Defending Climate Change Liability

 
 

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For almost a decade now, plaintiffs have tried to sue various industries for damages resulting from greenhouse gas emissions and climate change. In staving off such claims, defendants have employed two formidable primary defenses rooted in the doctrines of standing and political question. Through use of these and other defenses, defendants have been able to prevail time and again in climate change liability-related litigation.

Flowing from Article III of the U.S. Constitution, the doctrine of standing limits the jurisdiction of federal courts to cases that, by necessity, must include: 1) an injury in fact to the plaintiff, 2) that was caused by the defendant, and 3) that is capable of being redressed by the court.

If any of the conditions are not present, the plaintiff does not have standing to sue the defendant. The doctrine of standing thus focuses on whether there is a proper plaintiff before the court.

The focus of the political question doctrine is different; it addresses whether a plaintiff presents a claim that can be adjudicated by the court without interfering with the business of any other branch or department of the U.S. government.

Setting the stage for a defense rooted in the political question doctrine in climate change-related litigation was the 2007 U.S. Supreme Court decision in Massachusetts v. EPA. In that case, the Supreme Court ruled that the Environmental Protection Agency (EPA) is authorized to regulate greenhouse gas emissions through the Clean Air Act. Consequently, courts have since used the political question doctrine to bar plaintiff’s liability claims for damages allegedly resulting from climate change. For example, in 2011, the Supreme Court held in American Electric Power v. Connecticut that corporations cannot be sued for damages allegedly resulting from greenhouse gas emissions because, among other reasons, the Clean Air Act delegates the management of carbon dioxide and other greenhouse gas emissions to the EPA.

Among the more noteworthy of the climate change litigation cases is Comer v. Murphy Oil. Brought by plaintiffs in the aftermath of Hurricane Katrina, Mississippi Gulf residents sued numerous energy companies alleging that their emissions of greenhouse gases exacerbated the severity of the hurricane.

The district court dismissed the case, finding that the plaintiffs had no standing to bring the claims, which ranged from public and private nuisance to trespass and negligence to fraudulent misrepresentation and conspiracy. The plaintiffs tried to re-file the case, but it was dismissed by the U.S. Court of Appeals for the Fifth Circuit in May. The Supreme Court is currently considering a petition to review the case, but it is widely believed that there is little likelihood of the petition being granted.

Part of this belief is rooted in the Supreme Court’s treatment of a another climate change litigation case. In Native Village of Kivalina v. ExxonMobil Corp., the Alaskan shore village of Kivalina sued a group of energy companies operating in the region, alleging that their greenhouse gas emissions were causing polar ice to melt, sea levels to rise and the shoreline land of the village to erode at a rapid pace.

Similar to the Comer decision in 2012, a district court held that the plaintiffs lacked standing because they could not demonstrate that any of their alleged injuries could be traced back to the defendants’ actions. The U.S. Court of Appeals for the Ninth Circuit agreed, and also addressed the political question doctrine defense, ruling that, based on the Supreme Court precedent set in American Electric Power v. Connecticut, “We need not engage in complex issue and fact-specific analysis in this case, because we have direct Supreme Court guidance that has already determined that Congress has directly addressed the issue of domestic greenhouse gas emissions from stationary sources and has therefore displaced federal common law.”

By all accounts, then, it seems the defendants in climate change litigation will continue to prevail in court. The bad news for defendants, however, is that climate change-related litigation still exists, and it is expensive to defend. Once named in climate change-related litigation, a defendant often turns to its commercial general liability insurer for defense and indemnification. The trouble is that the allegations made in climate change-related litigation do not always trigger an insurer’s defense and indemnification duties.

In fact, when AES Corporation, one of the companies sued in the Kivalina case, sued its own liability insurer for defense and indemnification, the courts ruled in favor of the insurer, finding that there was no allegation of an “occurrence” as defined by the insurance policy at issue because the plaintiffs in Kivalina alleged its “damages were the natural and probable consequences of AES’s international actions,” rather than a “fortuitous event or accident,” which would have triggered coverage.

Ultimately, the Virginia Supreme Court upheld the lower court’s ruling in favor of the insurer. It is worth noting that, in so doing, the Virginia Supreme Court never reached an additional argument by the insurer—whether greenhouse gases such as carbon dioxide qualify as a pollutant under the pollution exclusions that are prevalent in liability insurance policies. If so, this would have spelled even more bad news for defendants seeking coverage.

So although defendants have strong defenses working in their favor in greenhouse gas and climate change-related cases, insurers currently seem to have the upper hand in coverage disputes, with arguments in their arsenal relating to the definition of occurrence and the possible implication of the pollution exclusion. Insureds will certainly counter with arguments that nuisance-related allegations by plaintiffs in typical climate change-related litigation should be covered under the personal injury portion of the liability insurance policy, which may be unrestricted by the pollution exclusion. But at best, that still means the defendant will be fighting on two fronts to ultimately get out of the lawsuit.

 

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About the Author

Warren A. Koshofer is a partner in the law firm of Michelman & Robinson, LLP and a member of the firm’s commercial and business litigation department.

 
 
 

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