The Virginia Supreme Court is expected to rule next month in what would be the first case in the nation on whether insurers have to foot the bill for companies facing damages over climate change claims.
The case is pending at a time when the U.S. Supreme Court, in American Electric Power v. Connecticut, is considering the underlying question of whether states can sue utilities over greenhouse gas emissions under federal common law (Greenwire, April 19).
The utility in the Virginia case, AES Corp., is a defendant in such a case, Kivalina v. Exxon Mobil, et al., which is currently before the San Francisco-based 9th U.S. Circuit Court of Appeals.
That case is on hold while the Supreme Court considers the AEP case, but experts say even if -- as most court-watchers expect -- the Supreme Court holds that states cannot make so-called public nuisance claims under federal law, what the Virginia Supreme Court has to say will be of some importance.
That's because plaintiffs are likely to continue to pursue state common law claims against utilities, lawyers familiar with the case say.
The Virginia case, AES Corp. v. Steadfast Insurance Co., was argued the same day, April 19, as the AEP case.
When AES faced the Kivalina lawsuit in 2008, it asked its insurer, Steadfast, to defend it against the claims that emissions had contributed to rising sea levels that are endangering the Alaskan village. Kivalina is at the end of an 8-mile barrier island that separates the Chukchi Sea and Kivalina River.
Steadfast refused and instead sought a declaration from an Arlington County, Va., judge stating that it didn't have a duty to defend.
The judge ruled in favor of Steadfast, in part because there was no "occurrence" or "accident" that triggered a duty to defend.
In its brief to the Virginia Supreme Court, AES states that Steadfast has a duty because the plaintiffs in Kivalina had accused the plaintiffs of negligence.
"Steadfast's policies broadly obligate it to indemnify AES for property damage claims involving 'accidents,'" the AES brief states.
Steadfast maintains that the company is only required to intervene if there is an "occurrence," not when there is a complaint "alleging intentional conduct with known consequences," which is how it defines the Kivalina suit.
Legal experts working on climate change issues are watching the case with interest.
Even after the Supreme Court case is decided, "we will continue to have plaintiffs harmed by climate change and they will continue to look for deep pockets," said J. Wylie Donald, a partner at the McCarter & English law firm in Wilmington, Del.
That means there are likely to be more disputes between companies and insurance about what kind of claims are covered, he added.
Julia Ciardullo, a fellow at the Center for Climate Change Law at Columbia Law School, noted that companies "need to know if they are going to be able to seek a defense from their insurance carriers" one way or another.
"It's an open question," she said.
Like what you see?
We thought you might.
Start a free trial now.