E-Alert Case Updates

Insurer Need Not Defend or Indemnify Global Warming Defendant

AES Corp. v. Steadfast Insurance Co.
No. 100764 (Supreme Court of Virginia, Sept. 16, 2011
by Colleen K. O’Brien, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In AES Corp. v. Steadfast Insurance Co., an insurer filed a declaratory judgment action in Virginia state court in order to disclaim coverage for a defendant sued in a global warming case. In the underlying case, Native Village of Kivalina v. ExxonMobil Corp., a native Alaskan community sued AES, an energy company, and other defendants, for allegedly damaging the village by intentionally emitting greenhouse gases, which caused global warming.

AES requested that Steadfast provide defense and indemnity under its commercial general liability policies, and Steadfast filed the instant declaratory judgment action for a determination of whether it was required to do so. The trial court granted the insurer’s Motion for Summary Judgment, holding that the Complaint did not allege an “occurrence” as that term was defined in the policy, and therefore, the allegations in the Complaint were not covered by the policies.

The appellate court upheld the trial court decision. It applied the eight corners rule, which requires the Court to confine its analysis to the four corners of the Complaint and the four corners of the policy. The Court reasoned that because the Complaint accused the insured of intentionally releasing greenhouse gases, that the insured’s conduct was not an “accident” or “occurrence” within the meaning of the policy. The Court rejected the insured’s argument that in reality, they had unintentionally released the emissions. To the Court, the issue was whether the resulting harm was a foreseeable consequence of the insured’s business. Because the Plaintiffs in the underlying case alleged that the insured should have anticipated the damages resulting from its emissions, the damage resulting from the insured’s conduct was foreseeable. Therefore, the trial court properly granted summary judgment in favor of the insurer.