INSURANCE COVERAGE FOR GLOBAL WARMING LIABILITY CLAIMS By James S. Malloy and John M. Sylvester 1 i. introduction By now, most of us have heard of the phenomenon called global warming and the ongoing debate over its effects on the planet. Indeed, former Vice President Al Gore’s best-selling book and Academy Award–winning docu- mentary, “An Inconvenient Truth,” have made global warming a part of the popular lexicon. Regardless of one’s beliefs regarding the causes or effects of global warming, 2 the debate has now seemingly shifted to the courtroom with potentially costly consequences to corporate defendants. In the past, courts have typically granted preliminary motions to dismiss suits seeking to impose liability on defendants for damages allegedly caused by global warming on the grounds that the plaintiffs lacked standing to pursue such claims and that the regulation of greenhouse gases (GHGs) 3 was a non- justiciable issue. Based on recent developments, however, global warming litigation may be turning from a mere inconvenience to something more problematic for companies across a wide array of industries: increased 1. The authors are lawyers in the Pittsburgh office of K&L Gates LLP , a law firm that regularly represents policyholders in insurance coverage disputes, including global warming– related claims. The views expressed herein are those of the authors and not necessarily those of the law firm or its clients. The authors would like to thank John Hagan, John Estep, and Jon Christman of K&L Gates LLP for their assistance on this article. Portions of this article were published previously by James Malloy in Insurance Coverage Alert: Insurance Coverage for Emerging Global Warming Claims , Newsstand (Nov. 18, 2009), www.fmocklaw.com /news stand / Detail.aspx?publication=6023 (a K&L Gates Internet publication). 2. Recent polls show that “48% of Americans . . . believe that the seriousness of global warming is generally exaggerated.” See Frank Newport, Americans’ Global Warming Concerns Continue to Drop , Mar. 11, 2010, www.gallup.com /poll /126560/americans-global-warming- concerns-continue-drop.aspx. 3. Carbon dioxide is “the principal anthropogenic [GHG] that affects the Earth’s radiative balance.” erms , www.epa.gov/ U.S. Envtl. Prot. Agency, Glossary of Climate Change T climatechange /glossary.html (last visited July 18, 2010). 811
812 Tort Trial & Insurance Practice Law Journal, Spring/Summer 2010 (45:3-4) defense costs and potential liability for damages awards. For example, con- sider the following: • T wo federal appellate court decisions in late 2009 ruled that plaintiffs have standing to pursue causes of action against corporate defendants that emit GHGs, seeking to recover damages allegedly caused by global warming. 4 • The Supreme Court in Massachusetts v. Environmental Protection Agency rec- ognized that “the harms associated with climate change are serious and well recognized” and that “EPA [Environmental Protection Agency] does not dispute the existence of a causal connection between man-made green- house gas emissions and global warming.” 5 • The Obama administration has dramatically increased the government’s efforts to regulate climate change–related risks, including capping GHG emissions. 6 These developments, among others, have combined to create an increas- ingly hostile litigation environment that appears to be on the verge of heat- ing up in courts across the nation for companies that have emitted GHGs, or continue to do so, as part of their ongoing business operations. Although insurance coverage for global warming liabilities may have been an afterthought for defendants because such cases were routinely dismissed at the preliminary stage, the availability of insurance to cover defense costs and any potential liability is an important factor to consider in the defense of these claims. Allegations that GHGs emitted by the de- fendants contributed to global warming, which in turn caused property damage or bodily injury to plaintiffs, may be sufficient to trigger general liability policies. 7 Consequently, companies that have been sued regarding global warming claims may have insurance available to cover some or all of the costs of these litigations. This article will focus on the potential issues that policyholders may face in seeking general liability coverage for global warming claims. Although many of the coverage issues will turn on the language of the relevant in- 4. See Connecticut v. Am. Elec. Power Co., 582 F.3d 309 (2d Cir. 2009); Comer v. Murphy Oil USA, 585 F.3d 855 (5th Cir. 2009) (see Section II.A for recent developments in this ap- peal). 5. 549 U.S. 497, 521, 523 (2007). The Environmental Protection Agency (EPA) has since promulgated an endangerment finding related to GHGs that is being challenged in the courts. See 74 Fed. Reg. 66,496 (Dec. 15, 2009); Robin Bravender, 16 “Endangerment” Law- suits Filed Against EPA Before Deadline , N.Y. T imes, Feb. 17, 2010. The EPA has settled some of these lawsuits. See Proposed Settlement Agreements, Clean Air Act Citizen Suit, 75 Fed. Reg. 42,085 ( July 20, 2010). 6. E.g ., American Clean Energy and Job Security Act of 2009, H.R. 2454, 111th Cong. (2009); see House Passes Historic Waxman-Markey Clean Energy Bill , June 28, 2009, http://energycommerce.house.gov/index.php?option=com_content&view=article&id=1697: house-passes-historic-waxman-markey-clean-energy-bill&catid=155:statements&Itemid=55. 7. Depending on the nature of the specific claims alleged and the specific parties named as defendants, other types of liability insurance, such as directors’ and officers’ liability (D&O) coverage or errors and omissions coverage, may also be implicated by such claims.
Insurance Coverage for Global Warming Liability Claims 813 surance policy, the applicable state law, and the set of facts unique to each policyholder, this article will provide a broad primer on the key liability in- surance issues for companies faced with potential global warming–related claims. In examining these issues, this article will cover four main topics: (1) the current state of litigations over global warming claims and insur- ance coverage for such cases, (2) the duty to defend under general liability policies, (3) the relevant liability policy language that will most likely be the focus of coverage disputes over global warming liabilities, and (4) the current developments by the insurance industry to address climate change liabilities and the impact those changes might have on the availability of coverage for such claims under insurance policies issued in the future. ii. history of global warming litigations and related insurance coverage disputes A. The Underlying Global Warming Claims T o date, there have been four reported suits seeking to impose liability for loss arising from corporate defendants’ GHG emissions’ alleged contribu- tion to global warming: Comer v. Murphy Oil USA , Case No. 1:05-cv-00436-LTS-RHW (S.D. Miss. Aug. 30, 2007) This putative class action was filed by residents and owners of property in the Mississippi Gulf Coast against oil and coal companies. 8 Plaintiffs alleged that defendants’ industrial operations and GHG emissions contrib- uted to global warming, “in turn caus[ing] a rise in sea levels and add[ing] to the ferocity of Hurricane Katrina,” which allegedly destroyed or caused severe damage to plaintiffs’ property. 9 Plaintiffs alleged a number of claims based on state common law theories, including public and private nuisance, trespass, negligence, unjust enrichment, fraudulent misrepresentation, and civil conspiracy and sought monetary damages. 10 Defendants moved to dis- miss plaintiffs’ complaint on the grounds of lack of standing to assert their claims and that the claims involved nonjusticiable political questions. 11 The district court, in ruling from the bench, dismissed the complaint on the grounds that it presented a political question. 12 Plaintiffs timely appealed to the U.S. Court of Appeals for the Fifth Cir- cuit, which reversed the district court on October 16, 2009, and reinstated 8. Comer , 585 F.3d at 859–60. 9. Id . at 860–61. see also Third Amended Class Action Complaint ¶¶ 28–41, Comer v. Mur- 10. Id . at 859; phy Oil USA, No. 1:05-cv-00436-LTS-RHW (S.D. Miss. Apr. 19, 2006). 11. Comer , 585 F.3d at 860. 12. Id . at 860 n.2.
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