The Virginia Supreme Court has handed down an unprecedented ruling on companies’ liability for global warming-related damages — a first-in-the-nation decision that could portend massive consequences for energy companies and environmental lawyers.
The ruling stems from an ongoing case in federal court, in which the Alaskan island town of Kivalina accused a handful of mostly U.S. energy companies of contributing to global warming, which it says has rendered the town uninhabitable. One of the energy companies named in the lawsuit, Arlington-based AES Corp., was then sued in Virginia by its insurance carrier, which objected to having to defend the company and possibly pay damages associated with global warming as part of a policy covering accidents.
“In this instance, the allegations of negligence do not support a claim of an accident,” Justice S. Bernard Goodwyn wrote in a 16-page opinion issued on April 20.
Some analysts say the opinion, the first of its kind on the subject, could set policy on an emerging issue of litigation for years to come.
Laura Foggan, a lawyer for the firm Wiley Rein LLP who filed an amicus brief in the case on behalf of the Complex Insurance Claims Litigation Association and the American Insurance Association, called it groundbreaking and said it shows companies can now be held liable for damage caused by global warming.
“Decades of releasing greenhouse gases into the atmosphere just doesn’t qualify as an accident,” she said.
But J. Wylie Donald, who writes for the firm McCarter & English’s climatelawyers.com, downplayed the legal implications.
“It’s one court, one set of facts, one set of policy language,” he said. “We’re just at the very beginning of the climate change coverage litigation. At the end of the day, there are people who are going to be negatively impacted by climate change, and they’re going to be looking for lawyers to mitigate their losses. It’s crazy to be allocating liability to some American power plant when the Chinese and Indian power plants are putting this stuff in the atmosphere as well.”
Mr. Donald noted the U.S. District Court for the Southern District of Mississippi dismissed claims in another climate change liability case.
A spokesman for AES did not respond to a request for comment.
The federal lawsuit that sparked the Virginia Supreme Court case was filed in U.S. District Court for the Northern District of California in February 2008 by the native village of Kivalina and city of Kivalina against AES, Exxon Mobil and about 20 other energy and oil companies, The lawsuit says the companies damaged the village by causing global warming through emitting greenhouse gases. Kivalina is located on a small barrier reef off the northwest coast of Alaska.
The villagers argue that the companies “knew or should have known of the impacts of their emissions on global warming and on particularly vulnerable communities, such as coastal Alaskan villages. Despite this knowledge, defendants continued their substantial contributions to global warming.”
Kivalina dedicates 16 pages of its 69-page complaint to explaining global warming, while also charging a “civil conspiracy by power, coal and oil companies to mislead the public about the science of global warming.”
The court dismissed the case in 2009, but Kivalina appealed to the 9th U.S. Circuit Court of Appeals, where the case now resides.
In the interim, Steadfast, AES’ insurance provider, brought action in Arlington County Circuit Court, claiming it did not owe the company defense or indemnity coverage because the particular damage either fell under exempted portions of its coverage agreement or happened when the two were not doing business together.
The court ultimately sided with Steadfast — a ruling upheld earlier this month by the state Supreme Court, which had also ruled for Steadfast in an initial opinion last year. But after AES petitioned for a rehearing, the court granted it and withdrew the Sept. 16 opinion.
The encroachment of the surrounding waters is forcing the island’s approximately 400 residents to relocate, which they say the government has estimated to cost between $95 million and $400 million.
What the case boils down to, the court held, is whether the damage resulted from an “occurrence” — in which case, AES would be covered. The relevant policies in this case define “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful condition.”
AES argues that since any damage suffered was unintentional, it should be deemed accidental.
But the court decided that an act such as emitting carbon into the atmosphere is intentional, is not an “occurrence” or an “accident,” and therefore is not covered.