By 2016, the market for renewable energy technology, including wind power, solar power, geothermal power and biofuels is expected to grow to $225 billion.  Some insurance companies have responded to the increased interest in renewable energy technologies by adapting existing insurance products and by developing new products specifically designed to meet the needs of the renewable energy market. While other insurers are electing not to pursue new lines of “green” coverage, even those insurers can expect to confront coverage questions arising out of renewable energy risks.
Of the various renewable energy technologies, wind power is considered to be one of the lowest-priced. As wind farms have proliferated, so have the lawsuits against wind turbine manufacturers and wind farm operators. If claims for coverage are made in connection with any such suits, insurers will face traditional questions about whether the damages alleged qualify as covered loss under the policies.
How Wind Power Works
Wind power is harnessed through the spinning blades of a wind turbine, which connect to a generator within the turbine and convert the kinetic energy of the spinning into electricity. Larger turbines, which can produce anywhere from 100 kilowatts to several megawatts of electricity, are often grouped together in wind farms. By 2030, wind power is projected to provide 20% of the nation’s electricity needs. One of the major challenges to using wind as a power source is that wind can be intermittent, and wind energy generally cannot be stored. See U.S. Department of Energy, Wind and Hydropower Technologies Program, available at http://www1.eere.energy.gov/windandhydro; see also United Nations Environment Programme, Financial Risk Management Instruments for Renewable Energy Projects 24 (2004).
Over the years, a number of lawsuits have been brought against wind turbine manufacturers and wind farm operators. Several of the suits have alleged excessive noise, emotional distress, economic loss and damage to property. Other suits have included more novel causes of action based on zoning restrictions, or violations of environmental laws. While the suits generally seek injunctive relief, some also request costs and other relief, including punitive damages.
One of the earliest lawsuits involving wind energy was brought by New Jersey residents in 1982. See Rose v. Chaikin, 453 A.2d 1378 (N.J. Super. Ct. Ch. Div. 1982). The residents alleged that a neighboring windmill created excessive noise, was a public nuisance, and caused them to experience nervousness, dizziness, loss of sleep and fatigue. While recognizing that windmills can further “the national need to conserve energy by the use of an alternate renewable source of power,” the court found that the windmill violated noise ordinances and constituted an actionable nuisance. As a result, the court held that the property owners were entitled to an injunction prohibiting operation of the windmill.
The most recent lawsuit alleging that wind turbines are a public nuisance and cause excessive noise was filed in April 2008 by a Blair County, Pennsylvania couple. See Stull v. Gamesa Energy, et al. No. 2008 GN 1836 (Pa. Ct. Com. Pl., Blair Cty., April 30, 2008). The suit was brought against wind turbine manufacturer Gamesa Energy, and its subsidiary, Allegheny Ridge. It alleges that a local wind farm operated by Allegheny created noise in excess of local regulatory limits, thereby causing the Stulls stress and anxiety, negatively impacting their enjoyment of their property and quality of life, and resulting in diminished property value. The Stulls also allege that while prior to the installation of the wind turbines the defendants misrepresented that the wind turbines would be quiet, they later acknowledged that the turbines were defective. The complaint seeks injunctive relief to abate the nuisance caused by the wind turbines, costs and other relief, including punitive damages.
In December 2008, the court ruled on demurrers filed by Gamesa and Allegheny Ridge. While the court overruled Allegheny’s demurrers with respect to trespass, private nuisance and private nuisance, it sustained the demurrer with respect to negligence, negligence per se, public nuisance, fraudulent misrepresentation and punitive damages, finding that the Stulls had failed to plead the necessary facts to support those allegations. The court also stayed as premature the demurrer with respect to injunctive relief. Stull v. Gamesa Energy, et al., No. 2008 GN 1836 (Pa. Ct. Com. Pl., Blair Cty., Dec. 4, 2008).
The court dismissed all of Plaintiffs’ claims against Gamesa, except for the fraudulent misrepresentation claim. The court explained that a parent corporation is not liable for its subsidiary’s torts unless the subsidiary is a “passive tool” of the parent. Accordingly, the court found that because operation of the windmills was Allegheny’s sole responsibility, and all of the causes of action, except for the fraudulent misrepresentation claim, arose out of Allegheny’s operation of the wind farm rather than Gamesa’s production or manufacture of the wind turbines, Plaintiffs failed to establish Gamesa’s independent liability. The court further found that while “it is possible” Plaintiffs could establish a fraudulent misrepresentation claim against Gamesa, Plaintiffs would need to file an amended complaint to plead the claim with sufficient specificity. Id. The court’s differing rulings with respect to Allegheny and Gamesa makes clear that while wind turbine manufacturers and wind farm operators may face similar complaints, their eventual liability may not be identical. 
Various other suits have also been brought over the years. For example, in 2005, two property owners appealed a decision of a Massachusetts Zoning Board of Appeals holding that two wind towers erected by the Princeton Municipal Light Department were not subject to by-laws that imposed height limitations. The property owners also appealed the Board’s finding that they did not have standing to challenge a building permit for the wind towers. Each submitted affidavits in which he alleged that the wind towers caused excessive noise and that pieces of ice thrown from the revolving blades created a safety hazard. The court found that only one of the two property owners had provided “credible evidence concerning increased noise and safety issues” that impacted him and were sufficient to establish standing. In rejecting the second property owner’s claim, the court found that speculative testimony that noise and ice from the wind farm would harm clientele at the property owner’s inn was insufficient. See Bomba v. Zoning Bd. of Appeals, No. 293552, 2005 WL 2106162 (Mass. Land Ct. Sept. 1, 2005).
Two additional cases – Coastal Habitat Alliance v. Patterson, No. 1:07-cv-00985-LY (W.D. Tx. Sept. 30, 2008) and Center for Biological Diversity v. FPL Group, 166 Cal. App. 4th 1349 (2008) – were brought recently and subsequently dismissed. Both cases were filed by environmental conservation organizations and alleged that wind turbines have a negative impact on birds and the environment.
In Coastal Habitat Alliance, the Plaintiffs alleged that wind farms constructed in the Laguna Madre Bay Area were causing environmental harm to the wetlands and adversely impacting bird migrations in the area. Plaintiffs brought causes of action under the Coastal Zone Management Act and the Texas Coastal Management Program, arguing that they had been deprived of any meaningful opportunity to raise concerns about the wind farm operations. The court dismissed the case on standing grounds, finding that the Coastal Zone Management Act does not confer a private cause of action. The court further found that the declaratory and injunctive relief Plaintiffs sought would not address their alleged injuries. Coastal Habitat Alliance v. Patterson, No. 1:07-cv-00985-LY (W.D. Tex. Sept. 30, 2008).
In Center for Biological Diversity, Plaintiffs brought nine causes of action under various provisions of the Fish and Game Code, the Migratory Bird Treaty and Unfair Competition Law, alleging that wind turbine generators had killed and injured eagles, hawks, falcons and other birds in California’s Altamont Pass Wind Resource Area. The lower court found that the Plaintiffs lacked standing to maintain these causes of action. However, the complaint also included a tenth cause of action which alleged that defendants' “destruction of California wildlife is a violation of the public trust,” and the appeal was directed to the court's dismissal of this last cause of action. The lower court had found that “[n]o statutory or common law authority supports a cause of action by a private party for violation of the public trust doctrine arising from the destruction of wild animals.” While the appeals court affirmed the lower court’s ruling, it stated that the “defect” in Plaintiffs’ complaint was not that it sought to enforce the public trust, but that it was brought against the wrong parties. The court explained that the claim should have been brought before the responsible agency that had authorized the use of the wind turbines, not in court. See Ctr. for Biological Diversity v. FPL Group, 166 Cal. App. 4th 1349.
The underlying lawsuits discussed above suggest that if policyholders make demands for insurance coverage, insurers may encounter claims based on allegations of loss of income, decreased property value, emotional distress, property damage, loss of use, nuisance, misrepresentation, and design defects. While the discussion here is not intended to be exhaustive, and does not address coverage under policies that may have been written specifically to insure wind risks, a few coverage issues that may arise in the context of wind claims are highlighted below. Some wind claims may implicate more than one of these coverage considerations.
Many of the lawsuits discussed above, including Chaikin, Stull, Center for Biological Diversity and Coastal Habitat Alliance seek injunctive relief. Claims for purely injunctive relief are not likely to be covered. See, e.g., Green v. Heritage Mut. Ins. Co., 655 N.W.2d 147, 153 (Wis. Ct. App. 2002) (no coverage where complaint seeking injunctive relief “failed to allege claims for which the trustees would have been ‘legally obligated to pay’ as required for coverage”); 116 Commonwealth Condo. Trust v. Aetna Cas. & Sur. Co., 742 N.E.2d 76, 79 (Mass. 2001) (“the trust could not reasonably expect that the policy would cover an action for injunctive relief that did not seek money damages”); Jones v. Farm Bureau Mut. Ins. Co., 431 N.W.2d 242 (Mich. Ct. App. 1988) (“damages” does not encompass strictly injunctive relief). However, some courts have found in the CERCLA context that comprehensive general liability policies containing “all sums” language provide coverage for certain injunctive relief. See, e.g., AIU Insurance Company et al. v. Superior Court of Santa Clara County, 799 P.2d 1253 (Cal. 1990)(CGL policies which provided coverage for all sums that insured became legally obligated to pay as “damages” or “ultimate net loss” because of property damage, covered costs of reimbursing government agencies and complying with injunctions ordering cleanup under Comprehensive Environmental Response Compensation and Liability Act and similar statutes). Thus, to some extent, the question of coverage for injunctive relief may turn on how the applicable court interprets the policy language at issue.
Similarly, claims for purely economic loss, such as loss of income and decreased property value generally will not be covered under commercial general liability policies because such policies are not intended to cover purely economic loss. See, e.g., Giddings v. Indus. Indem. Co., 112 Cal. App. 3d 213, 219 (1980) (“[S]trictly economic losses like lost profits . . . do not constitute damage or injury to tangible property covered by a comprehensive general liability policy.”) (internal citations removed); Montrose Chem. Corp. v. Superior Court, 861 P.2d 1153, 1162-63 (Cal. 1993) (“a suit seeking recovery for injuries to intangible economic interests is not a suit ‘of the nature and kind’ covered by a CGL policy”).
Allegations that wind farms are a public nuisance appear to be more common in lawsuits brought by neighboring residents than in actions filed by environmental organizations. Coverage for nuisance claims may turn on whether the definition of “personal injury” in the policy includes wrongful entry or invasion of the right of private occupancy. See, e.g., Gen. Accident Ins. Co. v. W. Am. Ins. Co., 42 Cal. App. 4th 95, 103-04 (1996) (including trespass and nuisance as examples of torts encompassed by policy definition of “personal injury”).
Coverage for emotional distress or health problems alleged to arise out of the operation of wind farms may depend on the policy’s definition of bodily injury and applicable case law. Some policies define bodily injury to include not only sickness and disease, but also mental anguish and emotional upset. These policies are more likely to provide coverage for emotional distress claims. However, courts have been divided as to whether policies that define bodily injury in a more limited fashion to include only “bodily injury, sickness or disease” provide coverage for emotional distress claims. Some courts have found coverage for emotional distress under such policies based on the belief that “emotional trauma may be as disabling as physical injury.” See, e.g.,Lavanant v. Gen. Accident Ins. Co., 79 N.Y.2d 623, 630 (1992). Even those courts that subscribe to this view, however, have declined to find coverage for emotional distress in all situations. See, e.g., First Investors Corp. v. Liberty Mut. Ins. Co., 152 F.3d 162 (2d Cir. 1998) (declining to broaden Lavanant to extend coverage to emotional distress arising from economic losses sustained by the underlying claimants). Still other courts have declined to find coverage for emotional distress at all, reasoning that policies defining bodily injury as “bodily injury, sickness or disease,” require actual physical injury. See, e.g., Allstate Ins. Co. v. Diamant, 518 N.E.2d 1154, 1157 (Mass. 1988) (“Bodily injury imports harm arising from corporeal contact. In this connection ‘bodily’ refers to an organism of flesh and blood. It is not satisfied by anything short of physical, and is confined to that kind of injury.”) (citation omitted).
Coverage for claims arising out of a wind turbine manufacturer’s or wind farm operator’s alleged misrepresentations that its windmills would not create excessive noise could depend on whether such misrepresentations meet the policy definitions of bodily injury, property damage, or personal injury. For example, some courts have held that a claim of misrepresentation does not give rise to property damage. See, e.g., U.S.F.&G. v. Warwick Dev. Co., 446 So. 2d 1021 (Ala.1984) (finding no evidence that a misrepresentation caused physical injury or destruction of tangible property). See also Frohberg v. Merrimack Mut. Fire Ins. Co., 612 N.E.2d 273 (Mass. App. Ct. 1993) (Claims of misrepresentation are not property damage). In addition, courts have found that the definition of personal injury as used in liability insurance contracts is limited to the torts enumerated in that definition. See, e.g. LaFrance v. Travelers Ins. Co., 594 N.E.2d 550, 551 (Mass. App. Ct. 1992) (coverage under “personal injury” definition is limited to torts enumerated in that definition, such as false arrest, detention, imprisonment, or malicious prosecution). Thus, an argument could also be made that there is no coverage for misrepresentation claims to the extent that misrepresentation is not an enumerated tort in the definition of “personal injury.”
Thus far few lawsuits, with the exception of Bomba, have been brought alleging property damage caused by windmills or wind farms. Coverage for any property damage claims may depend in large part on the policy’s definition of “property damage.” Many policies define property damage in pertinent part as “physical damage to or destruction of tangible property” and, therefore, require actual damage or destruction for coverage to apply. However, some policies also provide coverage for “loss of use” of tangible property that has not been physically damaged or destroyed. The plaintiffs in Bomba alleged property damage caused by ice thrown from the windmill’s blades. Unless otherwise excluded, property physically injured or destroyed by ice would likely be covered under a policy that defines property damage to include physical damage to tangible property. Absent physical damage, coverage might also be available to the extent that the policy at issue defined property damage to include “loss of use” of tangible property.
Coverage for claims involving a design defect in the wind turbine as alleged in Stull may turn on whether the policy contains a design defect exclusion that precludes coverage for loss or damage caused by a “defect, error or omission in design.” See., e.g., Laquila Constr., Inc. v. Travelers Indem. Co., 66 F. Supp. 2d 543, 544-45 (S.D.N.Y.1999) (where builder's risk policy contained an exclusion for the cost of making good faulty workmanship but had an "ensuing loss" provision for physical damage resulting from such faulty workmanship, a claim for cost of repairing defective concrete fell "squarely into the exclusion clause"), aff'd, 216 F.3d 1072 (2d Cir. 2000); Allianz Ins. Co. v. Impero, 654 F. Supp. 16, 17-18 (E.D. Wash. 1986) (where builder's risk policy contained an exclusion for cost of making good faulty workmanship and had an "ensuing loss" provision, losses incurred in repairing a defectively erected concrete wall were not covered). As Stull demonstrates, wind farm operators may not be the only ones to bring design defect claims against wind turbine manufacturers. Neighboring landowners also appear likely to file suits alleging design defects against the manufacturers.
Coverage for punitive damages may also be barred. See, e.g., PPG Indus., Inc. v. Transam. Ins. Co., 20 Cal. 4th 310, 317 (1999) (“[O]ur public policy prohibits indemnification for punitive damages.”). But see Citgo Petroleum Corp. v. Yeargin, Inc., 690 So. 2d 154 (La. Ct. App. 1997) (finding that term “damages” is broad and can include coverage for punitive damages). Thus, to the extent any of the wind suits include a punitive damages demand, coverage may depend on relevant state law or public policy, as well as on applicable policy provisions.
As additional wind farms are constructed, future lawsuits against wind power developers and operators are not unlikely. For insurers, the lawsuits will translate into questions about whether the allegations fall within the policy’s terms and conditions, whether they are otherwise barred from coverage by an exclusion, and whether there is controlling law relevant to a particular coverage question in the controlling jurisdiction.