All posts tagged 'nuisance'

Rising Sea Levels and Prohibited "Takings" - A Different Sort of Climate Change Litigation

November 18, 2014 21:39
by J. Wylie Donald
  A little noted anniversary passed this past week.  The odd 2009 storm, Nor’Ida (the progeny of a nor’easter and a hurricane), swept along the east coast pounding some areas with record storm surge five years ago in the second week of November.  Who is keeping Nor’Ida’s memory alive?  Among others, homeowners in Nags Head, North Carolina have especially good memories, as shown by their long-running litigation, Sansotta v. Town of Nag's Head.  They have been in state court, federal district court, the Fourth Circuit and on November 6 (one week short of the fifth anniversary of Nor’Ida) won an important battle in the Eastern District of North Carolina.  (The decision is attached below.)  Whether that is the end of the saga is anybody’s guess.  Or at least must be measured by how long the taxpayers want to keep paying their lawyers.   We blogged the prelude to the most recent decision a year ago last August.  Homeowners (perhaps beachfront cottage-owners is a better term) had challenged the Town of Nags Head, which had labeled certain beachfront homes nuisances because they obstructed emergency response and were in disrepair from Nor’Ida.  The plaintiffs asserted various constitutional claims (equal protection, due process, prohibited takings).  The Fourth Circuit rejected all the claims except the takings claim, which should have been allowed to proceed.   We pick up now from the Fourth Circuit’s ruling   Notwithstanding the loss of two theories of recovery, the case was hardly simple when it showed up before Chief Judge James Dever III on dueling motions for summary judgment. Plaintiffs asserted 14 causes of action, the Town responded with four counterclaims.  A few pieces of background are important. Nor'Ida (referred to by the Court as the November Storm) was anticipated and the homeowners took steps to preserve their properties with various earthmoving activities, but the Town ordered the work to stop when the access road washed out. Following the storm and accompanying damage the Town declared the properties nuisances, pursuant to a town ordinance.  The ordinance at issue provided as follows:    [t]he existence of any of the following conditions associated with storm-damaged or erosion-damaged structures or their resultant debris shall constitute a public nuisance. (a) ... (b) Damaged structure or debris from damaged structures where it can reasonably be determined that there is a likelihood of personal or property injury; (c) Any structure, regardless of condition, or any debris from damaged structure which is located in whole or in part in a public trust area or public land.   The Town invoked both provisions (b) and (c).   The public trust provision ((c)) was the most straightforward to enforce for the Town. Either the cottages were located in the public trust, or they were not. Further, if a property was in the public trust, it could not be issued a building permit for repair. Unfortunately for the Town, much of Judge Dever's work had already been accomplished when the North Carolina Court of Appeals ruled that public trust rights could only be enforced by the Attorney General. See Town of Nags Head v. Cherry, Inc., 723 S.E.2d 156, 160-61 (2012). Accordingly, the Town's nuisance ordinance relying on the doctrine was invalid.  Other claims of violations of due process, of negligent enforcement, for declaratory judgment, etc. were easily addressed as well (and won’t be discussed here).   That left the causes of action relying on the provision of the ordinance that forbade decrepit properties. Here, however, the Town had materially interfered with the homeowners' ability to repair their properties. And that, held the Court, constituted a prohibited taking, even if it were only a temporary prohibition.  Thus, even if the homes became nuisances during the storm, they did not have to continue that way because they would have been repaired in the normal course. In that case, “No rational jury could find that such use [repairing a beachfront cottage for use] constitutes a nuisance under the background principles of North Carolina common law.”  Sansotta at 26. Nevertheless, the Court also found merit in the Town's opposition to the plaintiffs' motion and denied both sides summary judgment on the temporary regulatory takings topic.   Takings scholars will undoubtedly find much to discuss in the Court's extensive discussion. We take a different focus and consider the decision in the context of rising sea level litigation, a different sort of climate change litigation from the liability suits we have frequently discussed. First, only those with their head in the sand refuse to acknowledge the rise of the oceans, and the increased acceleration of that rise. Government inevitably is going to have to take steps. The question will be:  when?  Must a municipality declare a nuisance only when the nuisance is overt and uncontroverted?  Or can the nuisance be anticipated and steps taken before the storm surge has wiped a slab slick, and distributed debris throughout the municipality. The Court suggests that proactive steps are possible, but they must be lawful:  “the Owners rightly expected that the Town would not attempt to accelerate that process [where erosion made it such that cottages could not legally or practically be repaired] through its unauthorized assertion of the public trust doctrine.” Sansotta at 27.  But the Court offers no insight on what accelerative steps might be approved.  That will be another topic for scholars.   Second, condemnation of beachfront cottages as nuisances may be extremely detrimental to the owners of the cottages, but it is a delightful windfall to those one lot inland.  Those lucky homeowners now own beachfront property (or at least unobstructed beach view property).  The Court acknowledged as much:  “the result would not have been a mere adjustment of the benefits and burdens of economic life.  Rather, the result would have been an outright transfer of wealth from the Owners to the beachgoing public and to those who own the would-be oceanfront cottages behind the Owners’ Cottages.” Sansotta at 28.  It is another interesting scholarly question as to whether that windfall can or should be distributed back in some way to the ousted beachfront owner, thus mitigating the total loss otherwise felt by the homeowner.   We have foisted much upon scholars here, but for planning purposes there may be no other place to find answers besides academe.  We haven’t been here before and if there’s a hope of avoiding swamping the littoral courts with lawsuits over windfalls and takings, then that hope must hinge on some well thought-out plan.  Stay tuned.  Sansotta's time for appeal has not yet run and, in any event, future hurricanes coming ashore at higher mean sea levels are inevitable, and so will be future disputes.

Climate Change Litigation | Rising Sea Levels | Weather

Whatever Happened to State Law Carbon Dioxide Liability Claims? Still No Music After Bell

October 27, 2013 07:30
by J. Wylie Donald
“Therefore, the Court declines to assert supplemental jurisdiction over the remaining state law claims which are dismissed without prejudice to their presentation in a state court action.”  So ends the last analytical paragraph in Native Village of Kivalina v. ExxonMobil Corp., 663 F. Supp. 2d 863 (N.D. Cal. 2009).  Thus, while plaintiffs’ federal common law carbon-dioxide-liability claims were extinguished on standing and political question grounds, state law claims could go forward should the plaintiffs choose to re-file.  Then, the Supreme Court decided American Electric Power Co., Inc. v. Connecticut, 564 U.S. __ (2011), and held a set of different plaintiffs’ federal common law claims were displaced by the Clean Air Act.  The Court specifically declined to rule on state law claims of the type at issue in Kivalina:  “None of the parties have briefed preemption or otherwise addressed the availability of a claim under state nuisance law. We therefore leave the matter open for consideration on remand.” Last fall we relied on Bell v. Cheswick Generating Station, 903 F. Supp. 2d 314 (W.D. Pa. 2012), out of the Western District of Pennsylvania as support for the proposition that state law nuisance claims were futile – preemption by the Clean Air Act doomed such claims.  The Third Circuit's recent review, while reversing the trial court, has not upended our conclusion. In Bell, 1500 neighbors of the 570 megawatt coal-fired Cheswick Generating Station operated by GenOn Power Midwest, L.P. became annoyed by ash and other contaminants allegedly settling on their property.  And so they brought a class action under Pennsylvania state tort law.  GenOn defended based on the comprehensive regulation of the Clean Air Act, which, it was asserted, preempted state law tort claims; the trial court agreed. On appeal, however, broad preemption by the Clean Air Act was not accepted.  The Court of Appeals acknowledged the comprehensive program established by the Act.  But it also recognized that Congress had specifically provided for a citizens suit provision, 42 U.S.C. § 7604, and that the Act contained two "savings" clauses.  The first, the "citizen suit savings clause," provided:   "Nothing in this section shall restrict any right which any person (or class of persons) may have under any statute or common law to seek enforcement of any emission standard or limitation or to seek any other relief (including relief against the Administrator or a State agency)."  42 U.S.C. § 7604(e).  The second, the "states' rights savings clause," stated:  "Except as otherwise provided ... nothing in this chapter shall preclude or deny the right of any State or political subdivision thereof to adopt or enforce (1) any standard or limitation respecting emissions of air pollutants or (2) any requirement respecting control or abatement of air pollution ...."  42 U.S.C. § 7416.  Read together, a more restrictive state law could be enforced in a citizen suit. This idea was consistent with the Cheswick Generating Station's permit:   "Nothing in this permit shall be construed as impairing any right or remedy now existing or hereafter created in equity, common law or statutory law with respect to air pollution, nor shall any court be deprived of such jurisdiction for the reason that such air pollution constitutes a violation of this permit."   Could a citizen suit successfully address the ill-placed ash and contaminants?  The trial court said "no":  “Based on the extensive and comprehensive regulations promulgated by the administrative bodies which govern air emissions from electrical generation facilities, the Court finds and rules that to permit the common law claims would be inconsistent with the dictates of the Clean Air Act.”  But the Third Circuit said "yes."  Its primary authority was the Supreme Court's 1987 decision in International Paper Co. v. Ouellette, 479 U.S. 481 (1987), a Clean Water Act case where Vermont plaintiffs asserted a (Vermont) common law nuisance suit in Vermont state court, where the pollution originated from a  New York facility.  To quote:  The Ouellette Court found that the Clean Water Act's savings clauses clearly preserved some state law tort actions, but that the text of the clauses did not provide a definitive answer to the question of whether suits based on the law of the affected state were preempted. 479 U.S. at 492, 497. However, it found definitively that "nothing in the [Clean Water Act] bars aggrieved individuals from bringing a nuisance claim pursuant to the laws of the source State." Id. at 497 (emphasis in original). The Court reasoned that, "[b]y its terms the Clean Water Act allows States . . . to impose higher standards on their own point sources," and "this authority may include the right to impose higher common-law as well as higher statutory restrictions." Id. (internal citation omitted). The Court acknowledged that a source state's "nuisance law may impose separate standards and thus create some tension with the permit system," but explained that this "would not frustrate the goals of the Clean Water Act," because "a source only is required to look to a single additional authority, whose rules should be relatively predictable." Id. at 498-99. Thus, a suit by Vermont citizens would not be preempted if brought under the law of New York, the source state. But, GenOn argued, the Clean Water Act and its savings clauses are distinguishable from the Clean Air Act and its savings clauses.  Not so said the court; "a textual comparison of the two savings clauses at issue demonstrates there is no meaningful difference between them."  Accordingly, the Bell plaintiffs, who brought suit as “Pennsylvania residents under Pennsylvania law against a source of pollution located in Pennsylvania,” were not preempted. Now let’s return again to Kivalina.  The concurring opinion laid out the rule:   “Kivalina may pursue whatever remedies it may have under state law to the extent their claims are not preempted.”  Bell limits those claims.  Where Alaska natives sue in California a collection of greenhouse gas emitters from around the country, they would appear not to satisfy the requirement of emission-source-state-law-applies unless they are arguing that the nuisance rules of a score of jurisdictions must be considered.  In which case, their case falls apart for improper joinder.  And if they attempt to sue in multiple jurisdictions, they only amplify a fundamental flaw in their approach.  Whomever they sue has only contributed a tiny fraction of global greenhouse gases in either volume or over time and thus could not be the proximate cause of the Kivalina plaintiffs’ loss.  See Comer v Murphy Oil USA, Inc., 839 F. Supp. 2d 84 (S.D. Miss. 2012) ("[t]he 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.")  Carbon dioxide liability plaintiffs may attempt to rely on the Third Circuit's decision in Bell to attempt to revive their litigation fortunes.  From our perspective, such attempts still won't ring the bell. 

Carbon Dioxide | Climate Change Litigation | Supreme Court

State Common Law Carbon Dioxide Liability Claims: Premonitions of Preemption (and Dismissal)

November 28, 2012 21:48
by J. Wylie Donald
Left open by the Supreme Court’s decision in American Electric Power Co. v. Connecticut, 131 S. Ct. 2527  (2011), was the question of whether state law nuisance claims for the emission of carbon dioxide were viable in the face of the Clean Air Act.  That question continued to be answered in the negative with the decision of the Western District of Pennsylvania last month in Bell v. Cheswick Generating Station, GenOn Power Midwest, L.P. (W.D. Penn. Oct. 12, 2012) (attached), which was appealed to the Third Circuit the Friday before Thanksgiving.1    In Bell, plaintiffs, neighbors to defendant’s coal-fired electricity generating plant, filed suit alleging: that the [defendant’s] atmospheric emissions fall upon their properties and leave a film ofeither black dust (i.e., unburned coal particulate/unburned coal combustion byproduct) or whitepowder (i.e., fly ash). According to the Plaintiffs, those discharges require them to constantlyclean their properties, preclude them from full use and enjoyment of their land, and “make[them] prisoners in their own homes.”  Order at 2.  Plaintiffs further alleged that defendant did not use best available technology and was damaging the plaintiffs' properties, an outcome not permitted by defendant’s Permit to Operate.  Id. at 3.  As to legal theories, plaintiffs alleged nuisance, negligence and recklessness, trespass and strict liability.  Id. Defendant moved to dismiss, asserting, among other things, that the claims were preempted by the Clean Air Act.  Id. at 5.  The court agreed.  Plaintiffs had attempted to distance themselves from their complaint, which had criticized defendants for failing to comply with their Clean Air Act permit and sought injunctive relief.  They asserted in their papers that “[t]he Defendant is allowed to emit whatever millions of pounds of emissions the [EPA] has decided for Defendant but Defendant is not allowed by those emissions granted [to] it by the [EPA] to damage private property.”  Id. at 8. The court was not buying:  “A review of the Complaint reveals that the allegations of Plaintiffs, as pleaded, assert various permit violations and seek a judicial examination of matters governed by the regulating administrative bodies. … Thus, the Court reads the Plaintiffs’ Complaint, including its common law claims, as necessarily speaking to and attacking emission standards."  Id. at 10. The court specifically noted that the Supreme Court, in American Electric Power Co. v. Connecticut, had held that “the Clean Air Act preempted federal common law nuisance claims as a means to curb emissions from power plants.”  Id. at 12 (citing 131 S. Ct. at 2540).  It also noted, however, that the Court had not ruled on state law nuisance claims.  Those claims would depend “on the preemptive effect of the federal Act.” Id. (citing 131 S. Ct. at 2540). Did the Clean Air Act preempt state law nuisance claims?  The court had little doubt and turned for authority to the Fourth Circuit’s decision in N. Carolina, ex rel. Cooper v. Tennessee Valley Auth., 615 F.3d 291 (4th Cir. 2010), cert. dismissed, 132 S. Ct. 46(2011)).  In finding that “public nuisance claims were preempted because they threaten to scuttle the comprehensive regulatory and permitting regime that has developed over several decades,” Order at 12-13, the Fourth Circuit held:  A field of state law, here public nuisance law, would be preempted if a scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it. Here, of course, the role envisioned for the states has been made clear. Where Congress has chosen to grant states an extensive role in the Clean Air Act's regulatory regime through the SIP and permitting process, field and conflict preemption principles caution at a minimum against according states a wholly different role and allowing state nuisance law to contradict joint federal-state rules so meticulously drafted. Id. at 13, quoting Cooper. 615 F.3d at 303 (citations, quotation marks and alterations in original omitted). Accordingly, because the “specific controls, equipment, and processes to which the Cheswick Generating Station is subject to are implemented and enforced by [state and federal regulators]  Plaintiff’s Complaint, as pled, would necessarily require this Court [the Western District] to engraft or alter those standards, and judicial interference in this regulatory realm is neither warranted nor permitted. To conclude otherwise would require an impermissible determination regarding the reasonableness of an otherwise government regulated activity.”  Id. at 14.  Thus, plaintiffs’ claims were pre-empted. Plaintiffs had one slim hope.  The Clean Air Act contains a “savings clause”, which provides “[n]othing in this section shall restrict any right which any person (or class of persons) may have under any statute or common law to seek enforcement of any emission standard or limitation or to seek any other relief (including relief against the Administrator or a State agency).” 42 U.S.C. § 7604(e).  This too had been considered in Cooper and rejected.  Order at 14, citing 15 F.3d at 303-04.  Further, the Supreme Court had spoken on savings clauses as well:  “As we have said, a federal statute’s saving clause cannot in reason be construed as allowing a common law right, the continued existence of which would be absolutely inconsistent with the provisions of the act.”  Id. at 14, quoting AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1748 (2011).  Thus, the court found that “Based on the extensive and comprehensive regulations promulgated by the administrative bodies which govern air emissions from electrical generation facilities, the Court finds and rules that to permit the common law claims would be inconsistent with the dictates of the Clean Air Act.”  Id. at 15.  Accordingly, notwithstanding the suggestion by the Supreme Court in American Electric Power that state law nuisance claims for carbon dioxide liability might be viable, if the Western District’s analysis is correct and applicable to carbon dioxide, such claims will not survive for very long.   1Comer v. Murphy Oil USA, Inc., 839 F. Supp. 2d 849, 865 (S.D. Miss. 2012), also relied on American Electric Power and found state law nuisance claims displaced by the Clean Air Act.  That court had first found that plaintiffs’ claims failed due to res judicata and estoppel, and half a dozen other reasons, and its analysis of the displacement and preemption issue is not extensive. See Dismissed Means Dismissed: Comer v. Murphy Oil, the First Climate Change Liability Damages Suit, Is Tossed Again. 20121012 Bell v. Cheswick Generating Station, Order of Dismissal & Notice of Appeal.pdf (694.83 kb)

Carbon Dioxide | Climate Change Litigation | Supreme Court

Ninth Circuit Displaces Kivalina v. ExxonMobil Climate Change Liability Case

September 21, 2012 16:22
by J. Wylie Donald
In litigation concerning liability for the emission of greenhouse gases, the federal common law of nuisance is displaced by the Clean Air Act.  This is not news.  It was established by the Supreme Court over a year ago in American Electric Power v. Connecticut, 131 S. Ct. 2527 (2011). This morning, the Ninth Circuit Court of Appeals acknowledged the rule and applied it to the plaintiffs in Native Village of Kivalina v. ExxonMobil Corp. ("Opinion") and affirmed the dismissal by the Northern District of California.  See Native Vill. of Kivalina v. ExxonMobil Corp., 663 F. Supp. 2d 863 (N.D. Cal. 2009). In a nutshell, a native Alaskan village on the shores of the Chukchi Sea brought suit against electric utilities, oil companies and one coal company.  The complaint asserted the defendants are responsible for excess emissions of greenhouse gases, which have led to global warming, which has resulted in delayed formation of arctic sea ice and early melting of the ice, which has accelerated the erosion caused by winter storms.  The plaintiffs sought damages for the cost of relocating their village.  See Opinion 11648-49.  The Court of Appeals dutifully explained the federal common law of nuisance and the doctrine of displacement.  Plaintiffs had hoped to avoid the application of American Electric Power by arguing that it was a case about injunctive relief.  Kivalina was different:  the plaintiffs there sought damages.  The Court was unmoved.  It stated simply:  “under current Supreme Court jurisprudence, if a cause of action is displaced, displacement is extended to all remedies.”  Opinion at 11655.  It did not matter that EPA had not acted before the damage was incurred; "Congressional action, not executive action, is the touchstone of displacement analysis.”  Opinion at 11656.  Nor did it matter that the Court’s decision would be applied retroactively.  Id.  The concurrence (Judge Pro of the District of Nevada, sitting by designation) was not as unequivocal as the Court, and explicated a tension between the Supreme Court’s rulings in Middlesex County Sewerage Authority v. National Sea Clammers Ass’n., 453 U.S. 1, 4 (1981), and Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008).  Middlesex expressly stated that “where a federal common law nuisance claim for injunctive relief is displaced, a federal common law nuisance claim for damages claim likewise is displaced”, but, according to Judge Pro, Exxon’s “overall holding suggests that severing rights and remedies is appropriate as between damages and injunctive relief in some circumstances.” Opinion at 11663, 11665. In the end, however, Judge Pro agreed that the doctrine of displacement shuts the door on federal common law claims for nuisances allegedly caused by greenhouse gas emissions whatever remedy is sought. More interesting and of more moment we think are two points made by the concurrence; the first will give heart to greenhouse gas plaintiffs, while the second may empty their sails. Judge Pro acknowledged that the Supreme Court’s decision and the 9th Circuit’s decision did nothing to affect the plaintiffs’ state law nuisance claims.  He wrote: Once federal common law is displaced, state nuisance law becomes an available option to the extent it is not preempted by federal law. AEP, 131 S. Ct. at 2540 (“In light of our holding that the Clean Air Act displaces federal common law, the availability vel non of a state lawsuit depends, inter alia, on the preemptive effect of the federal Act.”). The district court below dismissed Kivalina’s state law nuisance claim without prejudice to refiling it in state court, and Kivalina may pursue whatever remedies it may have under state law to the extent their claims are not preempted.  Opinion at 11671. We predicted this next phase when the case was argued back in November of last year.  Accordingly, the Kivalina case is not dead yet. However, judicial skepticism of climate change plaintiffs’ current liability theories is expanding.  Judge Guirola, in Comer v. Murphy Oil USA Inc in the Southern District of Mississippi, was dubious of the causation story:  “the tenuous nature of the causation alleged is readily apparent at the pleadings stage.”  Judge Pro went one further: Kivalina has not met the burden of alleging facts showing Kivalina plausibly can trace their injuries to Appellees. By Kivalina’s own factual allegations, global warming has been occurring for hundreds of years and is the result of a vast multitude of emitters worldwide whose emissions mix quickly, stay in the atmosphere for centuries, and, as a result, are undifferentiated in the global atmosphere. Further, Kivalina’s allegations of their injury and traceability to Appellees’ activities is not bounded in time. Kivalina does not identify when their injury occurred nor tie it to Appellees’ activities within this vast time frame. Kivalina nevertheless seeks to hold these particular Appellees, out of all the greenhouse gas emitters who ever have emitted greenhouse gases over hundreds of years, liable for their injuries.  Opinion at 11675.  To be sure, the Supreme Court approved an action by various States to challenge EPA’s failure to regulate greenhouse gases.  See Massachusetts v. EPA, 549 U.S. 497 (2007).  But “[i]t is quite another [thing] to hold that a private party has standing to pick and choose amongst all the greenhouse gas emitters throughout history to hold liable for millions of dollars in damages.”  Opinion at 11676. Judge Pro would have dismissed the case on standing grounds as well. Finally, notwithstanding our foresight above, it is rarely worth getting out the crystal ball to predict the outcome of a case or cases.  If we could do that with any reliability, we wouldn’t be sitting at this keyboard.  So rather than a prediction, we think offering some context is appropriate.  Will states be receptive to climate change liability suits as currently cast?  We are skeptical.  The environmental organization, Our Children’s Trust, orchestrated over a dozen lawsuits seeking to force state regulators to address greenhouse gas emissions.  With only one exception (New Mexico), those cases have been dismissed in jurisdiction after jurisdiction (Alaska, Arizona, Colorado. Minnesota, Montana, Oregon, Texas, Washington and the District of Columbia).  And even in the case that is moving forward, all the court permitted was an action to pursue whatever recourse was in place under current law, which is no more than the Supreme Court ruled in Massachusetts v. EPA. 

Carbon Dioxide | Climate Change Litigation

Virginia Supreme Court Decides First Climate Change Insurance Case

September 16, 2011 14:32
by J. Wylie Donald
This morning the Virginia Supreme Court decided the first climate change liability insurance coverage case:   The AES Corp. v. Steadfast Ins. Co., Record No. 100764 (attached). It held that there was no covered “occurrence” and that therefore the trial court properly dismissed the insured’s claim for coverage. Followers of this blog are well familiar with Steadfast and the underlying Kivalina case.  For those new to this subject, this coverage case arose out of the climate change nuisance damages case, Native Village of Kivalina v. ExxonMobil Corp., CV 08-1138 SBA (N.D. Cal.), in which claimants asserted that defendants' greenhouse gas emissions resulted in warmer winters, which lead to melting of sea ice and erosion of the shoreline around their community to the point that their village was set to fall into the sea.  They brought suit against oil and gas companies, electric utilities and a coal company, seeking damages for an alleged nuisance.  In Steadfast one of the Kivalina defendants’ insurers (Steadfast), after first defending under a reservation of rights, brought a declaratory judgment action against its insured (electric utility AES), seeking to avoid coverage under its general liability policies.  Shortly thereafter Steadfast filed a motion for summary judgment asserting that there was no occurrence, and that coverage was barred by the loss-in-progress and pollution exclusions. AES initially prevailed and defeated Steadfast’s motion.  AES then moved for summary judgment on the duty to defend and Steadfast cross-moved.  This time Steadfast gained victory.  The trial court issued a very brief opinion holding:  “Steadfast has no duty to defend AES in connection with the underlying Kivalina litigation because no 'occurrence' as defined in the policies has been alleged in the underlying Complaint.”  AES appealed. In most jurisdictions, including Virginia, an “eight corners” rule is applied:  “only the allegations in the complaint and the provisions of the insurance policy are to be considered in deciding whether there is a duty on the part of the insurer to defend and indemnify the insured.”  Opinion at 7 (citations omitted).  Coverage under the Steadfast policies hinged on whether there was an occurrence, specifically defined to mean “an accident, including continuous or repeated exposure to substantially the same general harmful condition.”  In Virginia the terms “occurrence” and “accident” are synonymous and an “accident” is commonly understood to mean “an event which creates an effect which is not the natural or probable consequence of the means employed and is not intended, designed, or reasonably anticipated.”  Id. at 9. There was no dispute that AES intentionally released carbon dioxide as part of the combustion process at its power plants.  But intentional acts do not preclude coverage:  “[W]hen the alleged injury results from an unforeseen cause that is out of the ordinary expectations of a reasonable person, the injury may be covered by an occurrence policy provision.”  Id. at 10 (citing 20 Eric M. Holmes, Appleman on Insurance 2d § 129.2(I)(5) (2002 & Supp. 2009)).  However, “If a result is the natural and probable consequence of an insured’s intentional act, it is not an accident” and coverage will be barred.  Id. at 9.  The Court summarized the rule it would apply: Thus, resolution of the issue of whether Kivalina’s Complaint alleges an occurrence covered by the policies turns on whether the Complaint can be construed as alleging that Kivalina’s injuries, at least in the alternative, resulted from unforeseen consequences that a reasonable person would not have expected to result from AES’s deliberate act of emitting carbon dioxide and greenhouse gases.  Id. at 10-11. Notwithstanding that the Kivalina plaintiffs specifically alleged negligence, and that AES adduced evidence that the Kivalina plaintiffs were arguing on appeal before the Ninth Circuit that their claim sounded in negligence, the Court followed strict adherence to the eight-corners rule: Kivalina plainly alleges that AES intentionally released carbon dioxide into the atmosphere as a regular part of its energy-producing activities. Kivalina also alleges that there is a clear scientific consensus that the natural and probable consequence of such emissions is global warming and damages such as Kivalina suffered. Whether or not AES’s intentional act constitutes negligence, the natural and probable consequence of that intentional act is not an accident under Virginia law.  Id. at 12. Further, “[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.”  Id. at 13.  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. As noted at the outset, this is the first skirmish of what is certain to be a protracted battle between insurers and insureds.  There are 50 other jurisdictions (including the District of Columbia) and this is only one issue based on one complaint and one insurer's policy language.  There is a long way to go before we will have clarity here. Post scriptum:  Many will recall that Steadfast argued in its papers and before the Court that the pollution exclusion also barred coverage; AES responded that it had not been properly raised.  The Court did not even address the subject, apparently feeling that it was enough to cite to AES's grounds for appeal, which did not include the pollution exclusion.  So even in Virginia, there are still coverage battles to be fought. AES Corp. v. Steadfast Ins. Co., No. 100764, slip op. (Va. Sept. 16, 2011).pdf (64.69 kb)

Carbon Dioxide | Climate Change Litigation | Insurance

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