Carbon Dioxide - Ubiquitous and Anonymous - Essential Preliminaries to Application of the Absolute Pollution Exclusion

Carbon Dioxide - Ubiquitous and Anonymous - Essential Preliminaries to Application of the Absolute Pollution Exclusion

June 13, 2008 03:44
by J. Wylie Donald

Although the U.S. Supreme Court's foray into the area of carbon dioxide emission regulation, Massachusetts v. EPA, garnered significant media attention, for liability purposes corporations and their insurance companies are paying attention to a different type of case: claims alleging injury arising from certain industries' emissions of carbon dioxide. These claims raise the issue of whether commercial general liability (CGL) policies will cover the defense and indemnification costs incurred in defending, settling, and, perhaps, paying judgments on these lawsuits. Thus, insurance coverage is an important legal issue in the climate change context. We intend to address the subject from numerous angles in subsequent blogs.

Most CGL policies issued during and after the mid-1980s contain a coverage exclusion, termed the "Absolute Pollution Exclusion" or "Total Pollution Exclusion" that in simplified terms precludes insurance coverage for the discharge or emission of a pollutant, which is in turn defined as an "irritant" or "contaminant." (I would not be a lawyer if I didn't throw an important caveat in: READ THE POLICY.) Therefore, an important threshold insurance coverage issue is whether carbon dioxide qualifies as a pollutant under the Absolute Pollution Exclusion, thus potentially barring coverage for climate-change related liabilities. To reach that issue, it is necessary to gain a basic understanding of carbon dioxide's ubiquitous and anonymous nature and the role it plays in the earth's atmosphere.

Carbon dioxide is present in the atmosphere and the oceans and incorporated into the earth's crust in substantial volumes, and in fact is essential to life on Earth. Atmospheric carbon dioxide has a variety of sources--some man-made, but mostly natural--including animal and plant respiration, volcanic eruptions and other geologic activity, and decomposition of dead plant and animal matter. The burning of fossil fuels and deforestation by humans is also a source of atmospheric carbon dioxide. Nonetheless, were humans not contributing to atmospheric carbon dioxide, billions and billions of tons of carbon dioxide would still be present performing in its function as a natural and essential component of the earth's atmosphere. Indeed, by trapping the sun's heat within the envelope of the atmosphere, carbon dioxide fulfills its benign function of maintaining temperatures conducive to life. As levels of carbon dioxide and other "greenhouse gases," such as methane and water vapor, increase, so can atmospheric temperatures, due to the heat-trapping effect of those substances.

Carbon dioxide constitutes a fraction of one percent of the Earth’s atmosphere (more precisely, about 0.037%), thus constituting somewhat more than 750 billion metric tons of atmospheric carbon. It is estimated by some climate scientists that in 2004 human activity contributed about 8 billion metric tons of carbon dioxide into the atmosphere.  None of this carbon dioxide is traceable to any particular emission source, whether natural or man-made.  Not all of the carbon dioxide released into the atmosphere remains in the atmosphere. The carbon dioxide in the atmosphere is part of an extremely complex chemical system involving such diverse factors as animal respiration, ocean absorption and plate tectonics, and, within that system, carbon dioxide cycles through the Earth's environment in various forms--as a component of the atmosphere, as dissolved in the oceans, and as locked up in rocks and sediments. A simple subset of this vast cycle is the process of photosynthesis, whereby plants take up (i.e., remove) carbon dioxide from the atmosphere, and convert it into sugar and starch, which is consumed by a plant eating animal that, while alive, breathes carbon dioxide back into the atmosphere, and, after it dies, decomposes, again releasing carbon dioxide back into the atmosphere. Another part of the cycle involves the erosion and chemical weathering of rocks (which removes carbon dioxide from the environment), the transport and deposition of the resulting sediment, and the burial and transformation of that sediment back into rock, which releases carbon dioxide and other volatile materials back into the environment. A fuller discussion of carbon dioxide and the carbon cycle as it relates to climate change can be found in the author's forthcoming article in volume 39 of the Seton Hall Law Review, Carbon Dioxide: Harmless, Ubiquitous and Certainly Not a "Pollutant" Under a Liability Policy's Absolute Pollution Exclusion, which he co-authored with Craig Davis, Esq.

Thus, for purposes of insurance coverage under a typical CGL policy, it is important to understand that carbon dioxide--in and of itself--is far from an alien or even a harmful substance in the environment, and that its presence in the environment is a result of an enormously diverse array of activities and processes--both man-made and natural. Consideration of carbon dioxide's fundamental character will be an important factor when it comes to analyzing the applicability of the Absolute Pollution Exclusion to an insured's coverage claim for climate-change related liabilities.

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