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Court to rehear closely watched climate change insurance coverage case

Court to rehear closely watched climate change insurance coverage case

RICHMOND, Va.—The Virginia Supreme Court has agreed to rehear a climate change suit after previously upholding a lower court ruling that Steadfast Insurance Co. has no obligation to indemnify Arlington, Va.-based energy corporation AES Corp.

The court decided last month to set aside its September judgment upholding the lower court verdict and said it would hear oral argument on the rehearing when its next session begins Feb. 27.

The case is seen as significant as the first involving insurance coverage for a climate change liability suit.

In its ruling in September, the Virginia high court upheld a summary judgment by an Arlington County, Va., circuit court judge, who held that a civil complaint filed against AES did not constitute an occurrence under the Steadfast commercial general liability policy the insurer had written for AES.

The underlying 2008 suit,, Native Village of Kivalina et al. vs. ExxonMobil Corp. et al., was brought by the native community of an Alaskan barrier island, alleging AES and other companies damaged the village by causing global warming. AES-Steadfast was considered by many to be the first insurance coverage case involving climate change litigation.

In the September opinion, Justice S. Bernard Goodwyn noted that the Steadfast CGL policy's definition of occurrence was “an accident, including continuous or repeated exposure to substantially the same general harmful condition.”

The Kivalina community had alleged that AES intentionally released carbon dioxide and greenhouse gases into the atmosphere in the course of generating electricity.

“Kivalina alleges its damages were the natural and probable consequences of AES's intentional actions,” the justice wrote in September. “Therefore, Kivalina does not allege that its property damage was the result of a fortuitous event or accident, and such loss is not covered under the relevant CGL policies.”

In seeking a rehearing, AES argued that none of the authorities cited by the court in its September ruling supported that finding. Instead, they hold that the duty to defend is excused only when the complaint alleges a defendant “should have known to a substantial probability” that its conduct would cause the alleged harm, AES argued.

In omitting the words “substantial probability” from the duty to defend test, AES argued, the court “radically redefined ‘accident' to exclude coverage in virtually all negligence cases.”

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