All posts tagged '"natural and probable consequence"'

Virginia Supreme Court Stands Firm on Rehearing Climate Change Insurance Case: AES v. Steadfast is (Re-) Affirmed

April 20, 2012 14:12
by J. Wylie Donald
The Virginia Supreme Court surprised us today.  It issued its opinion (attached) on rehearing in AES Corp. v. Steadfast Insurance Co., hardly changed from its original decision finding that the allegations in Native Village of Kivalina v. ExxonMobil Corp. did not constitute an occurrence.  The concurrence, however, is substantially altered, and it is there that one can get a taste of the mischief to which this decision may lead. We have blogged this subject on several occasions.  In a nutshell, AES sought coverage for climate change liability claims asserted by claimant Inupiat Eskimos, who alleged that AES’s (and others’) carbon dioxide emissions were the cause of the excessive erosion of their community on a spit of land north of the Arctic Circle.  AES tendered the claim to Steadfast, who accepted the defense subject to a reservation of rights, and then filed a declaratory judgment action against AES in Virginia.  Following dueling motions for summary judgment, Steadfast prevailed before the trial court.  AES took an appeal to the Virginia Supreme Court.  Notwithstanding specific allegations of negligence by AES, the Court concluded:   “[e]ven if AES were negligent and did not intend to cause the damage that occurred, the gravamen of Kivalina’s nuisance claim is that the damages it sustained were the natural and probable consequences of AES’s intentional emissions.”    In sum, “If an insured knew or should have known that certain results would follow from his acts or omissions, there is no 'occurrence' within the meaning of a comprehensive general liability policy.”  Thus, the trial court was affirmed. AES sought rehearing because three authorities on which the Court relied established that there was no occurrence where the insured knew to a “substantial certainty” or “substantial probability” that injury would occur.  As the Kivalina plaintiffs made no such “substantial certainty” allegation, AES asserted the Court’s holding was in error. We learned today that the Court disagreed.  Well, actually, we don’t know if the Court disagreed.  There is no mention of “substantial certainty” or “substantial probability” although the Court continues to cite the exact same authorities.  One could just as reasonably conclude that the Court felt AES’s argument simply was not relevant.  Virginia law, according to the Court is as follows:  “For coverage to be precluded under a CGL policy because there was no occurrence, it must be alleged that the result of an insured’s intentional act was more than a possibility; it must be alleged that the insured subjectively intended or anticipated the result of its intentional act or that objectively, the result was a natural or probable consequence of the intentional act.“  The Kivalina plaintiffs did not allege that AES intended the erosion of the spit, so the allegations had to be read to demonstrate that the erosion in Alaska was a natural or probable consequence of the emissions of carbon dioxide from AES’s plants’ emissions somewhere in the lower 48.  From where we sit, there seems a great distance from the alleged damage in Alaska being a “substantial certainty” or being a “probable consequence.”  We note a trial court's recent ruling (attached) in another climate change liability case, Comer v. Murphy Oil:, where the Southern District of Mississippi dismissed the climate change claims:  The assertion that the defendants’ emissions combined over a period of decades or centuries with other natural and man-made gases to cause or strengthen a hurricane and damage personal property is precisely the type of remote, improbable, and extraordinary occurrence that is excluded from liability. So one court rules that allegations of climate change effects are extraordinary, improbable and remote, while another rules they are to be taken as stated.  Regardless, the Court's decision should resolve AES’s quest for coverage from Steadfast.  Other Kivalina defendants will take note and ensure that Virginia is struck from possible litigation venues for their coverage claims. Will this decision have major implications?  Yes, but probably not in the climate change space.  It is one decision, on one issue, on one set of facts.  We will be very surprised if future plaintiffs do not take note of the decision and ensure that their pleadings more adequately state negligence claims so as to bring insurance money to the table (assuming at some point they can get past motions to dismiss).  Other jurisdictions have their own jurisprudence on “occurrence” and they are not likely to mirror Virginia’s.  We feel that we can say that with some authority based on the statements made by Justice Mims in his concurrence.  Justice Mims felt that Virginia law left the Court with no option but to find there was no occurrence:  “under the reasoning of our precedents, allegations of negligence and allegations of accident must be mutually exclusive.  … Because “accident” is synonymous with “occurrence,” which is what these CGL policies cover, I concur with the majority that our precedents require us to conclude that they do not provide coverage for AES’s allegedly negligent acts.”  But that leads to a real problem:  “I also must acknowledge the broader effect that this conclusion, and the underlying case law that compels it, may have on other CGL policies in which the insured risk is defined as an “occurrence.  Our precedents may have painted us into a jurisprudential corner.”   Can it be that commercial general liability policies in Virginia do not cover negligence?  Stand by.  This is sure to be the subject of future litigation. 20120420 AES v. Steadfast (Va. Apr. 20, 2012).pdf (42.88 kb) 20120320 Comer v. Murphy Oil USA Inc., Order of Dismissal (S.D Miss).pdf (172.02 kb)

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