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Pollution ruling may spark suits

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WASHINGTON—The U.S. Supreme Court's ruling that greenhouse gases are air pollutants could trigger a legal and regulatory assault on American industry, which likely would have to battle insurers at the same time for defense costs, according to legal experts.

Although the high court's April 2 ruling focused on a state's right to compel federal regulation of vehicle emissions, many legal experts predict it will embolden plaintiffs attorneys to launch more lawsuits claiming that industrial companies have stoked destructive climate changes.

Few experts predict such lawsuits would get far, saying the interplay of legal standards and science will thwart plaintiffs attorneys eventually. But those cases likely would survive long enough to run up huge defense costs that could encourage early settlements, experts said. Insurers, however, would likely assert that such claims fall under pollution exclusions.

In its 5-4 decision on April 2 in Massachusetts et al. vs. the Environmental Protection Agency et al., the Supreme Court ruled that greenhouse gases, including carbon dioxide, are pollutants under the Clean Air Act. Contrary to the EPA's assertions, the agency is authorized to regulate the emissions of those gases from new vehicles, the court ruled.

In addition, Massachusetts has "a special position and interest" to challenge the EPA's refusal to regulate greenhouse gases, because it is a large landowner facing actual or imminent injury from climate changes attributable to global warming caused in part by greenhouse gases, the court ruled. The court noted that the Massachusetts coastline is being swallowed by rising sea levels caused by global warming. In addition, the EPA has a Congressionally-imposed responsibility to protect the state, the court said.

The ruling, however, does not mean the EPA must begin to regulate greenhouse gas emissions. The high court remanded the case to a lower

court, where the agency still would have the opportunity to prove that "scientific uncertainty is so profound that it precludes EPA from making a reasoned judgment as to whether greenhouse gases contribute to global warming."

The EPA has not decided how it will proceed, a spokeswoman said.

Echoing several other attorneys, Matthew Cohen, a partner with policyholder law firm Heller Ehrman L.L.P. in Seattle, said the court's emphasis on Massachusetts' special standing "is not going to help the private plaintiffs."

Even so, Mr. Cohen and other legal experts say the decision could embolden plaintiffs attorneys to sue industrial concerns for emitting greenhouse gases. The Clean Air Act allows such suits, though that could change under some climate change bills being considered by Congress, he said.

Noting the court's "recognition of the scope of the problem" of global warming and "the human contribution to it," Mr. Cohen said: "That's pretty valuable stuff if you're a plaintiffs lawyer trying to survive" an attempt to dismiss a case.

Prior to the ruling, lawsuits against industrial concerns over their greenhouse gas emissions were tough "to get off the ground," with some limited exceptions, said James M. Davis, a managing partner at Anderson Kill & Olick P.C. in Chicago.

"This ruling may change the complexion of that," he said.

Adam Cole, an insurance recovery expert at Heller Ehrman in San Francisco, said the ruling gives plaintiffs attorneys a powerful one-two punch to press claims against industry. He noted that just three days earlier, a California federal court judge stated in a ruling that there is no dispute that carbon dioxide "is contributing to global warming."

In that case, environmental advocacy groups want officials at the Overseas Private Investment Corp. and the Export-Import Bank to analyze how greenhouse gas emissions by overseas projects would affect the U.S. environment before the defendants financially support those projects.

While the judge in that case on March 30 rejected the plaintiffs motion for a summary judgment, the case is still alive.

But some legal experts predicted that global warming science will keep plaintiffs attorneys away from the courts.

"It would be pretty hard to make a direct link between global warming and a roof being blown off or water rising at a particular address," said Laura A. Foggan, a Washington-based insurer attorney with Wiley, Rein & Fielding L.L.P. and counsel for the insurer-supported Complex Insurance Claims Litigation Assn.

Several policyholder and insurer attorneys as well as a legal scholar agreed, but they asserted that such a challenge would not be to stymie plaintiffs attorneys.

Their strategy could be to survive an early motion to dismiss and then leverage the prospect of protracted litigation and high defense costs to press for an early settlement, said Austen Parrish, an associate professor at Southwestern University Law School in Los Angeles.

If plaintiffs attorneys file a claim seeking class action status, the costs associated with fighting class certification would exert "enormous pressure on defendants to settle" even earlier in the litigation, he said. But Mr. Parrish said he would not expect settlements in the early cases.

Several legal experts also questioned whether plaintiffs could sue industry for their past greenhouse gas emissions, since those emissions were not illegal or even regulated.

But others noted that plaintiffs overcame similar retroactive liability challenges against asbestos and cigarette makers.

While battling plaintiffs over their alleged global warming damages, defendants likely would be fighting their insurers for defense costs.

Anderson Kill's Mr. Davis said common law in most states would require insurers to cover operation-related liabilities that policyholders have a reasonable expectation of being covered.

Environmental insurance broker David Dybdahl agrees. "If carbon dioxide isn't a regulated material by the EPA, then it's very hard for insurance companies to argue the pollution exclusion should apply," said Mr. Dybdahl, president of American Risk Management Resources Network L.L.C. in Middleton, Wis.

But insurer representatives say that neither coverage nor a defense is available.

For example, even if policyholders sought coverage under old policies that do not contain an absolute pollution exclusion, they could not identify an "abrupt event" that would trigger coverage, said insurer attorney William K. Enger, a partner with Wilson Elser Moskowitz Edelman & Dicker L.L.P. in Los Angeles.

As for later policies, the pollution exclusion is "quite broad" and contains some terminology that the Clean Air Act uses to define a pollutant, Ms. Foggan said. In addition, the Supreme Court defined greenhouse gases as pollutants, she said.

David Snyder, a vp and the assistant general counsel for the Washington-based American Insurance Assn., said the Supreme Court told the EPA "go do your job."

"But we don't think liability was created in any way by the Supreme Court decision," Mr. Snyder said.

Massachusetts et al. vs. the Environmental Protection Agency et al., U.S. Supreme Court, April 2; No. 05-1120.