All posts tagged 'Virginia Supreme Court'

Just When You Thought It Was Over, Rehearing is Granted in Steadfast v. AES

January 30, 2012 22:10
by J. Wylie Donald
The YogiBerraism "It ain't over till it's over" is overused. But just because it is overused does not mean it is wrong.  AES has stayed up late digesting the insights of one of baseball's greatest. Its homework has paid off. On January 17 the Virginia Supreme Court entered a terse order (attached) granting rehearing in Steadfast Insurance Co v AES Corp. Jump to the next paragraph if you are familiar with the case. For those unfamiliar, AES is a defendant in Native Village of Kivalina v ExxonMobil Corp., a lawsuit alleging that certain carbon dioxide emitters are responsible for global warming, which has melted arctic sea ice resulting in disastrous erosion of the plaintiffs' community.  (For our most recent blog on Kivalina, click here)   AES tendered the claim to Steadfast, who accepted the defense and then filed a declaratory judgment action seeking to avoid coverage. AES lost on summary judgment on whether there was an occurrence and then lost its appeal before the Virginia Supreme Court last September.  Or maybe not.  AES filed a petition for rehearing (attached) asserting that the Court "radically redefined 'accident' to exclude coverage in virtually all negligence cases." Petition at 1. Normally such hyperbole is a sign of weakness. Here, however, it is in large measure accurate. The Court held that "When the insured knows or should have known [as the Kivalina plaintiffs alleged] of the consequences of his actions, there is no occurrence and therefore no coverage." See Petition at 4. It relied on two treatises and an Eighth Circuit decision.  Id. Yet, as AES shows in its petition, each of those authorities requires that the insured should have known to a substantial probability or a substantial certainty. Id. at 4-6. Since plaintiffs made no such allegation, and the chain of causation was attenuated (to say the least, see Petition at 7-8), AES asserts the Court's decision was in error. And this was not something of little consequence. It potentially affected all general liability insurance. The quote from the Eighth Circuit's decision is worth repeating:  To adopt [the policy] that an injury is not caused by accident because the injury is reasonably foreseeable would mean that only in a rare instance would the comprehensive general liability policy be of any benefit to [the insured] .... Under [this] construction of the policy language if the damage was foreseeable then the insured is liable, but there is no coverage, and if the damage is not foreseeable, there is coverage, but the insured is not liable. This is not the law. The function of an insurance company is more than that of premium receiver. Petition at 10, quoting City of Carter Lake v. Aetna Cas. & Sur. Co., 604 F.3d 1052, 1058 (8th Cir. 1979).    What does it all mean?  We conducted an unscientific review of reported cases where the Court granted rehearing in the last 10 years. In all of them, the Court revised its opinion. See Tanner v. State Corp. Comm’n, 266 Va. 170 (2003); Jaynes v. Commonwealth, 276 Va. 443 (2008); Uniwest Const. v. Amtech Elev. Serv., Inc., No. 091495 (Apr. 21, 2011).  All of them.  If we were AES, we would be somewhat optimistic.  Yogi Berra also said: "You can observe a lot by watching."  Oral argument in Richmond in February is likely to demonstrate the truth of that rule as well. 20111017 Petition for Rehearing (by AES), AES Corp. v. Steadfast Ins. Co..pdf (453.91 kb) 20120117 Order (granting petition for rehearing), AES Corp. v. Steadfast Ins. Co..pdf (33.13 kb)

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