Three recent federal court decisions have split 2 to 1 over the viability of suits seeking damages arising out of green-house-gas (GHG) emissions and global warming impacts. These decisions serve warning to GHG emitters that the liability exposure is a real danger, and that they should look to insurance for protection, says insurance recovery attorney John G. Nevius, a shareholder in the New York office of Anderson Kill & Olick. "The proliferation of such suits will lead to further disputes over the duty to defend them. The different federal outcomes and the continuing uncertainty over the viability of GHG-related suits lend support to the argument that existing pollution exclusions cannot be said to definitively preclude all insurance coverage," added Mr. Nevius, who has no direct involvement in these cases.
On October 19, the Federal Court of Appeals for the Fifth Circuit ruled that a Mississippi landowners' suit claiming that oil and coal companies emitted greenhouse gasses that contributed to global warming and hence to a rise in sea levels and heightened Hurricane-Katrina storm damage, can go forward. The Fifth Circuit, citing a recent Supreme Court decision accepting the plausibility of a link between emissions and hurricane severity, held that the plaintiffs had standing and should be allowed to proceed to establish that their injuries are "fairly traceable" to defendants' activities.
The Fifth Circuit's ruling is in tune with last month's Second Circuit Court of Appeals' ruling on utility emissions in Connecticut v. AEP, allowing a similar nuisance claim by several states against coal-burning utilities to proceed. At the same time, a case filed against oil companies by the Inupiat Eskimo fishing village of Kivalina over the impacts of global warming on traditional ways of life was dismissed on October 15 by the U.S. District Court for the Northern District of California. That decision likely will be appealed, and the public nuisance claims refiled in state court.
Insurers' duty to defend contested
Mr. Nevius notes that from an insurance standpoint, the Kivalina case already has resulted in litigation over the scope of an insurer's duty to defend in state court in Virginia. On July 9, 2008, Steadfast Insurance Company filed a complaint seeking a declaration of no coverage for one of the underlying Kivalina defendants. Steadfast, a subsidiary of Zurich Financial Services, alleged that it had no duty to defend its policyholder for three reasons: 1) lack of an "occurrence"; 2) a Loss In Progress Endorsement; and 3) application of a pollution exclusion. Defending lawsuits such as the Kivalina case can be expensive. Though the underlying Kivalina case has now been dismissed, legal costs will continue to mount through the appeals process.
While many companies may think of "nuisance" suits alleging harm from their GHG emissions as unlikely to survive, Mr. Nevius notes, two have crossed important early hurdles on appeal in the last two months, and the cost of defending such suits can dwarf the costs of any potential judgment. An insurance company's duty to defend is broader than its duty to indemnify and companies facing such suits should move quickly to secure coverage for defense costs or prepare for more high stakes coverage battles such as the Steadfast case. If Steadfast prevails, insurance companies will be that much less likely to defend initially, and, rather, may simply deny defense coverage at the outset of any GHG-related suit seeking damages. Filing in Virginia may be a smart tactic by the insurance industry Mr. Nevius observed, because the Virginia Supreme Court has held that chlorine added to water by municipalities as a disinfectant falls within the ambit of a pollution exclusion.
Uncertainty favors coverage
Two Global Warming Cases Green-lighted, One Dismissed; But Insurance Issues Live On
Three recent federal court decisions have split 2 to 1 over the viability of suits seeking damages arising out of green-house-gas (GHG) emissions and global warming impacts. These decisions serve warning to GHG emitters that the liability exposure is a real danger, and that they should look to insurance for protection, says insurance recovery attorney John G. Nevius, a shareholder in the New York office of Anderson Kill & Olick. "The proliferation of such suits will lead to further disputes over the duty to defend them. The different federal outcomes and the continuing uncertainty over the viability of GHG-related suits lend support to the argument that existing pollution exclusions cannot be said to definitively preclude all insurance coverage," added Mr. Nevius, who has no direct involvement in these cases.
On October 19, the Federal Court of Appeals for the Fifth Circuit ruled that a Mississippi landowners' suit claiming that oil and coal companies emitted greenhouse gasses that contributed to global warming and hence to a rise in sea levels and heightened Hurricane-Katrina storm damage, can go forward. The Fifth Circuit, citing a recent Supreme Court decision accepting the plausibility of a link between emissions and hurricane severity, held that the plaintiffs had standing and should be allowed to proceed to establish that their injuries are "fairly traceable" to defendants' activities.
The Fifth Circuit's ruling is in tune with last month's Second Circuit Court of Appeals' ruling on utility emissions in Connecticut v. AEP, allowing a similar nuisance claim by several states against coal-burning utilities to proceed. At the same time, a case filed against oil companies by the Inupiat Eskimo fishing village of Kivalina over the impacts of global warming on traditional ways of life was dismissed on October 15 by the U.S. District Court for the Northern District of California. That decision likely will be appealed, and the public nuisance claims refiled in state court.
Insurers' duty to defend contested
Mr. Nevius notes that from an insurance standpoint, the Kivalina case already has resulted in litigation over the scope of an insurer's duty to defend in state court in Virginia. On July 9, 2008, Steadfast Insurance Company filed a complaint seeking a declaration of no coverage for one of the underlying Kivalina defendants. Steadfast, a subsidiary of Zurich Financial Services, alleged that it had no duty to defend its policyholder for three reasons: 1) lack of an "occurrence"; 2) a Loss In Progress Endorsement; and 3) application of a pollution exclusion. Defending lawsuits such as the Kivalina case can be expensive. Though the underlying Kivalina case has now been dismissed, legal costs will continue to mount through the appeals process.
While many companies may think of "nuisance" suits alleging harm from their GHG emissions as unlikely to survive, Mr. Nevius notes, two have crossed important early hurdles on appeal in the last two months, and the cost of defending such suits can dwarf the costs of any potential judgment. An insurance company's duty to defend is broader than its duty to indemnify and companies facing such suits should move quickly to secure coverage for defense costs or prepare for more high stakes coverage battles such as the Steadfast case. If Steadfast prevails, insurance companies will be that much less likely to defend initially, and, rather, may simply deny defense coverage at the outset of any GHG-related suit seeking damages. Filing in Virginia may be a smart tactic by the insurance industry Mr. Nevius observed, because the Virginia Supreme Court has held that chlorine added to water by municipalities as a disinfectant falls within the ambit of a pollution exclusion.
Uncertainty favors coverage
While the two appeals court rulings allowing GHG suits to go forward raise a warning flag to emitters, the lack of federal court unanimity also bolsters the case for insurance coverage for any GHG-related liability. Given that the Courts cannot agree on whether and how emissions of CO2 and other GHGs give rise to actionable pollution, it cannot be said with certainty that "pollution exclusions" bar coverage. When uncertainty exists over coverage, the policyholder should receive the benefit of any doubt.
Continued uncertainty will be the rule as these cases wind their way through the appeals process and the judiciary wrestles with who will bear the burden(s) of climate change.
John G. Nevius is a shareholder in the New York office of Anderson Kill & Olick, P.C., a registered Professional Engineer and an Adjunct Professor at Pace University School of Law, where he teaches a class on Climate and Insurance. Mr. Nevius has successfully resolved and litigated numerous insurance coverage actions on behalf of policyholders and provides advice and technical expertise on a wide range of environmental and insurance matters.
About Anderson Kill & Olick, P.C.
Anderson Kill & Olick, P.C. practices law in the areas of Insurance Recovery, Anti-Counterfeiting, Bankruptcy, Commercial Litigation, Corporate & Securities, Employment & Labor Law, Real Estate & Construction, Tax, and Trusts & Estates. Best-known for its work in insurance recovery, the firm represents policyholders only in insurance coverage disputes, with no ties to insurance companies and no conflicts of interest. Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Greenwich, CT, Newark, NJ, Philadelphia, PA, Ventura, CA and Washington, DC. For companies seeking to do business internationally, Anderson Kill, through its membership in Interleges, a consortium of similar law firms in some 20 countries, assures the same high quality of service throughout the world that it provides itself here in the United States.
Anderson Kill represents policyholders only in insurance coverage disputes, with no ties to insurance companies, no conflicts of interest, and no compromises in it's devotion to policyholder interests alone.
The information appearing in this article does not constitute legal advice or opinion. Such advice and opinion are provided by the firm only upon engagement with respect to specific factual situations
