(Article from Insurance Law Alert, September 2023)
For more information, please visit the Insurance Law Alert Resource Center.
Holding
A Hawaii district court asked the Hawaii Supreme Court to decide whether reckless conduct can be a covered “occurrence” under an insurance policy and whether greenhouse gases are pollutants within the meaning of a pollution exclusion. Aloha Petroleum, Ltd. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2023 U.S. Dist. LEXIS 156211 (D. Haw. Sept. 5, 2023).
Background
Two lawsuits against Aloha Petroleum and twenty other fossil fuel entities alleged that the defendants knew that their products created greenhouse gas pollution that resulted in harmful climate change and tangible harm to the plaintiff communities, but nonetheless continued to promote fossil fuel use. In this coverage action, Aloha Petroleum seeks a declaration that AIG has a duty to defend the underlying suits.
Decision
The court explained that AIG’s defense obligations turned on resolution of two issues: (1) whether the reckless conduct alleged in the complaint could constitute an “occurrence” under the operative policies; and (2) whether greenhouse gases are “pollutants” (defined as “gaseous” “irritant[s] or contaminant[s], including smoke, vapor soot, fumes acids, alkalis, chemicals and waste”) for purposes of applying a pollution exclusion.
With respect to the first issue, Aloha Petroleum argued that an insured may engage in conduct that is reckless, while still lacking intent or expectation of injury, such that a covered “occurrence” (defined in part as an “accident”) may be found. In contrast, AIG asserted that recklessness cannot be an “accident” because recklessness generally requires a risk of foreseeable harm that is disregarded by the tortfeasor.
As to application of the pollution exclusion, the court framed the central questions as whether the pollution exclusion applies only to “traditional environmental pollution” under Hawaii law, and if so, whether the production of greenhouse gases constitutes such “traditional environmental pollution.”
Comments
Because this dispute relates to AIG’s duty to defend, the court’s analysis will turn on a comparison of the allegations in the underlying complaint with the policy language. Here, the underlying suits expressly allege that the defendants had knowledge about the resulting harm of their products but continued to wrongfully market them. Such allegations arguably contravene any categorization of Aloha Petroleum’s conduct as “accidental.”
With respect to the pollution exclusion, even under a very narrow reading of the provision, it would seem incongruous to find that the release of harmful gases into the atmosphere does not fall within the scope of the plain language of the exclusion, particularly in light of a 2007 Supreme Court decision finding that greenhouse gases are “pollutants” under a provision of the Clean Air Act.
We will keep you posted on the Hawaii Supreme Court’s ruling in this matter.