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Robert D. Chesler, Dennis J. Artese, and Jamie O'Neill *
Abstract: Recent court decisions and ongoing cases have brought to the forefront the critical issue of the reach of pollution exclusions in insurance policies. Jurisdictions from South Dakota to Hawaii are redefining the scope of what constitutes a "pollutant," with significant developments that affect coverage in cases that range from contaminated agricultural products to carbon monoxide poisoning and greenhouse gas emissions. The thread that brings these cases together is the age-old question of what constitutes a "pollutant": Is the term limited to traditional environmental pollution, or should it be read more broadly to encompass other contaminants and non-environmental situations?
Case Law
Hawaii: Aloha Petroleum v. National Union
The first case of interest in this evolving area of law, which addresses pollution exclusions in insurance policies, is Aloha v. National Union. 1 At the center of the still unresolved dispute in Aloha lies a critical question: Can the repercussions of global warming, fueled by the emissions of greenhouse gases, fall within the scope of pollution exclusion clauses in insurance policies?
The case stems from allegations against Aloha Petroleum, a subsidiary of Sunoco LP, accused of contributing significantly to carbon dioxide emissions and other greenhouse gases, thereby exacerbating global warming. The plaintiffs, comprising cities and counties, have raised various tort claims against Aloha, asserting that the company bears direct responsibility for the damaging effects of global warming because of Aloha's alleged failure to disclose or warn about the dangers associated with the fossil fuels
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they sell. The complaints specifically allege that Aloha had known for decades that the unrestrained production and use of these fossil fuel products would lead to greenhouse gas pollution, ultimately warming the planet and altering the climate.
Aloha's insurance companies (collectively, AIG) have refused to defend or indemnify Aloha against the underlying claims. One of the central issues in their dispute is the applicability of the pollution exclusions present in Aloha's policies.
The United States District Court for the District of Hawaii, recognizing this significant issue of Hawaii law, certified the following question to the Hawaii Supreme Court: For an occurrence insurance policy excluding coverage of "pollution" damages, are greenhouse gases "pollutants," that is, "gaseous" "irritant[s] or contaminant[s], including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste"?
Aloha's policies, depending on the policy period, include two different versions of a "pollution exclusion": the "Qualified" Pollution Exclusion and the "Total" Pollution Exclusion.
The earliest AIG policies exclude coverage for property damage (1) "arising out of the discharge, dispersal, release or escape"; (2) "of smoke, vapors, soot fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants"; (3) "into or upon land, the atmosphere or any water course or body of water." Those policies also include a "give back" provision, which states that the "exclusion does not apply if [the] discharge, dispersal, release or escape is sudden and accidental."
The post-2004 AIG policies include the so-called Total Pollution Exclusion, which provides that the insurance does not cover "[b]odily injury or property damage which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time." Those policies define "pollutant" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed."
The parties agreed, however, that for the purposes of this dispute the variations in the policies are immaterial as they both require the discharge, dispersal, or release of a "pollutant" in essentially the same way.
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Aloha first argued in favor of coverage by drawing a distinction between combustion-produced greenhouse gases and "traditional environmental pollution." Their argument posited that greenhouse gases fall well outside the sphere of traditional environmental pollution, which the insurance policies were originally designed to exclude—meaning that the exclusion was not meant to encompass greenhouse gases.
This interpretation is supported by several arguments presented by both Aloha and the District Court. First, greenhouse gases, such as carbon dioxide, are a common part of our daily environment and do not pose immediate...
