Supreme Court

American Electric Power v. Connecticut: 8-0 the Supreme Court Rules Federal Common Law is Displaced

June 20, 2011 20:25
by J. Wylie Donald
The moment we have been waiting for since 2004 (when the first climate change liability case was filed) finally arrived. The Supreme Court today rendered its opinion in American Electric Power Co., Inc.. v. Connecticut.  As many predicted following oral argument, the use of the federal common law of nuisance to limit carbon dioxide emissions simply is not a viable theory because it has been displaced by the Clean Air Act and the EPA's steps to implement the Act. For those who have not yet read the opinion, it is straightforward. Following the Supreme Court's 2007 decision in Massachusetts v. EPA, the EPA undertook to begin the regulation of carbon dioxide emissions. AEP at 2.  Within the framework of the Clean Air Act it issued its "Endangerment Ruling" (76 Fed. Reg. 66496), and then adopted final rules regulating emissions from light-duty trucks, initiated a joint rulemaking covering medium and heavy-duty vehicles, began phasing in requirements for best available control technology for major greenhouse gas emitters, and commenced a rulemaking on emissions from fossil-fuel fired power plants. Id.at 2-3.  That rule is due to be final in May 2012.  Id.at 3. With those steps, and the comprehensive activities authorized under the Clean Air Act (id. at 10-11), the Court applied the simple test:  "whether congressional legislation excludes the declaration of federal common law is simply whether the statute 'speak[s] directly to [the] question' at issue." Id.at 10. The Court held:  "the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement of carbon-dioxide emissions from fossil-fuel fired power plants." Id. The Court responded to arguments that the EPA was only beginning to regulate but had not yet finished the process by emphasizing that it was the "delegation [that] displaces federal common law.". Id.at 12 (emphasis added). That is, even if the EPA chose not to regulate carbon dioxide emissions, "the federal courts would have no warrant to employ the federal common law of nuisance to upset the agency's expert determination." Id. Some may recall that the political question doctrine was front and center in the decisions below. See id. at 5-6.  Here, however, the Court mentions it only indirectly.  In describing the "prescribed order of decisionmaking" (i.e., expert agencies and then federal judges), "the expert agency is surely better equipped to do the job than individual district judges issuing ad hoc, case-by-case injunctions." Id.at 14. Notwithstanding the apparently simple rule and its application, we do not expect AEP to end climate change liability litigation.  State nuisance law (which plaintiffs pleaded) remains. Although the Court offered no opinion on such a theory's efficacy, it did give a hint of where it might land:  "the Clean Water Act does not preclude aggrieved individuals from bringing a 'nuisance claim pursuant to the law of the source state.'" Id. at 15-16 (citing International Paper Co. v. Ouellette, 479 U. S. 481 (1987)). Accordingly, the case was remanded to the Second Circuit. Further, the significance of Justice Sotomayor's recusal (which we called in an earlier post) manifested itself. The Court split 4-4 on the issue of standing (which compelled it to hear the case on the merits).  Id. at 6.  This jurisdictional dispute could surface in the future when Justice Sotomayor is included in the full panel. She presumably would be in favor of broader standing, which is likely to support more claims of aggrieved climate change plaintiffs. Last, the Court offered some helpful commentary for future carbon-dioxide liability insurance coverage cases.  We have written often on how carbon dioxide should not fall within the meaning of pollution in a comprehensive general liability policy's pollution exclusion.  The Court appears to agree.  In discussing the scope of legislative activity needed to preempt federal common law, the Court stated:  "Congress could hardly preemptively prohibit every discharge of carbon dioxide unless covered by a permit. After all, we each emit carbon dioxide merely by breathing." Immediate effects of the decision will be filings by the defendants in the Kivalina v. ExxonMobil case before the Ninth Circuit for dismissal.  Undoubtedly the justices deciding Steadfast Insurance Co. v. AES Corp. will read the decision; how it will affect them is hard to say.  It should have no effect on the multiple climate change lawsuits orchestrated by Our Children's Trust.  And over the long term, it likely will have the effect of forcing plaintiffs' to come up with new climate change liability theories.  That will not be necessary, of course, if (as has been suggested) Congress acts to remove carbon dioxide from EPA's jurisdiction.  In that case, we just might find AEP revived.

Carbon Dioxide | Climate Change Litigation | Legislation | Supreme Court

Our Children's Trust Unleashes Wave of Climate Change Litigation

May 5, 2011 10:40
by J. Wylie Donald
When we wrote last month concerning the implications of the upcoming decision by the Supreme Court in American Electric Power v. Connecticut, we were fully expecting to wait for the decision to test our powers of prognostication.  We were very wrong.  In a collection of lawsuits and regulatory filings across the nation, environmentalists have joined the climate change litigation fray in a very big way.  Here is what we wrote:  "[A dismissal of Connecticut] says nothing about state law nuisance claims, nor new theories that have not yet been tested, nor even thought up. We strongly believe that carbon dioxide liability suits will be with us for a while yet. Our reason: climate change is ongoing and those whose interests are harmed will look for succor. So theories of liability will be spun and suits will be brought. And such suits will require a defense." Here is what has happened:  On Monday, May 4, in state courts across the nation lawyers representing children and young adults filed (and apparently will continue to file) suits seeking to compel State governments to recognize the application of the public trust doctrine to greenhouse gas emissions and to take action to abate those emissions.  The environmental group coordinating these actions is Our Children's Trust, based in Eugene, Oregon.  Its mission:  "Protecting Earth's Climate for Future Generations."  It is joined by Kids vs. Global Warming, whose "youth activists" are named plaintiffs in a number of the actions.  So far (according to the Associated Press), cases have been filed in California, Colorado, Minnesota, Montana, New Mexico, Oregon, and Washington, and also in federal court in California.  Our perception is that these jurisdictions are friendlier to environmental issues than other places.  In those other places regulatory petitions are being filed. We won't go into the details of all of these filings but here is the gist of the claims brought in New Mexico: Sanders-Reed v. Martinez.  New Mexico is at risk from the effects of climate change.  From loss of snowpack to drought to extreme heat waves, as temperatures rise life in New Mexico is being degraded.  Enter the State.  Before the current administration of Governor Martinez, New Mexico was taking steps to limit the discharge of greenhouse gases within New Mexico.  State agencies studied the problem and made recommendations.  The governor issued executive orders.  The Environmental Improvement Board promulgated greenhouse gas regulations.  New Mexico joined the Western Climate Initiative.  Id. ¶¶ 61-73, 76.  Then Governor Martinez took office at the beginning of this year.  According to the complaint, she attempted to block the publication of the greenhouse gas rules and announced that she would keep New Mexico from joining a regional cap-and-trade program. She also removed all of the members of the Environmental Improvement Board because she believed the Board was anti-business.  The Small Business-Friendly Task Force, created by the Governor, has recommended that New Mexico shift to “observer” status in the Western Climate Initiative. Id. ¶¶ 74-76.  Plaintiffs, one teen-ager (a member of Kids vs. Global Warming) and one environmental group, sued under the public trust doctrine, which has not yet been applied to the atmosphere.  In a nutshell, plaintiffs assert that "Defendant State of New Mexico has failed in its fiduciary duty to recognize and protect our atmospheric public trust resource, thereby injuring these Plaintiffs."  Id. ¶ 19.  In more detail, plaintiffs desire a declaration by the New Mexico court that "(1) the public trust doctrine is operative in New Mexico and, pursuant to this doctrine, the State holds the atmosphere in trust for the public; (2) the State has an affirmative fiduciary duty to establish and enforce limitations on the levels of greenhouse gas emissions as necessary to protect and preserve the public trust in the atmosphere; (3) the State’s fiduciary duty to protect the atmospheric trust is defined by the best available science; and (4) the State has breached its fiduciary duty to protect the public trust in the atmosphere by failing to exercise its right of control over the atmosphere in a manner that promotes the public’s interest in the atmosphere and does not substantially impair this resource."  One will note that the claim is for declaratory relief, but not damages.  Plaintiffs' goal is to stabilize before 2100 the earth's atmosphere at 350 ppm carbon dioxide.  Id. ¶¶ 51-53.  Today it is at 390 ppm and increasing.  Id. ¶¶ 43, 45.  Failure to achieve such stabilization will lead to catastrophe.  Id. ¶ 46. (If you wish to read other complaints and petitions, visit Our Children's Trust's website.) There are a host of issues before these lawsuits are successful.  First, is the atmosphere subject to the public trust doctrine?  Second, can private parties require the State to act to preserve that trust?  Third, what are the elements of standing for those parties?  Fourth, what is the "best available science"?  Fifth, could federal preemption apply?  And probably many more.  But plaintiffs have a lot of opportunities to address these questions and will undoubtedly learn from one case so as to improve the others. In the meantime, the battle for control of the public dialog will continue.  Environmentalists have chosen a broad-based attack and will certainly make the most out of any successes they have.  Further, although we will not link the Tuscaloosa tornadoes and this year's record Mississippi flooding to climate change, some certainly will because more extreme weather is a central prediction of the climate change story.   Those kinds of extreme weather events may be all that is necessary to push climate change back onto the federal agenda.   Perhaps the most interesting facet of this set of cases is how it juxtaposes with Connecticut.  In that case, States are suing private parties to compel them to abate carbon dioxide emissions.  Commentary on the Supreme Court argument suggests that the Court may have some sympathy to States who are trying to remedy a problem that the federal government is ignoring.  Now private parties are suing those same State governments asserting that they are not doing enough either. And where does all this leave our prediction.  We are right about new theories, right about claims of ongoing injuries and right that more suits would be brought.  We are wrong that those suits would be suits for liability.  We are wrong today, anyway.

Carbon Dioxide | Climate Change | Climate Change Litigation | Greenhouse Gases | Supreme Court

The Implications of American Electric Power v. Connecticut for the Duty to Defend

April 24, 2011 18:52
by J. Wylie Donald
We were interviewed by Business Insurance last week after the Virginia Supreme Court heard argument in AES Corp. v. Steadfast Insurance Co. The topic du jour:  what would be the effect of the U.S. Supreme Court's decision in American Electric Power v Connecticut. Obviously, an insurance readership would very much like to know if carbon dioxide liability was something they needed to continue to worry about. Much of the blogosphere has concluded that the justices didn't give much credence to the public nuisance theories of the plaintiffs (we reserve judgment on that conclusion - there were some pretty tough questions posed to the appellants too). If that is so, then carbon dioxide liability is something like Y2K, right? Unfortunately, we fear that is not the case. The concerns over Y2K reached their zenith at 1159 on December 31, 1999. By 1201 on January 1, 2000 most everyone had slapped each other on the back and moved on. Story over. Concerns over carbon dioxide liability are unlikely to have that sharp crest.  If a decision favorable to carbon dioxide emitters is issued by the Supreme Court, that will only mean that federal common law nuisance claims cannot move forward. It says nothing about state law nuisance claims, nor new theories that have not yet been tested, nor even thought up. We strongly believe that carbon dioxide liability suits will be with us for a while yet. Our reason:  climate change is ongoing and those whose interests are harmed will look for succor. So theories of liability will be spun and suits will be brought.  And such suits will require a defense.  All of which leads us back to AES v. Steadfast.  The Virginia Supreme Court will render a decision on one state's law on likely only one issue. Indeed, at oral argument, Steadfast's counsel conceded the result would be different in other jurisdictions. Thus, insureds concerned about carbon dioxide liability should be paying attention to choice of law rules, and to the range of issues where choice of law matters. Let's look at just the two issues in dispute in AES, the application of the pollution exclusion and the meaning of occurrence. The Wisconsin Supreme Court has already ruled that exhaled carbon dioxide is not a "pollutant" and numerous jurisdictions have held that a so-called "absolute" pollution exclusion is not absolute.  Donaldson v. Urban Land Interests, Inc., 564 N.W.2d 728, 730 (Wis. 1997); Am. States Ins. Co. v. Koloms, 687 N.E.2d 72 (Ill. 1997) (carbon monoxide); W. Am. Ins. Co. v. Tufco Flooring E., Inc., 409 S.E.2d 692 (N.C. Ct. App. 1991) (floor sealant); Cont’l Cas. Co. v. Rapid-Am. Corp., 593 N.Y.S.2d 966 (1993) (asbestos); Keggi v. Northbrook Prop. & Cas. Ins. Co., 13 P.3d 785 (Ariz. Ct. App. 2000) (bacteria).   As for occurrence, in many jurisdictions there is no question that an occurrence is determined by looking at the intentionality of the injury from the subjective standpoint of the insured, rather than the reasonably foreseeable standard argued by the insurer in AES. Compare Ohio Cas. V. Henderson, 939 P.2d 1337 (Ariz. 1997); Am. Family Mut. Ins. Co. v. Pacchetti, 808 S.W.2d 369 (Mo. 1991) with Brief of Appellee, AES Corp. v. Steadfast Ins. Co., No. 100764 (Va. Sup. Ct. Oct 8, 2010).  Accordingly, it would be extremely shortsighted for insureds to assume every jurisdiction is like every other.  Potential carbon dioxide liability defendants should take two steps going forward. They should ascertain what state's law will be applied on the liability contract they are purchasing today and how that law is likely to address the carbon dioxide liability coverage questions. And they should be asking the same questions for past occurrence-based policies.  And of course, if the oracles and seers who have channeled the Supreme Court turn out to be wrong, the need for coverage and the answers to these questions will manifest themselves much sooner. Brief of Appellee, AES Corp. v. Steadfast Ins. Co..pdf (182.69 kb)     

Carbon Dioxide | Climate Change Litigation | Insurance | Supreme Court

Oral Argument is April 19 in American Electric Power v. Connecticut and in AES Corp. v. Steadfast Insurance Co.

April 5, 2011 21:09
by J. Wylie Donald
Where I grew up (outside of Boston) April 19 is of singular moment. On that day, over 200 years ago, the British marched from Boston to destroy the military stores in Concord. But Paul Revere and William Dawes got the word out first and the Minutemen gathered at the Old North Bridge, stood their ground and then chased the British back to Boston. The locals celebrate by "marching to Concord" every year to witness the reenactment. April 19 this year also has significance, but the action will not be "by the rude bridge that arched the flood."  Rather, readers of this blog will be focused on two Supreme Courts - one in Washington and the other in Richmond. On the docket?  Two climate change cases. In Washington, the U.S. Supreme Court will hear oral argument in American Electric Power v. Connecticut.  This case is the bellwether for climate change liability suits and will test whether public nuisance under federal common law provides a viable theory for shifting damages arising from climate change to carbon dioxide emitters. Almost four dozen amicus briefs have been filed and where the Court will land is anybody's guess. EPA is attempting to regulate carbon dioxide using the Clean Air Act but other lawsuits and Congress challenge that effort. Will that eviscerate the argument that carbon dioxide regulation has been committed to the political branches of the federal government?  Does the fact that the case was brought by state attorneys general prima facie establish that this case is all about a robust federalism?  We hope to have a better inkling on where the Court will land after we hear the oral argument. Across the Potomac and several miles down the road, the Virginia Supreme Court is hearing AES Corp. v. Steadfast Insurance Co. on the very same day.  (It seems too unlikely to be a coincidence.  Readers will remember that Stop the Beach Replenishment, Inc. was heard the same day the New Jersey Supreme Court took argument on City of Long Branch, both beach replenishment cases, see climatelawyers.com).  That case tests whether there will be insurance coverage under general liability policies for carbon dioxide liability. The insurer filed the case as a declaratory judgment action disclaiming coverage for one of the utilities sued in Native Village of Kivalina v. ExxonMobil Corp.  The trial court, in the briefest of opinions, held that because "no 'occurrence' as defined in the policies [was] alleged in the underlying Complaint," there was therefore no coverage. AES appealed directly to the Virginia Supreme Court, which granted certification.  Before the court are arguments about the scope of an "occurrence", but also over whether a pollution exclusion applies, even though the trial court rendered no opinion on that topic.  The implications of a decision are potentially colossal, especially if the U.S. Supreme Court permits Connecticut to move forward. Steadfast is the first climate change liability coverage suit and, to our knowledge, not a single climate change liability defendant has been defended by its insurer in any of the three damages cases (Comer v. Murphy Oil, California v. General Motors, Kivalina). Two hundred years ago on April 19th was fired the "shot heard round the world."  The metaphor is not perfect but this month on the same day similarly significant salvos will be set off in the climate change liability and coverage wars. Stay tuned. 20100205 Order for Summary Judgment for Steadfast against AES.pdf (120.02 kb)

Carbon Dioxide | Climate Change Litigation | Supreme Court | Utilities

Supreme Court Denies Petition for Mandamus in Comer

January 10, 2011 09:59
by J. Wylie Donald
It does not get much more anti-climactic.  The Supreme Court today rejected the Comer v. Murphy Oil plaintiffs' request for a writ of mandamus.  It took only a short seven words to relegate the petition (as well as others) to the dustbin:  "The petitions for writs of mandamus are denied."  So ends a saga that was initiated with Hurrican Katrina, expressed in a complaint, dismissed under the political question doctrine, reversed by the Fifth Circuit, accepted for en banc review, reinstated as dismissed when the Fifth Circuit's quorum dissolved, and ultimately ended up on the Supreme Court's docket.  Then it ended, not with a bang, nor even a whimper.     The questions as framed by the plaintiffs were thoughtful:     Where the litigants have perfected a right to an appeal under 28 U.S.C. § 1291, does the Circuit Court have a duty to render a decision?     When an en banc court loses its quorum after granting rehearing but before hearing argument en banc, can the remaining judges dismiss an appeal of right without a decision on the merits?     When an en banc court loses its quorum before deciding an appeal on rehearing en banc, does the    original panel maintain control over the case? I will be frank, I don't have a clue about the answers to these meaty questions (and I suspect there will be a few law review notes and articles attempting to intuit one).  But I do have some thoughts on the significance of this ruling with respect to climate change litigation. First, it was an expensive defeat for the plaintiffs' bar.  Gerald Maples, lead counsel for the plaintiffs, estimated he had spent $3 million on the case even before the en banc and Supreme Court appeals.  (Maples Australian Interview).  I assume that even for the plaintiffs' bar, $3 million is not chump change.  While tobacco litigation required numerous attempts before plaintiffs finally beat Big Tobacco, tobacco plaintiffs never had to contend with problems of causation anywhere near the complexity faced by climate change plaintiffs.  As stated by the district court in Comer:     I foresee daunting evidentiary problems for anyone who undertakes to prove, by a preponderance of the evidence, the degree to which global warming is caused by the emission of greenhouse gasses; the degree to which the actions of any individual oil company, any individual chemical company, or the collective action of these corporations contribute, through the emission of greenhouse gasses, to global warming; and the extent to which the emission of greenhouse gasses by these defendants, through the phenomenon of global warming, intensified or otherwise affected the weather system that produced Hurricane Katrina.  Comer v. Nationwide Mut. Ins. Co., Civ. A. No. 1:05 CV 436-LTD-RHW, 2006 WL 1066645, *4 (S.D. Miss. Feb. 23, 2006). Conversely, however, plaintiffs' counsel may be encouraged notwithstanding the loss in Comer.  There are presently two appellate decisions on the merits on public nuisance climate change cases, Connecticut v. American Electric Power and Comer; both come out for the plaintiffs.  As we wrote in December, with the retirements of Justices Stevens and Souter, and the recusal of Justice Sotomayor, a 4-4 stalemate at the Supreme Court in Connecticut is a distinct possibility.  That, coupled with the panel decision in Comer, could send a message that climate change liability cases are worth bringing.  In that case, we will certainly see more such cases. Second, the Tennessee Valley Authority is batting 1.000 in climate change appeals.  TVA filed papers supporting the petition for certiorari in Connecticut.  The Court accepted the petition.  And TVA opposed the request for mandamus in Comer, which was denied.  The same of course could be said of several other utlities in both litigations.  The difference being that when TVA speaks on the political question doctrine, it is the government itself asserting that it wishes to address climate change through the political process rather than through the courts.  In the appeal of Native Village of Kivalina v. ExxonMobil, TVA did not join as an amicus.  Instead, the defendants drew the support of two Congressmen:  Lamar Smith, the Ranking Republican Member of the House Judiciary Committee, and James Sensenbrenner, Jr., the Ranking Republican of the Select Committee on Energy Independence and Global Warming.  (Kivalina Amicus Brief) Let us hope that the 50 years of congressional experience between them gives them some sway with the Ninth Circuit. Last, can we read the tea leaves in Connecticut through the Comer lens?  The blogosphere is particularly harsh on the Fifth Circuit for its failure to solve its quorum problem.  Suggested solutions include bringing in a district court judge or a jurist from another circuit.  Instead, based on procedure the court nullified the case's only appellate merits ruling.  That seems a particularly harsh result on a topic of such significance, but it is only so if the Court affirms the Second Circuit and permits the appellate decision in Connecticut to survive. Is the rejection of Comer then, a case of precognition applicable to Connecticut?  By June we will have found out.

Climate Change | Climate Change Litigation | Supreme Court

Climate Change and the Supreme Court Part II: Certiorari Granted in Connecticut v. American Electric Power

December 6, 2010 07:35
by J. Wylie Donald
It doesn't take much insight to conclude that today's granting by the Supreme Court of the petition for certiorari in Connecticut v. American Electric Power could be the start of a whole new era in climate change liability lawsuits. If the Supreme Court comes down on the side of the plaintiff States, it may become open season on utilities, coal and petrochemical companies, automobile manufacturers, and anyone else a litigation-minded plaintiff wishes to mulct in damages for carbon dioxide emissions and climate change. Potential defendants need to take steps now to identify their insurance coverage and be prepared to give notice. The Supreme Court last looked at climate change in 2007 when it concluded in Massachusetts v. EPA, 549 U.S. 497 (2007), by a 5-4 decision, that the Clean Air Act required the USEPA to consider whether carbon dioxide and other greenhouse gases were air pollutants within the meaning of the Act. The issue this time is whether the courts should be imposing judicial remedies for injuries allegedly arising from the emission of carbon dioxide, an alleged nuisance. Few reading this blog will need an introduction to Connecticut v. American Electric Power. I won't go over it other than to remind readers that it was filed in New York federal court in 2004 by several states against a collection of carbon dioxide-emitting utilities and was then consolidated with similar cases filed by public interest groups. The basic allegation was that the utilities' carbon dioxide emissions constituted a public nuisance and the plaintiffs sought injunctive relief compelling the utilities to reduce their emissions. On motion, the trial court dismissed the case concluding that the political question doctrine applied because only the political branches (i.e., the legislative and executive arms of the government) could appropriately balance the array of environmental, economic and other issues presented. An appeal followed to the Second Circuit, which reversed and held that the political question doctrine does not preclude federal common law nuisance claims. Following denial of a petition for en banc review, the petition for certiorari was filed on August 2, followed shortly by an amicus curiae brief from the Obama administration. The federal government asserted that the Second Circuit's decision should be vacated because the government was developing regulations and that the courts should stay out. Of course Connecticut v. American Electric Power is not alone. Private and public plaintiffs have brought suit for alleged climate change losses arising in Mississippi, California and Alaska. Although all three cases have been dismissed, the appeal of one was withdrawn, the appellate panel in the second reversed the dismissal, but which was then vacated when the en banc court accepted review and then could not muster a quorum, and the third is pending before the Ninth Circuit. See Cal. v. Gen. Motors Corp., No. C06-05755, 2007 WL 2726871 (N.D. Cal. Sept. 17, 2007), appeal dismissed, No. 07-16908 (9th Cir. June 24, 2009); Comer v. Murphy Oil Co., 2007 WL 6942285 (S.D. Miss. Aug. 30, 2007), rev'd, 585 F.3d 855 (5th Cir. 2009), reh'g granted, 598 F.3d 208 (5th Cir.), appeal dismissed, 607 F.3d 1049 (5th Cir. 2010); Native Village of Kivalina v. ExxonMobil Corp., 663 F.Supp.2d 863 (N.D. Cal. 2009), appeal pending, No. 09-17490 (9th Cir. Nov. 5, 2009). Quite clearly, the last chapter on these types of lawsuits has not been written. Reading the tea leaves on Connecticut v. American Electric Power will be difficult. To grant a petition for certiorari, only four justices need to approve. With the retirement of Justices Stevens (author of Massachusetts v. EPA) and Souter (who joined in the opinion), and the recusal from Connecticut of Justice Sotomayor (who heard argument at the Second Circuit but did not sign the opinion), a 4-4 decision in Connecticut is certainly possible. That would leave the Second Circuit's decision intact without a Supreme Court decision (which might bode well for the appeal of Kivalina before the Ninth Circuit). IMPLICATIONS FOR A DECISION Emitters of carbon dioxide are hoping for a clean decision that puts the climate change liability genie back in the bottle and lays the theory of federal common law nuisance in its grave. But what if that does not occur? There is certainly a fair chance that the justices either affirm the theory, or, 4-4, do not reject it. In that case, plaintiffs' lawyers are very likely to be emboldened and bring other suits. Some target industries have already been identified. When the results of USEPA's greenhouse gas reporting rule are collated, other industries may find themselves in the crosshairs. The time to identify insurance coverage is not when half a dozen claims have been filed in jurisdictions across the nation demanding an answer within 30 days. Climate change defendants and potential defendants should take steps now to prepare for future claims, most notably because of the risk they may lose insurance coverage for these claims if they are not reported timely. Many will rely on notice to their current insurer and that is a good strategy, so far as it goes and only if that carrier agrees to coverage. But besides one's current policy, one should also be considering prior "occurrence-based" policies, which could be triggered based on allegations of injury-causing events occurring over time. It does not require much imagination to analogize the time periods over which, for example, glaciers have melted, snowpack has become depleted, erosion has increased, and water supplies have been drawn down to other drawn-out injuries that established the "continuous trigger" rule that attached multiple policies. Some states have a bright line rule for notice. If it is not given promptly, dismissal based on late notice is a likely result. Other states are more lenient and require prejudice to the insurer. New York until recently was a no-prejudice-to-the-insurer state. But the law changed in 2009 to require the insurer to show prejudice (or the insured to show no prejudice) - but it was not retroactive. Accordingly, insureds with policies subject to New York law (which is often the case due to a choice of law provision in the policy) prior to 2009 still need to give notice promptly. Even in those states that require prejudice to be shown, one cannot know how the case law on prejudice will evolve in the context of climate change; hence prompt notice is a good idea in other states as well. Notice here is not as easy as it may sound. Unlike Superfund cases where the (alleged) responsible entity is identified by the claimant and therefore can be identified to the insurance company, carbon dioxide emission liability can fall to any fossil-fuel fired plant owned by the corporate entity, including potentially those operated by subsidiaries. Accordingly, those subsidiaries' policies may need to be tracked down and placed on notice as well. Taking liberties with Ben Franklin's adage, an ounce of protection is worth a pound of cure. Should climate change claims get the green light from the Supreme Court, policyholders would be wise to have located all of their protection ahead of time.

Carbon Dioxide | Carbon Emissions | Climate Change | Climate Change Litigation | Insurance | Supreme Court | Utilities

Looking Forward and Looking Back - Some Climate Change Response Perspectives and Predictions

December 2, 2010 07:44
by J. Wylie Donald
Another year done, another time to look back and to look forward. In the climate change space, the increasing tempo of regulation was halted, but that does not mean that there were not significant events. We catalog a few with accompanying predictions of the future:Without a doubt the big legal action this year will be the United States Supreme Court's decision in Connecticut v. American Electric Power, where States and public interest organizations seek to vindicate their ability to sue on a "carbon dioxide as public nuisance" theory. One should expect the Ninth Circuit to hold off an any decision in Kivalina v. ExxonMobil until after the Supremes render their decision. And climate change plaintiffs will husband their resources until the lay of the legal landscape is clear before filing any new suits. Our crystal ball, however, also hints that clarity may not be forthcoming. Justice Sotomayor has recused herself - there may be effectively no decision if the Court comes out 4-4. Hand-in-hand with climate change liability lawsuits goes climate change liability insurance coverage. That too is being litigated at an ultimate appellate venue. In Steadfast Insurance Co. v. The AES Corp., the Virginia Supreme Court will consider whether for the purposes of the duty to defend, an occurrence is alleged in Kivalina. Although Virginia is not the most popular of coverage litigation venues, that Steadfast is the first climate change coverage case ensures that the decision will be significant.While these are heady times for courts and litigators, those ready for the legislative "fix" for climate change will not find succor in 2011. Cap-and-trade advocates became quieter and quieter in the days leading up to the November 2010 mid-term elections. We win no points for our prescience when we predict that there will be no new federal legislation regulating carbon dioxide emissions in the coming year. Quieter even than domestic cap-and-trade supporters are those in favor of some international regime. COP 16 in Cancun achieved very little. It established a $100 billion Green Climate Fund, without any provisions to fund it. It did not extend the Kyoto Protocol, which expires in 2012. And China and the United States (the two largest greenhouse gas emitters) are still not part of any global climate change plan. COP 17 takes place in Durban, South Africa at the end of next year. With an American presidential race beginning, it is hard to imagine the Administration will butt heads with its Republican adversaries on anything contentious or innovative proposed at Durban. Even if legislation is going nowhere, that does not mean the administrative agencies will be quiet. The FTC Green Guides have proposed revisions to address carbon neutrality and renewable energy claims. Expect the proposals to be acted on in 2011. The SEC's guidance on climate change disclosure surfaced in February 2010. The guidance specifically requires analysis of domestic and international regulation. In light of the shift in the climate-change-regulation pendulum, it will be interesting to see if any reporting company states that it expects less restrictions, rather than more restrictions. And of course USEPA's greenhouse gas reporting rules required the first set of data to be turned in at the end of 2010, which undoubtedly will initiate further regulatory rules. Private parties will go where the money is, which will continue to be in heavily subsidized renewable programs. Will the Republican Congress recognize the market dislocations engendered by these subsidies and cut them? Or will different influences like jobs or constituents continue to make their presence felt? If the December enactment of the Tax Relief Act (which provided an extension of the 30% tax grant for renewable projects) is any guide, if a project can be supported with a tax subsidy, rather than a government payment, it will continue. And what can we say about the weather? 2010 was an above average hurricane year, but fortunately for the United States, damage was minimal. The hurricane experts at Colorado State University predict an equally busy year for 2011. Pay up those premiums. Best for the New Year!

Insurance | Climate Change | Supreme Court | Legislation | Carbon Emissions

McCARTER & ENGLISH CLIMATE CHANGE AND RENEWABLE ENERGY PRACTICE GROUP

The business case for the development of renewable energy projects, from biodiesel and ethanol to wind, solar, and distributed generation, is more compelling than ever as tax and regulatory incentives combine to attract investments. Emerging issues in environmental law and increasingly recognized principles of corporate social responsibility are encouraging public companies to voluntarily reduce greenhouse gas emissions, install clean energy alternatives, and invest overseas in projects under the Kyoto Protocol to respond to climate change concerns.

Click here for more information and a list of our group members.

MONTH LIST

© 2017 McCarter & English, LLP. All Rights Reserved. disclaimer
navbottom image