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RICHMOND, Va.—The Virginia Supreme Court has affirmed its previous ruling that Steadfast Insurance Co. has no obligation to defend or indemnify Arlington, Va.-based AES Corp. in a climate change liability suit.
In its Friday opinion, the Virginia high court said a civil complaint filed against the energy company by a group of native Alaskans did not constitute an occurrence under the commercial general liability policy Steadfast had written for AES.
The underlying suit, Village of Kivalina et al. vs. ExxonMobil Corp. et al., alleged AES and other companies damaged the village by causing global warming. AES vs. Steadfast was considered by many to be the first insurance coverage case involving climate change litigation.
In its September opinion, Virginia Supreme Court 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.
In seeking a rehearing, AES had 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 had argued.
In omitting the words “substantial probability” from the duty to defend test, AES maintained, the court “radically redefined ‘accident' to exclude coverage in virtually all negligence cases.”
In its Friday decision, also written by Justice Goodwyn, the Virginia Supreme Court disagreed, applying the “eight-corners rule,” which compares the “four corners” of the underlying complaint with the “four corners” of the insurance policy to determine whether the allegations in the underlying complaint are covered.
“The relevant policies only require Steadfast to defend AES against claims for damages for bodily injury or property damage caused by an occurrence or accident,” the court noted.
“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 consequence 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,” the opinion states.
The decision is “a major victory for insurers in the first-ever climate change-related coverage case, with important implications for both insurers and companies with potential exposure to climate change-related tort claims,” said Joanne L. Zimolzak, a partner in the Washington office of McKenna Long & Aldridge L.L.P., who has been following the case.
“Although policyholders and their counsel may yet attempt to press similar coverage issues in more favorable jurisdictions, the decision nonetheless stands as a significant step toward resolving the question of whether such claims are covered under CGL policies,” Ms. Zimolzak said.
The decision may have other implications as well, she noted, pointing to a concurring opinion by Justice William C. Mims that disagreed with the majority opinion that the reasoning be limited to the eight corners of the particular complaint and policies at issue.
“He went on to signal his view that the court’s decision may have a broader effect on other CGL policies in which the insured risk is defined as an ‘occurrence,’ an issue that bears further exploration by both insurers and policyholders,” Ms. Zimolzak said.
RICHMOND, Va.—The Virginia Supreme Court has upheld a lower court ruling that Steadfast Insurance Co. has no obligation to defend and indemnify Arlington, Va.-based energy corporation AES Corp. in a climate change suit.