We blogged last May and again in December about the tidal wave of litigation set loose by Our Children's Trust (OCT), an Oregon environmental group that had orchestrated the filing of  a dozen suits asserting the defendant States and the United States had an obligation under the public trust doctrine to restrain carbon dioxide emissions, as well as regulatory petitions in about 40 jurisdictions.  One can find OCT on Facebook, Flickr, YouTube and Vimeo. It prepares "backgrounders" for the press (attached). It has even coined its own acronym, ATL (atmospheric trust litigation) for its legal assault.  OCT is media savvy. It has still not established that it is litigation savvy. 

The petitions have not fared well.  OCT's website is not up-to-date but petitions have been denied in at least 27 jurisdictions (Arkansas, Connecticut, Florida, Georgia. Hawaii, Idaho, Illinois, Iowa, Louisiana, Maine, Maryland, Michigan, Missouri, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wyoming and Washington, DC).   The denials have  prompted two more lawsuits (appeals) in Iowa and Texas. 

On the litigation side, motions to dismiss have been the defendants' responses of choice.  The lawsuit against Montana filed in the Montana Supreme Court was dismissed almost immediately.  Montana has a rule permitting an original action before the Montana Supreme Court where there are no factual issues and the matter is urgent. The court rejected that position:  "This Court is ill equipped to resolve the factual assertions presented by Petitioners. We further conclude that Petitioners have not established urgency or emergency factors that would preclude litigation in a trial court followed by the normal appeal process."  Accordingly, the petition for original jurisdiction was denied.

Fast forward to today, the tidal wave is starting to break.  New Mexico and Oregon had oral argument on their motions in January. Decisions have not been issued.  In the Oregon suit it was reported that, after argument, the judge remained undecided about whether to dismiss the case.  This month there are hearings in Alaska, Arizona and Washington.   

And last Monday the first merits decision was handed down.  In Aronow v. Minnesota the Minnesota District Court dismissed the case with prejudice.

Plaintiff's complaint (attached) lays out the threats posed by climate change in great detail.  It then explains the public trust doctrine, including legal authority for extending it to the atmosphere.  "The Public Trust Doctrine is a foundational aspect of sovereignty; it holds government responsible, as perpetual trustee, for the protection and preservation of resources necessary for the common welfare of all citizens, those living and those yet to be born. ... The atmosphere, because of the climate stability it makes possible, is a necessary resource protected by the public trust."  The doctrine is, according to the complaint, partially codified in the Minnesota Environmental Rights Act (MERA) (Minn. Stat. §§ 116B.01 - 13). 

Plaintiff coffered two theories as the basis for relief:  one under the public trust doctrine and the other under MERA.  He sought a declaration that the atmosphere was protected by the public trust doctrine and that the defendants were in violation of the doctrine.  He also sought a declaration that defendants had violated MERA (without identifying what part of MERA was violated).  Last, plaintiff asked the court to "Compel Defendants to take the necessary steps to reduce the State's carbon dioxide output by at least 6% per year, from 2013 to 2050, in order to help stabilize and eventually reduce the amount of carbon dioxide in the atmosphere."

The defendants, Minnesota, the governor and the Minnesota Pollution Control Agency, filed a motion to dismiss.  They succeeded.   In dismissing the claims, the court set down its opinion (attached) in three parts:  1. can the governor be sued (no); 2. does the public trust doctrine apply to the atmosphere (no); and 3) are there viable causes of action under MERA (no).

As to the governor, he had no legislative authority or funding "to  implement the policies sought by plaintiff." Accordingly, he was not a proper party to the suit.

As to the public trust doctrine, this ruling is arguably the most important part of the decision.  A ruling in OCT's favor would provide it ammunition in the imminent battles in other jurisdictions.  A ruling against it would supplement the arsenals of the defendants in those other cases.  Further, the court's decision was the first merits decision on the central tenet of OCT's raft of cases:  the public trust doctrine applies to the atmosphere.  The court's analysis is brief so we provide it in full: 

Minnesota Courts have recognized the Public Trust Doctrine only as it applies to navigable waters. "Navigability and nonnavigability [sic] mark the distinction between public and private waters. The state, in its sovereign capacity, as trustee for the people, holds all navigable waters and the lands under them for public use." Nelson v DeLong, 7 N.W.2d 342, 346 (Minn. 1942) (emphasis added). The Nelson court ultimately held that a private citizen's riparian rights are subordinate to the State's needs as it manages the navigable waters that are held in the public trust. See also Pratt v. State, Dep't of Natural Resources, 309 N.W.2d 767, 771 (Minn. 1981).  In Larson v Sando, 508 N.W.2d 782 (Minn. Ct. App. 1993), rev. denied (Jan. 21, 1994), the court declined to extend the public trust doctrine beyond the state's management of waterways, partly because the cases cited by the parties applied only to waterways. Id. at 787 (declining to extend the doctrine to land). Similarly, this Court cannot locate, nor did counsel for either party supply, a Minnesota case supporting broadening the Public Trust Doctrine to include the atmosphere. This Court has no authority to recognize an entirely new common law cause of action through plaintiff's proposed extension of the Public Trust Doctrine. 

That is it.  There is no analysis of whether the public trust doctrine should or should not apply to the atmosphere.  Instead, the court simply ruled it has not been done before in Minnesota and it will not be done by this district court here.

Last, are the MERA claims.  The court went out of its way to consider a variety of ways that a MERA suit might be justified. We want to focus on the simplest: the statutory requirements. Under § 116B.03 a resident of Minnesota could bring suit in the name of the State "for the protection of the air ... from pollution impairment or destruction." A problem was that plaintiffs had not complied with the statutory requirements of giving notice, which was "fatal." Another problem was that plaintiff was required to sue on behalf of the State, which he did not.  A final problem was that the required "pollution, impairment or destruction" was defined by statute, and the statutory requirement, according to the court, was not met.  We have trouble with this conclusion, however.  To be sure the statutory definition required "conduct by any person which violates, or is likely to violate, any environmental quality standard, limitation, rule, order, license, stipulation agreement, or permit," but it also alternatively permitted a claimant to challenge "conduct which materially adversely affects or is likely to materially adversely affect the environment."  Minn. Stat. §  116B.02(5).  Plaintiff expansively alleged how carbon dioxide emissions lead to climate change which is causing numerous deleterious effects on humans and the environment.  And he alleged how Minnesota's state government's conduct (inaction) was materially adversely affecting the environment.  These allegations just don't seem to square with the court's conclusion that "the Complaint does not allege anything falling within the definition of 'pollution, impairment or destruction.'"  We wonder why the court ventured into this area when it had established the procedural bars.

Alternatively, under Minn. Stat. § 116B.10 a Minnesota resident could "maintain a civil action .... for declaratory or equitable relief against the state ...where the nature of the action is a challenge to an environmental quality standard, limitation, rule, order, license, stipulation, agreement or permit promulgated or issued by the state ... for which the applicable statutory appeal period has lapsed."  Plaintiff's fundamental problem was that his complaint failed to "refer to or challenge a single environmental quality standard, limitation, [etc.]"  In other words, by its terms plaintiff's claim did not meet the statutory requirements.

OCT is 0-27 in the regulatory arena.  It is now 0-2 in litigation.  Notwithstanding, we cannot see the future here.  Regulatory agencies cannot move into new areas without legislative authority.  We will not be surprised if OCT is 0-40 in the not too distant future.  But in the courts it may be a different story.   Montana's dismissal simply set the stage for re-filing in the trial court.  In Minnesota the court did not reject the concept of applying the public trust doctrine to the atmosphere; it simply was unwilling to plow new ground.   And the Oregon trial court is reportedly on the fence.  We still await thoughtful jurisprudence on whether the public trust doctrine applies to the atmosphere.  We note, however, that we expect a long wait for this to settle down; whatever happens in the immediate future, there are certain to be appeals.

20120130 Order of Dismissal, Aronow v. Minnesota (Our Children's Trust).pdf (960.57 kb)

Aronow v. Minnesota Complaint (Our Children's Trust).pdf (247.79 kb)

Our Children's Trust, National Backgrounder (ATL) 12-1-191.pdf (316.65 kb)

The YogiBerraism "It ain't over till it's over" is overused. But just because it is overused does not mean it is wrong.  AES has stayed up late digesting the insights of one of baseball's greatest. Its homework has paid off. On January 17 the Virginia Supreme Court entered a terse order (attached) granting rehearing in Steadfast Insurance Co v AES Corp.

Jump to the next paragraph if you are familiar with the case. For those unfamiliar, AES is a defendant in Native Village of Kivalina v ExxonMobil Corp., a lawsuit alleging that certain carbon dioxide emitters are responsible for global warming, which has melted arctic sea ice resulting in disastrous erosion of the plaintiffs' community.  (For our most recent blog on Kivalina, click here)   AES tendered the claim to Steadfast, who accepted the defense and then filed a declaratory judgment action seeking to avoid coverage. AES lost on summary judgment on whether there was an occurrence and then lost its appeal before the Virginia Supreme Court last September. 

Or maybe not.  AES filed a petition for rehearing (attached) asserting that the Court "radically redefined 'accident' to exclude coverage in virtually all negligence cases." Petition at 1. Normally such hyperbole is a sign of weakness. Here, however, it is in large measure accurate.

The Court held that "When the insured knows or should have known [as the Kivalina plaintiffs alleged] of the consequences of his actions, there is no occurrence and therefore no coverage." See Petition at 4. It relied on two treatises and an Eighth Circuit decision.  Id. Yet, as AES shows in its petition, each of those authorities requires that the insured should have known to a substantial probability or a substantial certainty. Id. at 4-6. Since plaintiffs made no such allegation, and the chain of causation was attenuated (to say the least, see Petition at 7-8), AES asserts the Court's decision was in error.

And this was not something of little consequence. It potentially affected all general liability insurance. The quote from the Eighth Circuit's decision is worth repeating: 

To adopt [the policy] that an injury is not caused by accident because the injury is reasonably foreseeable would mean that only in a rare instance would the comprehensive general liability policy be of any benefit to [the insured] .... Under [this] construction of the policy language if the damage was foreseeable then the insured is liable, but there is no coverage, and if the damage is not foreseeable, there is coverage, but the insured is not liable. This is not the law. The function of an insurance company is more than that of premium receiver.

Petition at 10, quoting City of Carter Lake v. Aetna Cas. & Sur. Co., 604 F.3d 1052, 1058 (8th Cir. 1979).   

What does it all mean?  We conducted an unscientific review of reported cases where the Court granted rehearing in the last 10 years. In all of them, the Court revised its opinion. See Tanner v. State Corp. Comm’n, 266 Va. 170 (2003); Jaynes v. Commonwealth, 276 Va. 443 (2008); Uniwest Const. v. Amtech Elev. Serv., Inc., No. 091495 (Apr. 21, 2011).  All of them.  If we were AES, we would be somewhat optimistic.  Yogi Berra also said: "You can observe a lot by watching."  Oral argument in Richmond in February is likely to demonstrate the truth of that rule as well.

20111017 Petition for Rehearing (by AES), AES Corp. v. Steadfast Ins. Co..pdf (453.91 kb)

20120117 Order (granting petition for rehearing), AES Corp. v. Steadfast Ins. Co..pdf (33.13 kb)

Last week a big step forward was taken by the Western Climate Initiative (WCI). Or what remains of it. On January 1, 2012 members were to establish binding caps on emissions of carbon dioxide from electricity generators and certain industrial sources, issue allowances for those emissions and then permit the trading of those allowances.  At least that was the plan back in September 2008 when  Design Recommendations for the WCI Regional Cap-and-Trade Program was released and when climate change response was popular and states had money in their budgets.  Since then Arizona, Montana New Mexico, Oregon, Washington and Utah have withdrawn from the WCI leaving only California and four Canadian provinces.  As the WCI puts it:  "British Columbia, California, Ontario, Quebec and Manitoba are continuing to work together through the Western Climate Initiative to develop and harmonize their emissions trading program policies."  And of those remaining only two (California and Quebec) are moving forward with a cap-and-trade program.

So is this the end of regional greenhouse gas initiatives?  After all, on the East Coast New Jersey has bolted from the Regional Greenhouse Gas Initiative, while New Hampshire attempted to bolt and New York faces a lawsuit (attached) aimed at ejecting New York.

We think not.  Our reasoning is three fold. 

First, climate change is not going away.  We are going to have to do something.  The theory behind regional initiatives -- that they act as a laboratory for experimenting with greenhouse gas regulation -- remains valid.  And until federal legislation takes over (certainly not in 2012), regional initiatives are going to be the only game in town. 

Second, organizations exist around the globe to develop manufacturing or construction or laboratory or telecommunications or you-name-it standards.   Companies ignore these organizations at their peril and often join so they can influence the result and at a minimum have inside knowledge of what the standard is and how it came to be.  Regional initiatives operate in a similar manner where the development of the rules and the issues behind them are  critical in effectively implementing the rules.  States and provinces that are out in front on climate change issues are going to have two advantages going forward.  They will have a program in place when federal rules ultimately come along; that primacy will undoubtedly influence the federal program.  And they will have experience implementing the program which likely will translate into a more effective program when compared with newly minted greenhouse gas regulators.

And third they are reported to add economic benefit.  In November RGGI released a report by The Analysis Group that analyzed  the effect of RGGI:   "The Economic Impacts of the Regional Greenhouse Gas Initiative on Ten Northeast and Mid-Atlantic States."   

To quote the report's authors:

Key findings include:

■The regional economy gains more than $1.6 billion in economic value added (reflecting the difference between total revenues in the overall economy, less the cost to produce goods and services)
■Customers save nearly $1.1 billion on electricity bills, and an additional $174 million on natural gas and heating oil bills, for a total of $1.3 billion in savings over the next decade through installation of energy efficiency measures using funding from RGGI auction proceeds to date
■16,000 jobs are created region wide
■Reduced demand for fossil fuels keeps more than $765 million in the local economy
■Power plant owners experience $1.6 billion in lower revenue over time, although they overall had higher revenues than costs as a result of RGGI during the 2009-2011 period

This is not a surprise.  By limiting the emission of carbon dioxide, RGGI drove up, at least initially, the cost of electricity production.  This had the effect of promoting more efficient use of electricity. 

So practitioners would do well to pay attention to California's efforts.  It is likely to be the source of what ultimately happens in Washington.

Thrun v. Cuomo (RGGI Complaint).pdf (1.34 mb)

NOAA reported that 2011 was one for the record books:  12 weather and climate-related disasters each causing over $1 billion in damage.  One might expect (or hope) that a national climate change policy would be coming into place to prevent repeating or setting a new record.  One would be disappointed.  U.S. climate policy is "uncertain," to quote Michael Morris, CEO of American Electric Power, "dysfunctional" is the word applied by Resources for the Future, "hamstrung" is how the chief UN climate change negotiator and Executive Secretary of the UNFCCC, Christiana Figueres, calls it.  

We don't disagree with these viewpoints; they are accurate.  But if a response to climate change is the goal, it is worse than these commenters are acknowledging because not only has Congress shown that it is incapable of getting anything done, other avenues are not delivering either.  As the year expires we thought it might be helpful to sift through the year's detritus and assess  the status of attempts to reduce carbon dioxide emissions, distinct from overt attempts like passing laws and adopting regulations.

1. Tax emissions - Some will remember our blog on the federal lawsuit brought by Mirant Corp. against Montgomery County challenging the County's tax on carbon emissions which fell only on Mirant. The County challenged the federal court's jurisdiction and won before the federal district court. In June, however, the Fourth Circuit reversed.  With that Montgomery County folded its tent and abandoned its carbon tax.

2. Favor renewable energy - The inexorable scrutiny of the markets has proved the undoing of several former high-flying renewable energy ventures. Most well-known is the debacle with Solyndra LLC, whose well-publicized collapse generated scrutiny by the FBI and Congress. Others that have failed with less limelight in 2011 include numerous solar companies (Solar Millennium, Stirling Energy Systems, Evergreen Solar, Spectrawatt), as well as ventures in wind (Skycon), energy storage (Beacon Power), and biofulels (Range Fuels).

3. Impose liability for emissions of carbon dioxide - The results here are mixed.  Everyone points to American Electric Power v Connecticut for the principle that for greenhouse gas liability claims the federal common law of nuisance has been displaced by federal regulation. They could equally point to Connecticut v AEP before the Second Circuit for the principle that the political question doctrine does not bar these types of claims or to the Fifth Circuit panel in Comer v Murphy Oil USA that held similarly.  However, even if the cases are permitted to move forward, they face daunting problems in proof of causation.

4. Force state action to regulate carbon dioxide - We blogged last May and just this month about the tidal wave of litigation unleashed by Our Children's Trust, an Oregon environmental group that had orchestrated a dozen suits asserting the defendant States had an obligation under the public trust doctrine to restrain carbon dioxide emissions, as well as regulatory petitions in about 40 jurisdictions. 

Time has not been good to OCT. First, its petitions have been denied by at least 23 agencies (Arkansas, Connecticut, Georgia. Hawaii, Idaho, Illinois, Iowa, Louisiana, Maine, Maryland, Michigan, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, and Wyoming).  Where OCT filed lawsuits, three states (Arkansas, Minnesota and New Mexico) responded with motions to dismiss.  The lawsuit against Montana was dismissed. In the federal lawsuit, the plaintiffs lost a motion to transfer.

5. Reach regional agreements - With great fanfare the Regional Greenhouse Gas Initiative was launched in 2005. Despite a recent study that claims significant economic benefit to the states in RGGI, its future success is unclear. New Jersey pulled out, New Hampshire tried to leave but the governor vetoed the bill. In New York, there is a court challenge. 

6. Voluntarily trade carbon dioxide emissions credits - The only carbon exchange in North America came to an end in 2010 when the Chicago Climate Exchange closed its doors.  A shadow of its former self, the CCX now registers verified emission reductions based on a comprehensive set of established protocols.

7. Develop carbon capture and storage - The most prominent project in the US came to a halt in July when American Electric Power concluded not to build a full-scale CCS plant at its Mountaineer, West Virginia plant. As noted above, AEP explained its decision as based on the uncertainty of US climate policy.  The lack of direction in American climate change response hurts business. AEP walked away from a $300 million Department of Energy match.  It didn't help that the Virginia consumer advocate, in successfully arguing against including CCS costs in the rate base, asserted:  “Any potential benefit is speculative and outweighed by the enormous cost of the pilot project.”

Some may think no policy is the best policy.  We think otherwise.  Climate change is happening.  There will be a response.  All will benefit if that response is choreographed over time, rather than rushed into when political consensus ultimately concludes that something must be done NOW.  Maybe in 2012?  Happy New Year. 

On November 8-9, 2011 an Arctic gale bore down on the peninsulas, islands, salt marshes and beaches of the Alaska littoral.  Named the Bering Sea Superstorm it pounded Alaska with 8-10 foot storm surges, wind gusts up to 75 mph and blizzard conditions.  One small community was particularly fearful.  Many readers already know of whom we are speaking:  Kivalina.  The National Weather Service wrote:  "WIDESPREAD MAJOR COASTAL FLOODING AND SEVERE BEACH EROSION IS EXPECTED IN THE FOLLOWING AREAS: ... 4. THE CHUKCHI SEA COAST FROM CAPE KRUSENSTERN TO POINT HOPE. THIS INCLUDES THE VILLAGES OF NOME AND KIVALINA WHERE MAJOR DAMAGE FROM COASTAL FLOODING AND STRONG WINDS IS EXPECTED.  Fortunately, the seawall at Kivalina held.

While unusual, this was one storm of thousands that have visited high winds and storm surge upon Alaska's shoreline over the millennia.  Last Monday a storm of a different sort broke. Although not even rated on the Saffir-Simpson scale, the verbal gusts exhaled before the Ninth Circuit Court of Appeals in Native Village of Kivalina v ExxonMobil Corp. may have substantially more effect than any Arctic storm.  Or they may not. (Click here for the video or audio link or oral argument.)

Kudos must be extended to Matt Pawa (Appellant Kivalina) and Daniel Collins (Defendants/Appellees) for masterful argument.  Both were completely on top of their game, whether it was jousting with the Court or each other over the Restatement (Second) (and sometimes Third), laying out their key arguments or responding to pointed questions from Judges Thomas, Clifton or Pro (on temporary assignment from the District of Nevada).

(For those to whom Kivalina is not familiar, in a nutshell, a native Alaskan village on the shores of the Chukchi Sea has brought suit against electric utilities, oil companies and one coal company.  The complaint asserts the defendants are responsible for excess emissions of greenhouse gases, which have led to global warming, which has resulted in delayed formation of arctic sea ice and early melting as well, which has accelerated the erosion caused by winter storms.  The plaintiffs seek damages for the cost of relocating their village.  The suit was dismissed on political question grounds by the District Court for the Northern  District of California; it is now on appeal to the Ninth Circuit.)

Mr. Pawa opened his argument with the proposition that it is black letter law that no balancing of interests is needed where an intentionally caused nuisance is causing a claimant serious harm.  He cited numerous Restatement sections in support.  The Court seemed skeptical.  Judge Clifton asserted in his question that balancing was called for in the Restatement.  Judge Pro wanted to know what instructions Mr. Pawa would give to the jury.  Judge Clifton queried:  "Why is it so difficult to find a case that remotely resembles this one?"  Mr. Pawa pointed to People v. Gold Run Ditch & Mining Co., 66 Cal. 138, 4 P. 1152 (1884), which established, he said, that valid nuisance claims lie against all polluters of a common resource.  (We, of course, take strong exception to any referral to carbon dioxide as pollution in light of its ubiquity, natural presence, and lack of toxicity in the atmosphere.  The parallels to water vapor - the most prevalent greenhouse gas and in no one's estimation a pollutant - are striking.)

Although  there was not enough time in argument to fully develop Gold Run Ditch, it is worth a moment to consider.  There the California Supreme Court was asked to enjoin hydraulic mining which was despoiling California's rivers and threatening agricultural interests.  In holding that an injunction against the hydraulic mining operator should issue, the Court wrote:

But a legitimate private business, founded upon a local custom, may grow into a force to threaten the safety of the people, and destruction to public and private rights; and when it develops into that condition, the custom upon which it is founded becomes unreasonable, because dangerous to public and private rights, and cannot be invoked to justify the continuance of the business in an unlawful manner. Every business has its laws, and these require of those who are engaged in it to so conduct it as that it shall not violate the rights that belong to others. Accompanying the ownership of every species of property is a corresponding duty to so use it as that it shall not abuse the rights of other recognized owners ... Upon that underlying principle, neither State nor Federal legislatures could, by silent acquiescence, or by attempted legislation ... divest the people of the State of their rights in the navigable waters of the State for the use of a private business, however extensive or long continued .... As we have already said, the rights of the people in the navigable rivers of the State are paramount and controlling.  66 Cal. at 152.

The effect of Gold Run Ditch and a parallel decision in federal court, Woodruff v. North Bloomfield Mining Co., 18 F. 753 (1884), effectively ended hydraulic mining in California.  Whether a similar ruling could be used against entities emitting carbon dioxide into the atmosphere remains to be seen.

Another interesting argument broached by Mr. Pawa concerned what he referred to as trivial emitters.  Judge Thomas played into his hand with a question about whether his driving to work made him a defendant.   According to Mr. Pawa Section 36 of the Restatement  (Third) takes care of that issue and negates liability to trivial emitters.  That section provides:  "When an actor’s negligent conduct constitutes only a trivial contribution to a causal set that is a factual cause of physical harm under § 27, the harm is not within the scope of the actor’s liability."  Mr. Pawa would permit the defendants to demonstrate that they constitute trivial contributors to the global warming problem.

In closing, Mr. Pawa cited the substantial precedent in his clients' favor.  The Second Circuit reversed the trial court and found standing for the plaintiffs in Connecticut v. AEP, 582 F.3d 309 (2d Cir. 2009), which was not reversed by the Supreme Court.  Likewise the appellate panel in Comer v. Murphy Oil USA, 585 F.3d 855 (5th Cir. 2009), also reversed the trial court and found standing for the climate change liability plaintiffs.  (Mr. Pawa acknowledged that the decision had been vacated and cited the decision for the panel's thinking, not as precedent.)  Last, in Massachusetts v. EPA, 127 S.Ct. 1438 (2007), the Supreme Court also found standing for an entity alleging damage from greenhouse gas emissions.

Mr. Collins responded to Mr. Pawa's arguments and knocked down plaintiffs' claim that black letter law established that balancing was not required.  Mr. Collins pointed to comment e of section 821B of the Restatement (Second) which requires an assessment of reasonableness whether the allegation is an intentional, reckless or negligent nuisance.  Further, the balancing required by plaintiffs' claims is "utterly without precedent."  "But balancing is what courts do all the time," interjected Judge Pro.  "Nothing on this scale has ever been remitted to a court," rejoined Mr. Collins.  This is not a case about a discreet pollution site; it is a case of global dimensions and there is no traceability of the emitted carbon dioxide (as the plaintiffs conceded).

The Court was not so easily put off and brought up AEP, where the Second Circuit had permitted plaintiffs to proceed with their greenhouse gas liability claim, and the Supreme Court had not reversed.  Mr. Collins had seen that softball coming:  AEP is different because some of the plaintiffs were sovereigns, which was not the case here.

Mr. Collins closed with strong points on his clients' primary position:  displacement of the federal common law applies to both injunctive and damages remedies.  This was established in Middlesex County Sewerage Auth. v. Sea Clammers, 453 U.S. 1, 13 (1981).  The reason is simple.  When Congress crafted the regulatory framework establishing the Clean Air Act, which displaced injunctive remedies, see American Electric Power v. Connecticut, Congress did not provide for any compensatory relief to an aggrieved private party.  Accordingly, a damages remedy is also displaced and the plaintiffs' claim is barred.  As the Ninth Circuit had itself held in In re Exxon Valdez, 270 F.3d. 1215 (9th Cir. 2001):  "a nuisance theory would enable a federal district judge to substitute a different balancing of interests from the one made by the agency to which Congress assigned the job". 

In our view the Court's decision is not likely to be the final curtain.  If it goes in favor of the plaintiffs, the defendants will certainly appeal.  And if the defendants prevail, the state law claims (dismissed by the federal district court without prejudice) are likely to be refilled, particularly with the invitation set forth in by the Supreme Court in AEP:  "None of the parties have briefed preemption or otherwise addressed the availability of a claim under state nuisance law. We therefore leave the matter open for consideration on remand."

This morning the Virginia Supreme Court decided the first climate change liability insurance coverage case:   The AES Corp. v. Steadfast Ins. Co., Record No. 100764 (attached). It held that there was no covered “occurrence” and that therefore the trial court properly dismissed the insured’s claim for coverage.

Followers of this blog are well familiar with Steadfast and the underlying Kivalina case.  For those new to this subject, this coverage case arose out of the climate change nuisance damages case, Native Village of Kivalina v. ExxonMobil Corp., CV 08-1138 SBA (N.D. Cal.), in which claimants asserted that defendants' greenhouse gas emissions resulted in warmer winters, which lead to melting of sea ice and erosion of the shoreline around their community to the point that their village was set to fall into the sea.  They brought suit against oil and gas companies, electric utilities and a coal company, seeking damages for an alleged nuisance.  In Steadfast one of the Kivalina defendants’ insurers (Steadfast), after first defending under a reservation of rights, brought a declaratory judgment action against its insured (electric utility AES), seeking to avoid coverage under its general liability policies.  Shortly thereafter Steadfast filed a motion for summary judgment asserting that there was no occurrence, and that coverage was barred by the loss-in-progress and pollution exclusions.

AES initially prevailed and defeated Steadfast’s motion.  AES then moved for summary judgment on the duty to defend and Steadfast cross-moved.  This time Steadfast gained victory.  The trial court issued a very brief opinion holding:  “Steadfast has no duty to defend AES in connection with the underlying Kivalina litigation because no 'occurrence' as defined in the policies has been alleged in the underlying Complaint.”  AES appealed.

In most jurisdictions, including Virginia, an “eight corners” rule is applied:  “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.”  Opinion at 7 (citations omitted).  Coverage under the Steadfast policies hinged on whether there was an occurrence, specifically defined to mean “an accident, including continuous or repeated exposure to substantially the same general harmful condition.”  In Virginia the terms “occurrence” and “accident” are synonymous and an “accident” is commonly understood to mean “an event which creates an effect which is not the natural or probable consequence of the means employed and is not intended, designed, or reasonably anticipated.”  Id. at 9.

There was no dispute that AES intentionally released carbon dioxide as part of the combustion process at its power plants.  But intentional acts do not preclude coverage:  “[W]hen the alleged injury results from an unforeseen cause that is out of the ordinary expectations of a reasonable person, the injury may be covered by an occurrence policy provision.”  Id. at 10 (citing 20 Eric M. Holmes, Appleman on Insurance 2d § 129.2(I)(5) (2002 & Supp. 2009)).  However, “If a result is the natural and probable consequence of an insured’s intentional act, it is not an accident” and coverage will be barred.  Id. at 9. 

The Court summarized the rule it would apply:

Thus, resolution of the issue of whether Kivalina’s Complaint alleges an occurrence covered by the policies turns on whether the Complaint can be construed as alleging that Kivalina’s injuries, at least in the alternative, resulted from unforeseen consequences that a reasonable person would not have expected to result from AES’s deliberate act of emitting carbon dioxide and greenhouse gases.  Id. at 10-11.

Notwithstanding that the Kivalina plaintiffs specifically alleged negligence, and that AES adduced evidence that the Kivalina plaintiffs were arguing on appeal before the Ninth Circuit that their claim sounded in negligence, the Court followed strict adherence to the eight-corners rule:

Kivalina plainly alleges that AES intentionally released carbon dioxide into the atmosphere as a regular part of its energy-producing activities. Kivalina also alleges that there is a clear scientific consensus that the natural and probable consequence of such emissions is global warming and damages such as Kivalina suffered. Whether or not AES’s intentional act constitutes negligence, the natural and probable consequence of that intentional act is not an accident under Virginia law.  Id. at 12.

Further, “[e]ven if AES were negligent and did not intend to cause the damage that occurred, the gravamen of Kivalina’s nuisance claim is that the damages it sustained were the natural and probable consequences of AES’s intentional emissions.”  Id. at 13.  In sum, “If an insured knew or should have known that certain results would follow from his acts or omissions, there is no 'occurrence' within the meaning of a comprehensive general liability policy.”  Thus, the trial court was affirmed.

As noted at the outset, this is the first skirmish of what is certain to be a protracted battle between insurers and insureds.  There are 50 other jurisdictions (including the District of Columbia) and this is only one issue based on one complaint and one insurer's policy language.  There is a long way to go before we will have clarity here.

Post scriptum:  Many will recall that Steadfast argued in its papers and before the Court that the pollution exclusion also barred coverage; AES responded that it had not been properly raised.  The Court did not even address the subject, apparently feeling that it was enough to cite to AES's grounds for appeal, which did not include the pollution exclusion.  So even in Virginia, there are still coverage battles to be fought.

AES Corp. v. Steadfast Ins. Co., No. 100764, slip op. (Va. Sept. 16, 2011).pdf (64.69 kb)

No, this is not jihad or the last gasp of a d esperate despot.  Instead, it is a citizens group taking on the government and seeking to compel the completion of environmental impact statements (EISs) prior to the promulgation of regulations for the development of shale oil wells in the Delaware River Basin.  If they are successful, they will certainly delay the drilling of hundreds if not thousands of wells.  And as part of that success, the role of natural gas as a "bridging" fuel to ease us into a carbon-free world may be substantially diminished.

Taking a page from the playbook of past environmental challenges, Damascus Citizens for Sustainability, Inc. filed suit earlier this month against the Army Corps of Engineers, Fish and Wildlife Service, National Park Service, Department of the Interior, EPA and Delaware River Basin Commission (DRBC), as well as various officers in their official capacities to block hydraulic fracturing ("fracking") activities in the Delaware River Basin. The gravamen of the complaint (attached) is that the agencies have violated federal law by failing to require the completion of an environmental impact statement before promulgating regulations allowing natural gas development within the Basin.  Plaintiff seeks declaratory and injunctive relief. 

DCS is a non-profit conservation group whose members "live, work and recreate" in the Basin. Complaint ¶ 11.  Members of DCS include organic farmers, bird watchers, hunters and fishermen. Id. ¶ 12.  Some will take offense at the disengagement of some of the plaintiff's members who "escape on weekends and vacations to their refuge in the Upper Delaware Basin where they can commune with nature in the bucolic setting of the Basin."  Id.  As summarized by the complaint, "For each member of DCS, the Basin's unspoiled resources are his or her own Walden Pond."  Id.

Defendants are government agencies responsible in one way or another for the watershed.  As such, effects from fracking (which, according to the complaint, will result in between 15,000 and 18,000 natural gas wells in the Basin, id. ¶ 62) fall under their jurisdiction.

A substantial hurdle in plaintiff's suit is whether the National Environmental Policy Act (NEPA) (which requires EISs) even applies to an interstate commission such as the DRBC. As the complaint acknowledges, "DRBC has stated that it is not subject to NEPA, noting that four of the five commissioners are appointed by states.  DRBC thus refuses to comply with NEPA."  Id. ¶ 32.  There is support in the case law for this position:  "That DRBC is a federal agency for purposes of NEPA is very doubtful."  Delaware Water Emergency Group v. Hansler, 536 F. Supp. 26, 35 (E.D. Pa. 1981).  DCS argues that, among other things, the DRBC is a federal agency as it was established by federal legislation, publishes its regulations in the Code of Federal Regulations, publishes its activities in the Federal Register, is listed as a U.S. Government Agency by USA.gov and is viewed as a federal agency by the Council of Environmental Quality, which oversees the federal government's compliance with NEPA.  Complaint ¶¶ 26, 28, 29.

If DCS gets past that hurdle then numerous aspects of fracking may come under the microscope.  Allegations include:  highly contaminated return flows of water, gas and other materials, confidential fracking fluid formulas containing "carcinogenic, acutely toxic, chronically toxic and bioaccumulative" materials, methane emissions as greenhouse gases, "systematic evidence of methane contamination of drinking water from gas extraction activities", "large-scale changes in land use and increased water withdrawals," "significant air pollution from truck exhaust emissions," "serious vehicular accidents,"  "significant public health problems" and  permanent change to the rural and scenic character of the area.  Id. ¶¶ 50, 51, 54, 59, 62, 63, 65 and 66.  It is obvious that full development of all these topics will substantially delay the development of the Marcellus shale.

To focus on just one aspect of the allegations, it is worth looking at greenhouse gas emissions.  The conventional wisdom is that because natural gas is composed of lighter, less complex hydrocarbons, and therefore when combusted it emits less carbon dioxide per BTU than other fossil fuels, it is to be preferred over oil and coal.  NaturalGas.org reports on its webpage that "The combustion of natural gas emits almost 30 percent less carbon dioxide than oil, and just under 45 percent less carbon dioxide than coal."  (Particulates, SOx and NOx and mercury are likewise much lower.)  Methane, an even more potent greenhouse gas than carbon dioxide, and a significant component of natural gas, likewise is reported to have better characteristics in natural gas. An EPA/Gas Resources Institute 1997 study concluded "that the reduction in emissions from increased natural gas use strongly outweighs the detrimental effects of increased methane emissions."  Id.  Accordingly, many believe that if one substitutes natural gas for coal and oil, one could continue to grow the economy while at the same time reducing greenhouse gas emissions.

This proposition is under attack.  Citing a 2010 EPA study, DCS pleads that EPA "revised its estimated potential emissions from gas well completions from 0.02 tons of methane per well to 177 tons of methane per well."  Complaint ¶ 63.

We tracked down the EPA study and some additional scholarship.  In Greenhouse Gas Emissions Reporting from the Petroleum and Natural Gas Industry, Background Technical Support Document, the EPA walks away from its earlier study:  "new data and increased knowledge of industry operations and practices have highlighted the fact that emissions estimates from the EPA/GRI study are outdated and potentially understated for some emissions sources."  Background Technical Support Document at 8.  One of those sources is unconventional natural gas production, aka fracking.  Appendix B of the study lays out the sources of the new data and they are thin: four presentations at a 2007 EPA Natural Gas STAR Production Technology Transfer Workshop .  Nevertheless, they may be a game changer.

Cornell researchers Howarth, Santoro and Ingraffea took the new numbers and applied them to the proposition that natural gas should be used "as a transitional fuel, allowing continued dependence on fossil fuels yet reducing greenhouse gas (GHG) emissions compared to oil or coal over coming decades."  Howarth at 2.  They concluded that shale gas has a greenhouse gas footprint substantially larger than previously thought and that, depending on circumstances, the footprint of coal can be superior to that of shale gas (i.e., smaller).  Id. ¶ 8.  Thus, "the large GHG footprint of shale gas undercuts the logic of its use as a bridging fuel over coming decades, if the goal is to reduce global warming."  Id.

One thing that was striking in the EPA study was the acknowledgment of "great variability in the natural gas sector and [that] the resulting emission rates have high uncertainty."   Background Technical Support Document at 86.  EPA also noted that its results do not include reductions due to control technologies.  Id. at 87.  Howarth et al. acknowledge the efficacy of technology and that "methane emissions during the flow-back period in theory can be reduced by up to 90%."  Howarth ¶ 7.  In practice, they assert it does not happen.  If Damascus Citizens for Sustainability has anything to say about it, we will know more.

Damascus Citizens for Sustainability, Inc. v. U.S. Army Corps of Engineers et al, 11-cv-03857 Complaint (Aug. 10, 2011).pdf (828.33 kb)

The moment we have been waiting for since 2004 (when the first climate change liability case was filed) finally arrived. The Supreme Court today rendered its opinion in American Electric Power Co., Inc.. v. Connecticut.  As many predicted following oral argument, the use of the federal common law of nuisance to limit carbon dioxide emissions simply is not a viable theory because it has been displaced by the Clean Air Act and the EPA's steps to implement the Act.

For those who have not yet read the opinion, it is straightforward. Following the Supreme Court's 2007 decision in Massachusetts v. EPA, the EPA undertook to begin the regulation of carbon dioxide emissions. AEP at 2.  Within the framework of the Clean Air Act it issued its "Endangerment Ruling" (76 Fed. Reg. 66496), and then adopted final rules regulating emissions from light-duty trucks, initiated a joint rulemaking covering medium and heavy-duty vehicles, began phasing in requirements for best available control technology for major greenhouse gas emitters, and commenced a rulemaking on emissions from fossil-fuel fired power plants. Id.at 2-3.  That rule is due to be final in May 2012.  Id.at 3. With those steps, and the comprehensive activities authorized under the Clean Air Act (id. at 10-11), the Court applied the simple test:  "whether congressional legislation excludes the declaration of federal common law is simply whether the statute 'speak[s] directly to [the] question' at issue." Id.at 10. The Court held:  "the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement of carbon-dioxide emissions from fossil-fuel fired power plants." Id.

The Court responded to arguments that the EPA was only beginning to regulate but had not yet finished the process by emphasizing that it was the "delegation [that] displaces federal common law.". Id.at 12 (emphasis added). That is, even if the EPA chose not to regulate carbon dioxide emissions, "the federal courts would have no warrant to employ the federal common law of nuisance to upset the agency's expert determination." Id.

Some may recall that the political question doctrine was front and center in the decisions below. See id. at 5-6.  Here, however, the Court mentions it only indirectly.  In describing the "prescribed order of decisionmaking" (i.e., expert agencies and then federal judges), "the expert agency is surely better equipped to do the job than individual district judges issuing ad hoc, case-by-case injunctions." Id.at 14.

Notwithstanding the apparently simple rule and its application, we do not expect AEP to end climate change liability litigation.  State nuisance law (which plaintiffs pleaded) remains. Although the Court offered no opinion on such a theory's efficacy, it did give a hint of where it might land:  "the Clean Water Act does not preclude aggrieved individuals from bringing a 'nuisance claim pursuant to the law of the source state.'" Id. at 15-16 (citing International Paper Co. v. Ouellette, 479 U. S. 481 (1987)). Accordingly, the case was remanded to the Second Circuit.

Further, the significance of Justice Sotomayor's recusal (which we called in an earlier post) manifested itself. The Court split 4-4 on the issue of standing (which compelled it to hear the case on the merits).  Id. at 6.  This jurisdictional dispute could surface in the future when Justice Sotomayor is included in the full panel. She presumably would be in favor of broader standing, which is likely to support more claims of aggrieved climate change plaintiffs.

Last, the Court offered some helpful commentary for future carbon-dioxide liability insurance coverage cases.  We have written often on how carbon dioxide should not fall within the meaning of pollution in a comprehensive general liability policy's pollution exclusion.  The Court appears to agree.  In discussing the scope of legislative activity needed to preempt federal common law, the Court stated:  "Congress could hardly preemptively prohibit every discharge of carbon dioxide unless covered by a permit. After all, we each emit carbon dioxide merely by breathing."

Immediate effects of the decision will be filings by the defendants in the Kivalina v. ExxonMobil case before the Ninth Circuit for dismissal.  Undoubtedly the justices deciding Steadfast Insurance Co. v. AES Corp. will read the decision; how it will affect them is hard to say.  It should have no effect on the multiple climate change lawsuits orchestrated by Our Children's Trust.  And over the long term, it likely will have the effect of forcing plaintiffs' to come up with new climate change liability theories.  That will not be necessary, of course, if (as has been suggested) Congress acts to remove carbon dioxide from EPA's jurisdiction.  In that case, we just might find AEP revived.

When we wrote last month concerning the implications of the upcoming decision by the Supreme Court in American Electric Power v. Connecticut, we were fully expecting to wait for the decision to test our powers of prognostication.  We were very wrong.  In a collection of lawsuits and regulatory filings across the nation, environmentalists have joined the climate change litigation fray in a very big way.  Here is what we wrote:  "[A dismissal of Connecticut] says nothing about state law nuisance claims, nor new theories that have not yet been tested, nor even thought up. We strongly believe that carbon dioxide liability suits will be with us for a while yet. Our reason: climate change is ongoing and those whose interests are harmed will look for succor. So theories of liability will be spun and suits will be brought. And such suits will require a defense."
 
Here is what has happened:  On Monday, May 4, in state courts across the nation lawyers representing children and young adults filed (and apparently will continue to file) suits seeking to compel State governments to recognize the application of the public trust doctrine to greenhouse gas emissions and to take action to abate those emissions.  The environmental group coordinating these actions is Our Children's Trust, based in Eugene, Oregon.  Its mission:  "Protecting Earth's Climate for Future Generations."  It is joined by Kids vs. Global Warming, whose "youth activists" are named plaintiffs in a number of the actions.  So far (according to the Associated Press), cases have been filed in California, Colorado, Minnesota, Montana, New Mexico, Oregon, and Washington, and also in federal court in California.  Our perception is that these jurisdictions are friendlier to environmental issues than other places.  In those other places regulatory petitions are being filed.
 
We won't go into the details of all of these filings but here is the gist of the claims brought in New Mexico: Sanders-Reed v. Martinez.  New Mexico is at risk from the effects of climate change.  From loss of snowpack to drought to extreme heat waves, as temperatures rise life in New Mexico is being degraded.  Enter the State.  Before the current administration of Governor Martinez, New Mexico was taking steps to limit the discharge of greenhouse gases within New Mexico.  State agencies studied the problem and made recommendations.  The governor issued executive orders.  The Environmental Improvement Board promulgated greenhouse gas regulations.  New Mexico joined the Western Climate Initiative.  Id. ¶¶ 61-73, 76.  Then Governor Martinez took office at the beginning of this year.  According to the complaint, she attempted to block the publication of the greenhouse gas rules and announced that she would keep New Mexico from joining a regional cap-and-trade program. She also removed all of the members of the Environmental Improvement Board because she believed the Board was anti-business.  The Small Business-Friendly Task Force, created by the Governor, has recommended that New Mexico shift to “observer” status in the Western Climate Initiative. Id. ¶¶ 74-76.
 
Plaintiffs, one teen-ager (a member of Kids vs. Global Warming) and one environmental group, sued under the public trust doctrine, which has not yet been applied to the atmosphere.  In a nutshell, plaintiffs assert that "Defendant State of New Mexico has failed in its fiduciary duty to recognize and protect our atmospheric public trust resource, thereby injuring these Plaintiffs."  Id. ¶ 19.  In more detail, plaintiffs desire a declaration by the New Mexico court that "(1) the public trust doctrine is operative in New Mexico and, pursuant to this doctrine, the State holds the atmosphere in trust for the public; (2) the State has an affirmative fiduciary duty to establish and enforce limitations on the levels of greenhouse gas emissions as necessary to protect and preserve the public trust in the atmosphere; (3) the State’s fiduciary duty to protect the atmospheric trust is defined by the best available science; and (4) the State has breached its fiduciary duty to protect the public trust in the atmosphere by failing to exercise its right of control over the atmosphere in a manner that promotes the public’s interest in the atmosphere and does not substantially impair this resource."  One will note that the claim is for declaratory relief, but not damages.  Plaintiffs' goal is to stabilize before 2100 the earth's atmosphere at 350 ppm carbon dioxide.  Id. ¶¶ 51-53.  Today it is at 390 ppm and increasing.  Id. ¶¶ 43, 45.  Failure to achieve such stabilization will lead to catastrophe.  Id. ¶ 46. (If you wish to read other complaints and petitions, visit Our Children's Trust's website.)
 
There are a host of issues before these lawsuits are successful.  First, is the atmosphere subject to the public trust doctrine?  Second, can private parties require the State to act to preserve that trust?  Third, what are the elements of standing for those parties?  Fourth, what is the "best available science"?  Fifth, could federal preemption apply?  And probably many more.  But plaintiffs have a lot of opportunities to address these questions and will undoubtedly learn from one case so as to improve the others.
 
In the meantime, the battle for control of the public dialog will continue.  Environmentalists have chosen a broad-based attack and will certainly make the most out of any successes they have.  Further, although we will not link the Tuscaloosa tornadoes and this year's record Mississippi flooding to climate change, some certainly will because more extreme weather is a central prediction of the climate change story.   Those kinds of extreme weather events may be all that is necessary to push climate change back onto the federal agenda.  

Perhaps the most interesting facet of this set of cases is how it juxtaposes with Connecticut.  In that case, States are suing private parties to compel them to abate carbon dioxide emissions.  Commentary on the Supreme Court argument suggests that the Court may have some sympathy to States who are trying to remedy a problem that the federal government is ignoring.  Now private parties are suing those same State governments asserting that they are not doing enough either.
 
And where does all this leave our prediction.  We are right about new theories, right about claims of ongoing injuries and right that more suits would be brought.  We are wrong that those suits would be suits for liability.  We are wrong today, anyway.

We were interviewed by Business Insurance last week after the Virginia Supreme Court heard argument in AES Corp. v. Steadfast Insurance Co. The topic du jour:  what would be the effect of the U.S. Supreme Court's decision in American Electric Power v Connecticut. Obviously, an insurance readership would very much like to know if carbon dioxide liability was something they needed to continue to worry about. Much of the blogosphere has concluded that the justices didn't give much credence to the public nuisance theories of the plaintiffs (we reserve judgment on that conclusion - there were some pretty tough questions posed to the appellants too). If that is so, then carbon dioxide liability is something like Y2K, right?

Unfortunately, we fear that is not the case. The concerns over Y2K reached their zenith at 1159 on December 31, 1999. By 1201 on January 1, 2000 most everyone had slapped each other on the back and moved on. Story over. Concerns over carbon dioxide liability are unlikely to have that sharp crest.  If a decision favorable to carbon dioxide emitters is issued by the Supreme Court, that will only mean that federal common law nuisance claims cannot move forward. It says nothing about state law nuisance claims, nor new theories that have not yet been tested, nor even thought up. We strongly believe that carbon dioxide liability suits will be with us for a while yet. Our reason:  climate change is ongoing and those whose interests are harmed will look for succor. So theories of liability will be spun and suits will be brought.  And such suits will require a defense.
 
All of which leads us back to AES v. Steadfast.  The Virginia Supreme Court will render a decision on one state's law on likely only one issue. Indeed, at oral argument, Steadfast's counsel conceded the result would be different in other jurisdictions. Thus, insureds concerned about carbon dioxide liability should be paying attention to choice of law rules, and to the range of issues where choice of law matters.

Let's look at just the two issues in dispute in AES, the application of the pollution exclusion and the meaning of occurrence. The Wisconsin Supreme Court has already ruled that exhaled carbon dioxide is not a "pollutant" and numerous jurisdictions have held that a so-called "absolute" pollution exclusion is not absolute.  Donaldson v. Urban Land Interests, Inc., 564 N.W.2d 728, 730 (Wis. 1997); Am. States Ins. Co. v. Koloms, 687 N.E.2d 72 (Ill. 1997) (carbon monoxide); W. Am. Ins. Co. v. Tufco Flooring E., Inc., 409 S.E.2d 692 (N.C. Ct. App. 1991) (floor sealant); Cont’l Cas. Co. v. Rapid-Am. Corp., 593 N.Y.S.2d 966 (1993) (asbestos); Keggi v. Northbrook Prop. & Cas. Ins. Co., 13 P.3d 785 (Ariz. Ct. App. 2000) (bacteria).   As for occurrence, in many jurisdictions there is no question that an occurrence is determined by looking at the intentionality of the injury from the subjective standpoint of the insured, rather than the reasonably foreseeable standard argued by the insurer in AES. Compare Ohio Cas. V. Henderson, 939 P.2d 1337 (Ariz. 1997); Am. Family Mut. Ins. Co. v. Pacchetti, 808 S.W.2d 369 (Mo. 1991) with Brief of Appellee, AES Corp. v. Steadfast Ins. Co., No. 100764 (Va. Sup. Ct. Oct 8, 2010).  Accordingly, it would be extremely shortsighted for insureds to assume every jurisdiction is like every other. 

Potential carbon dioxide liability defendants should take two steps going forward. They should ascertain what state's law will be applied on the liability contract they are purchasing today and how that law is likely to address the carbon dioxide liability coverage questions. And they should be asking the same questions for past occurrence-based policies. 

And of course, if the oracles and seers who have channeled the Supreme Court turn out to be wrong, the need for coverage and the answers to these questions will manifest themselves much sooner.

Brief of Appellee, AES Corp. v. Steadfast Ins. Co..pdf (182.69 kb)