In AES Corp. v. Steadfast Insurance Co. (AES), 2011 WL 4139736 (September 16, 2011), the Virginia Supreme court unanimously held that the Steadfast Insurance Company (Steadfast) is not obligated to cover court costs for the Virginia-based energy group AES Corporation under its liability policy in another lawsuit, Native Village of Kivalina v. ExxonMobil Corp. (Kivilina).
AES is one of 24 companies that were sued by Kivilina, an Alaskan coastal village, for damage to its community from global warming (The underlying case, Kivilina, No. 09-17490, is still pending before the Ninth Circuit Court of Appeals). After being sued by Kivalina, AES tendered the claim to its insurer, Steadfast. Steadfast denied the claim, and subsequently filed an action for declaratory judgment in Virginia. The trial court ruled in favor of the insurer, concluding that the underlying climate change claims in the Kivalina lawsuit did not constitute an "occurrence" under AES' commercial general liability policies. Because the court decided the case on the occurrence issue, the court did not reach the issue of whether the pollution exclusion might apply. AES appealed to the Virginia Supreme Court. The Virginia Supreme Court held that an insurer’s duty to defend is not triggered by allegations of damages flowing from intentional actions that the plaintiffs claim resulted in climate change. The court held that the insurance policies at issue “only require [the insurer] to defend … against claims for damages of bodily injury or property damage caused by an occurrence or accident” and that the allegations in the underlying complaint do not constitute such an occurrence or accident: Further, the state supreme court held, “Whether or not [the insured’s] intentional act constitutes negligence, the natural and probable consequence of that intentional act is not an accident under Virginia law.” This decision is being hailed as a major victory for insurers.