Supreme Court of Virginia

In AES Corp. v. Steadfast Ins. Co., 715 S.E.2d 28 2011 (Va. Sept. 16, 2011), the Supreme Court of Virginia held that a complaint alleging than an insured contributed to global warming through emission of carbon monoxide and other greenhouse gases did not allege an "occurrence" within the meaning of a commercial general liability policy.  

AES Corporation, a Virginia-based energy company, holds controlling interests in companies that generate and distribute electricity.  Steadfast Insurance Company issued commercial general liability policies to AES.  In February 2008, a native fishing village located on an Alaskan barrier island sued AES and others for damage to the village.  The suit alleged that the energy-generating activities of AES and the other defendants, which used fossil fuels that emit carbon monoxide and other greenhouse gases, were disrupting the natural cycle and causing land-fast sea ice to form later or melt earlier than usual, thereby exposing the village's shoreline to storm surges and erosion and rendering the village uninhabitable.  AES tendered the suit to Steadfast.  The Steadfast policy defined "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful condition."  Steadfast provided a defense under a reservation of rights and filed an action for declaratory judgment, contending, among other things, that it did now owe a defense or indemnity because the underlying complaint did not allege "property damage" caused by an "occurrence."  The trial court agreed with Steadfast that no "occurrence" was alleged and entered summary judgment for Steadfast.

The Supreme Court of Virginia affirmed. The court rejected AES' contentions that the underlying complaint, by alleging that AES negligently created the nuisance of global warming, alleged both intentional and unintentional conduct.  The court noted that the underlying complaint alleged that AES intentionally released carbon monoxide into the atmosphere as a regular part of its energy-producing activities, and that there is a clear scientific consensus that the natural and probable consequences of such emissions is global warming and damages like those suffered by the fishing village.  The court stated that allegations of negligence are not synonymous with allegations of an accident, and that even if AES were negligent and did not intend the damage that occurred, the gravamen of the village's nuisance claim was that the damages sustained were the natural and probable consequence of AES' intentional emissions.