{This is a periodic column on unique, nerdy and fascinating questions posed by my fastidious readers.  If you have a burning insurance or indemnity issue that you want me to address, drop me a line.  I will research and write about it in a future post.} 


Does a standard CGL policy provide coverage for climate change related occurrences?

Not yet.
A seminal case recently discussed this narrow issue for the first time.  I thought you might be interested in the result. 


In AES Corp. v. Steadfast Insurance Co., 725 S.E.2d 532 (Va. 2012), the Virginia Supreme Court was asked to determine whether an insurance company should defend and indemnify a policyholder for losses allegedly attributed to climate change.  AES Corporation sought coverage for claims made against it by an Inupiat village, Kivalina, located on an Alaskan barrier island.


The Inupiat alleged that AES, which is an energy company, caused global warming through emission of greenhouse gases.  The village alleged that global warming has eroded its coastline, damaged its fishing and other means of livelihood, and caused irreparable harm to the local population.

The Virginia court decided that the underlying Inupiat complaint did not allege an “occurrence” which was covered by the insurance policies.  AES intended to emit gases as part of its energy output.  Intentional acts are not covered by the Steadfast policy.

Under the CGL policies, Steadfast would not be liable because AES’s acts as alleged in the complaint were intentional and the consequences of those acts are alleged by Kivalina to be not merely foreseeable, but natural or probable. Where the harmful consequences of an act are alleged to have been not just possible, but the natural or probable consequences of an intentional act, choosing to perform the act deliberately, even if in ignorance of that fact, does not make the resulting injury an “accident” even when the complaint alleges that such action was negligent.


Id., 725 S.E.2d at 537-38 (emphasis added).

It is hard to say whether this decision will deter future coverage claims for these types of losses. But it is easy to conclude that the Virginia Supreme Court got it right. Under standard CGL policy terms, regardless of the outcome, intentional acts are clearly not covered.  The issue may be new, but the law is well-grounded and universal on this point.