question
nevertheless was raised as to whether AES was entitled to a defense in the Kivalina lawsuit. The Supreme Court of Virginia initially ruled
in the insurer’s favor in a September 2011 decision. See,
AES Corporation v. Steadfast Ins. Co., 715 S.E.2d 28 (Va. 2011). In January 2012, however, the Supreme Court
of Virginia, in a surprising move, withdrew its 2011 decision and agreed to
have further argument on the issue.
In
its decision on rehearing, the Virginia Court essentially adopted its earlier
ruling, holding that the underlying complaint, alleging causes of action for
nuisance and concert of action, did not trigger a duty to defend. The court’s reasoning hinged on the fact that
the complaint alleged that AES intentionally released tons of greenhouse gases
into the atmosphere. Intentional
conduct, explained the court, cannot be an occurrence and “[i]f a result is the
natural or probable consequence of an insured’s intentional act, it is not an
accident.” The court nevertheless acknowledged
that in some situations, when intentional acts give rise to a harm so far
outside the ordinary expectations of a reasonable person, coverage may be
triggered. As such, the question for the
court was “whether the Complaint can be construed as alleging that Kivalina’s
injuries, at least in the alternative, resulted from unforeseen consequences
that were not natural or probable consequences of AES’s deliberate act of
emitting carbon dioxide and greenhouse gases.”
AES
argued that this “alternative” was satisfied in light of the allegation in
Kivalina’s complaint that defendants “intentionally or negligently” created the
conditions for global warming. AES
further relied on the allegation that defendants “knew or should have known” of
the consequences of greenhouse gas emissions, thus raising the possibility that
defendants did not intend these consequences.
The court rejected these arguments, reasoning:
In the Complaint, Kivalina plainly alleges that AES
intentionally released carbon dioxide into the atmosphere as a regular part of
its energy-producing activities.
Kivalina also alleges that there is a clear scientific consensus that
the natural and probable consequences of such emissions is global warming and
damages such as Kivalina suffered.
Whether or not AES’s intentional act constitutes negligence, the natural
or probable consequence of that intentional act is not an accident under
Virginia law.
Thus,
it was not enough that Kivalina alleged negligence in the alternative, since
under Virginia law, an allegation of negligence is not synonymous with an
allegation of an accident. Because the
Kivalina suit alleged that plaintiffs’ damages were the “natural and probable
consequences” of AES’ “intentional emissions,” it necessarily followed that the
Kivalina suit did not allege an accident.
In addressing this point, the court was careful to explain that its
holding was limited to the unique facts pled:
The dissimilarity between the allegations in the Kivalina
complaint and those in most other tort actions for bodily injury or property
damage is the relevant intentional or negligent act alleged in the
complaint. Kivalina does not allege that
AES’s intentional acts were done negligently.
The complaint alleges that AES was “negligent” only in the sense that it
“knew or should have known” that its actions would cause injury no matter how
they were performed.
Thus,
the court concluded, regardless of AES’ ignorance, because the harms of its
intentional emissions were the natural or probable consequences of such
conduct, no occurrence was alleged and Steadfast owed no defense.
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