All posts tagged 'occurrence'

The Top 6 at 6: A Review of the Most Important Climate Change Legal Stories in the First Half of 2012

June 30, 2012 21:01
by J. Wylie Donald
Arbitrary and capricious.  Familiar words to anyone involved in regulatory activity.  But also applicable to calendars, which willy-nilly cut off a series of events and ascribe them to one solar cycle, as if the sun gave two hoots.  As we perused the various "Climate Change: Year in Review" reviews that crossed our desk last January, we concluded 365 days are arbitrary and one year capricious in assessing what is important to resurrect and re-discuss.  We further concluded that a 12-month look-back is too long.  So, for what it is worth, here is one of six months. 1.  Cap-and-Trade in the U.S. - On January 1 the Western Climate Initiative (WCI) (or what remains of it) initiated its long-anticipated cap-and-trade program for greenhouse gas emissions.  Notwithstanding the lack of support from other WCI members, California and Quebec are moving forward with a cap-and-trade program.  California's and Quebec's mandated reporting rules applied to stationary sources emitting at or above 25,000 metric tons of CO2e per year.  On May 9 coordination between the two programs was announced  initiating the 45-day public comment period.  The first auction will be held in November and then, on January 1, 2013, enforcement begins when covered entities must participate. It is obviously too soon to tell how successful the California program will be, but when the world's eighth largest economy takes an initiative, it is likely to have impact elsewhere, particularly when it is the only program in the nation. 2.  Greenhouse Gas Liabilities and Insurance Coverage - We didn't think there would be anything to say this year about coverage for GHG liabilities.  After all, in the only case in litigation the Virginia Supreme Court issued its opinion in AES Corp. v. Steadfast Insurance Co. in September 2011 and concluded that there was no "occurrence" triggering coverage made in the allegations pleaded by the Native Village of Kivalina against AES Corporation.  But then the Court granted a motion for reconsideration in January and many puzzled as to what was going on.  Apparently nothing as the Court reiterated its previous conclusions in an April 20, 2012 opinion.  The decision will be significant in Virginia because it may have upset coverage in more conventional cases, as the concurring opinion of Justice Mims suggests.  As for the rest of the nation, it is one decision, on one issue, on one set of facts.  The case is important because it is the first, but we will be surprised if it provides guidance anywhere else. As for greenhouse gas liability that is a story unto itself.  Like something out of a Steven King novel, the Comer v. Murphy Oil case refuses to pass quietly into the night.  This is the case that was dismissed by the Southern District of Mississippi, reversed by the 5th Circuit, vacated by the 5th Circuit en banc when it accepted rehearing and then reinstated as dismissed when the 5th Circuit's quorum dissolved.  Following a denial of a request for a writ of mandamus from the U.S. Supreme Court, the Comer plaintiffs re-filed their complaint against over 100 electric utilities, oil companies, chemical companies and coal companies alleging their GHG emissions were responsible for the ferocity of Hurricane Katrina.  And the Southern District of Mississippi dismissed the plaintiffs again on March 20.  And plaintiffs appealed again.  We don't expect the case to be finally at rest until the Supreme Court denies certiorari, or accepts it (perhaps in order to address the Ninth Circuit's much-anticipated decision in Native Village of Kivalina v. ExxonMobil, which has been pending for over six months since oral argument). 3.  Natural Gas:  The Bridge Fuel - With the combining of two technologies, hydraulic fracturing and horizontal drilling, a resource of unprecedented volume is "changing the game" of energy.  "Annual shale gas production in the US increased almost fivefold, from 1.0 to 4.8 trillion cubic feet between 2006 and 2010. The percentage of contribution to the total natural gas supply grew to 23% in 2010; it is expected to increase to 46% by 2035."  Thus reported the Energy Institute at the University of Texas in February in a 400+ page tome entitled Fact-Based Regulation for Environmental Protection in Shale Gas Development.  Momentously, the UT researchers report "there is at present little or no evidence of groundwater contamination from hydraulic fracturing of shales at normal depths."  The reference to "normal depths" acknowledged that in December 2011 the EPA linked contamination in Pavilion, Wyoming to shallow fracking operations. In March 2012, however, EPA agreed to conduct further testing.  And then in May, a personal injury tort case, Strudley v. Antero Resources Corp. et al., No. 2011-CV-2218 (2d Jud. Dist. Ct. Col. May 9, 2012), brought against fracking operators in Colorado was thrown out because plaintiffs could not muster adequate proofs of specific causation. Despite some intense opposition, fracking is moving forward.  What does all of this have to do with climate change?  Natural gas when burned emits half the carbon dioxide of coal.  Accordingly, some argue that natural gas is the bridge to a low-carbon future.  If so, then fracking builds that bridge. 4.  Innovative Climate Change Legal Theories - Last spring the sound and the fury were intense as the environmental organization Our Children's Trust unleashed several dozen regulatory petitions and a dozen lawsuits across the nation.  The goal:  establish the public trust doctrine as applicable to the atmosphere and use it to implement greenhouse gas regulation.  It appears that all of that is signifying nothing. Over two dozen petitions were denied in 2011 and two lawsuits were dismissed (Montana and Colorado).  It did not get any better in 2012.  The first six months of this year delivered only bad news to OCT.  State courts dismissed lawsuits in Alaska, Arizona, Minnesota, Oregon, and Washington.  The federal court in the District of Columbia did the same.   Plaintiffs took a voluntary dismissal in California.  To be sure, OCT has filed appeals (the one in Minnesota is scheduled to be argued on July 18).  Having failed to convince a single court so far, we think we are safe in predicting an uphill battle. 5.  Power Plant Performance Standards - On April 13, 2012, a scant seven months before the presidential election, the EPA published in the Federal Register standards of performance for all new fossil fuel-fired electricity-generating units requiring them to meet an electricity-output-based emission rate of 1,000 lb of carbon dioxide for every megawatt-hour of electricity generated.  The only plants that can meet this standard without implementing costly carbon capture and storage technology are natural gas plants.  Thus, the administration took a strong stand against coal-based generation.  Or it is all smoke and mirrors.  As EPA notes in the proposed rule, because of the glut of natural gas made available by fracking, there is little likelihood of a new coal-powered plant before 2030.  Notwithstanding, industry groups have filed a half-dozen lawsuits seeking to derail the rule. 6.  EPA's Greenhouse Gas Regulatory Program - Less than a week ago USEPA and its GHG program got a firm "thumbs up" from the D.C. Circuit.  Inundated with over two dozen appeals of various USEPA GHG regulations, the Endangerment Finding, the Tailpipe Rule, the Tailoring Rule and the Timing Rule (for citations see The DC Circuit Locks in USEPAs GHG Regulations Sort Of). The court turned away every challenge, sometimes on the merits and sometimes on procedural grounds such as standing.  There is much that deserves comment not the least of which are the differences between the states with California, Connecticut, Delaware, Illinois, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, and Washington, lining up on one side, and Alabama, Florida, Indiana, Kansas, Kentucky, Louisiana, Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota, Texas, Utah, and Virginia lining up on the other.  To focus more on legal matters, several challenges were turned away on standing.  For example, neither states nor industry groups could challenge the Tailoring Rule as they did not allege the requisite injury.  Because the Tailoring Rule benefits small businesses (who are not required to comply with certain GHG emission requirements), it would appear that the door may remain open for parties who allege competitive injury (i.e., non-regulated entities gain a competitive advantage). In the meantime, do not expect Congress this election year to touch the issue.    

Carbon Dioxide | Climate Change | Climate Change Litigation | Greenhouse Gases | Insurance | Legislation | Regulation | Year in Review

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)

Carbon Emissions | Climate Change Litigation | Insurance

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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