Aes Corp. v. Steadfast Ins. Co.

• Decision Date: 20 April 2012
• Docket Number: Record No. 100764.
• Citation: 283 Va. 609,725 S.E.2d 532
• Court: Virginia Supreme Court
• Parties: The AES CORPORATION v. STEADFAST INSURANCE COMPANY.

283 Va. 609

725 S.E.2d 532

The AES CORPORATION

v.STEADFAST INSURANCE COMPANY.

Record No. 100764.

Supreme Court of Virginia.

April 20, 2012.¹

Rex S. Heinke (L. Steven Emmert, Virginia Beach; Anthony T. Pierce; Richard K. Welsh; Sykes, Bourdon, Ahern & Levy; Akin Gump Strauss Hauer & Feld, on brief) for appellant.

Leah Ward Sears (Tamera M. Woodard; Marci A. Eisenstein; Catherine M. Masters; William F. Stewart; Robert E. Worst; Fairfax, Schiff Hardin; Nelson Levine de Luca & Horst; Kalbaugh, Pfund & Messersmith, on brief) for appellee.

Amicus Curiae: Virginia Trial Lawyers Association (John E. Davidson; Davidson & Kitzmann, Charlottesville, on brief) for appellant.

Amici Curiae: Complex Insurance Claims Litigation Association, American Insurance Association, and Property Casualty Insurers Association of America (Laura A. Foggan; Gregory J. Langlois; Samuel B. Gedge; Wiley Rein, on briefs) in support of appellee.

Present: All the Justices.

Opinion by Justice S. BERNARD GOODWYN.

In this appeal from a judgment in a declaratory judgment action, we consider whether the circuit court erred in ruling that a civil complaint filed against The AES Corporation (AES) did not allege an “ occurrence” as that term is defined in AES's contracts of insurance with Steadfast Insurance Company (Steadfast), and that Steadfast, therefore, did not owe AES a defense or liability coverage.

Background

AES is a Virginia-based energy company that holds controlling interests in companies specializing in the generation and distribution of electricity in numerous states, including California. Steadfast is an Illinois-based company and indirect subsidiary of Zurich Financial Services, a global insurance provider. AES paid premiums to Steadfast for commercial general liability (CGL) policies from 1996 to 2000 and 2003 to 2008.

In February 2008, the Native Village of Kivalina and City of Kivalina (Kivalina), a native community located on an Alaskan barrier island, filed a lawsuit (the Complaint) in the United States District Court for the Northern District of California against AES and numerous other defendants for allegedly damaging the village by causing global warming through emission of greenhouse gases. See Native Vill. of Kivalina v. ExxonMobil Corp., 663 F.Supp.2d 863 (N.D.Cal.2009). AES requested Steadfast provide a defense and insurance coverage, pursuant to the terms of the CGL policies, for the claims alleged in the Complaint. Steadfast provided AES a defense under a reservation of rights and filed a declaratory judgment action, which is the subject of this appeal, in the Circuit Court of Arlington County.

In the declaratory judgment action, Steadfast claimed that it did not owe AES a defense or indemnity coverage for damage allegedly caused by AES's contribution to global warming based on three grounds: (1) the Complaint did not allege “property damage” caused by an “occurrence,” which was necessary for there to be coverage under the policies; (2) any alleged injury arose prior to the inception of Steadfast's coverage; and (3) the claims alleged in the Complaint fell within the scope of the pollution exclusion stated in AES's policies.

The parties subsequently filed cross-motions for summary judgment, both claiming that whether Steadfast had a duty to defend AES against the Complaint could be decided by examining the “eight corners” of the Complaint and the CGL policies. The circuit court denied AES's motion for summary judgment and granted Steadfast's motion for summary judgment, holding that the Complaintdoes not allege an “occurrence” as that term is defined in the CGL policies, and thus, the allegations in the Complaint are not covered under those policies.

The Insurance Policies

In each of the CGL policies AES purchased from Steadfast, Steadfast agreed to defend AES against suits claiming damages for bodily injury or property damage, if such damage “is caused by an ‘occurrence.’ ” The policies define “occurrence” as follows: “ ‘Occurrence’ means an accident, including continuous or repeated exposure to substantially the same general harmful condition.” The policies specify that Steadfast has no duty to defend or indemnify AES against damage suits to which the policies do not apply.

The Complaint

Kivalina is located on the tip of a small barrier reef on the northwest coast of Alaska, approximately seventy miles north of the Arctic Circle. As pertinent to this appeal, in the Complaint, Kivalina alleges that AES engaged in energy-generating activities using fossil fuels that emit carbon dioxide and other greenhouse gases, and that the emissions contributed to global warming, causing land-fast sea ice protecting the village's shoreline to form later or melt earlier in the annual cycle. This allegedly exposed the shoreline to storm surges, resulting in erosion of the shoreline and rendering the village uninhabitable.

The Complaint alleges that AES “ intentionally emits millions of tons of carbon dioxide and other greenhouse gases into the atmosphere annually.” (Emphasis added.) The Complaint further alleges that AES “ knew or should have known of the impacts of [its] emissions” of carbon dioxide, but that “[d]espite this knowledge” of the “impacts of [its] emissions on global warming and on particularly vulnerable communities such as coastal Alaskan villages,” AES “continued [its] substantial contributions to global warming.” (Emphasis added.) Kivalina then dedicates sixteen pages and sixty-six paragraphs of its sixty-nine page Complaint to explaining global warming.

The Complaint alleges a civil conspiracy by power, coal and oil companies to mislead the public about the science of global warming. It states that “[d]espite the attempts by certain defendants to make the cause of climate change controversial in the popular media, there has been for many years an overwhelming scientific consensus that human activity that releases greenhouse gases is causing a change in the Earth's climate.” The Complaint alleges that there is “a clear scientific consensus that global warming is caused by emissions of greenhouse gases, primarily carbon dioxide from fossil fuel combustion and methane releases from fossil fuel harvesting.”

The Complaint recounts published articles, books and testimony in which scientists have confirmed the existence of global warming, and discusses current and projected global warming impacts, stating that “[e]mpirical evidence underlies the scientific consensus that global warming has arrived.” It then discusses the special injuries to Kivalina's property interests allegedly resulting from global warming.

The Complaint then states three claims for relief against AES. Two causes of action are for nuisance and the other is for concert of action. The first claim for relief is entitled “Federal Common Law: Public Nuisance.” In support of its claims for federal common law public nuisance, Kivalina asserts the following:

251. Defendants' greenhouse gas emissions are a direct and proximate contributing cause of global warming and of the injuries and threatened injuries Plaintiffs suffer.

252. Defendants know or should know that their emissions of greenhouse gases contribute to global warming, to the general public injuries such heating will cause, and to Plaintiffs' special injuries. Intentionally or negligently, defendants have created, contributed to, and/or maintained the public nuisance.

253. Defendants, both individually and collectively, are substantial contributors to global warming and to the injuries and threatened injuries Plaintiffs suffer.

.... 255. Defendants knew that their individual greenhouse gas emissions were, in combination with emissions and conduct of others, contributing to global warming and causing injuries to entities such as the Plaintiffs.

....

[283 Va. 616]261. Defendants are jointly and severally liable to Kivalina under the federal common law of public nuisance.

The second claim for relief asserted against AES is entitled “State Law: Private and Public Nuisance.” Kivalina asserts as follows:

264. Defendants' emissions of carbon dioxide, by contributing to global warming, constitute a substantial and unreasonable interference with public rights, including, inter alia, the rights to use and enjoy public and private property in Kivalina....

265. Defendants have engaged and continue to engage in intentional or negligent acts or omissions that unreasonably interfere with the use and enjoyment of Plaintiffs' properties, and/or work a substantial annoyance, inconvenience, or injury to the public, and are therefore liable under the applicable state statutory and/or common law of private and public nuisance.

266. Defendants, individually and collectively, are substantial contributors to global warming and to the injuries and threatened injuries suffered by Plaintiffs....

267. Defendants are jointly and severally liable to Plaintiffs under the applicable state statutory and/or common law of private and public nuisance.

The other claim for relief against AES is entitled “Concert of Action.” Kivalina alleges that the “[d]efendants have engaged in and/or are engaging in tortious acts in concert with each other or pursuant to a common design” in creating, contributing to and/or maintaining a public nuisance, specifically, global warming.

Analysis

We awarded AES an appeal on the following assignment of error:

The trial court erred in summarily ruling that the underlying complaint did not allege an “occurrence” covered by the insurance policies.

Both AES and Steadfast agree that it is a well-established principle, consistently applied in this Commonwealth, that only the allegations in the complaint and the provisions of the insurance policy are to be considered in deciding whether there is a duty on the part of the insurer to defend and indemnify the insured. See Brenner v. Lawyers Title Ins. Corp., 240 Va. 185, 189, 192, 397 S.E.2d 100, 102, 104 (1990); Reisen v. Aetna Life & Cas. Co., 225 Va....