Hawaii high court asked to rule in AIG climate change case

A Honolulu federal district court is asking the Hawaii Supreme Court to rule on whether the pollution exclusion applies to greenhouse gases, in a case involving a coverage dispute between an oil company and American International Group Inc. units.

The state’s high court is being asked two questions: whether recklessness can amount to an “accident” and, if so, whether greenhouse gas emissions constitute the escape of pollutants. It may be the first time a state supreme court will be ruling on the pollutant issue.

There is no “clear standing controlling precedent in Hawaii judicial decisions on these issues,” says the order issued by the district court in Aloha Petroleum Ltd. vs. National Union Fire Insurance Co. of Pittsburgh, PA, and American Home Assurance Co. 

Honolulu-based Aloha Petroleum sued AIG units National Union and American Home for refusing to defend it against two underlying climate change lawsuits filed by Hawaii counties.

The policies involved cover “occurrences,” which is defined to mean accidents, but “accident” is not further defined. In addition, many policies exclude coverage for pollutants’ release or escape, the order says.

The underlying lawsuits’ crux is that Aloha disregarded known risks that selling its fuel products “would inevitably combust and produce greenhouse gases, particularly carbon dioxide, thereby changing the climate and causing harm to the county plaintiffs,” the order said.

Aloha contends it is unsettled under Hawaii law as to whether “pollution exclusions extend beyond traditional environmental pollution to cover micro contamination…such as the greenhouse effect alleged in the underlying lawsuits.”

AIG’s counterargument is that the “greenhouse gas pollution” alleged in the underlying lawsuit “is not as far from ‘traditional environmental pollution’ as Aloha contends,” the order said.

AIG had no comment while Aloha Petroleum’s attorneys in the case did not respond to requests for comment.