Sunoco subsidiary Aloha Petroleum is suing its former liability insurer in federal court in Hawaii, alleging that the company is failing to defend Aloha in climate-change lawsuits filed against Big Oil companies by local governments in Honolulu and Maui.
According to the complaint filed Wednesday by Cades Schutte attorneys, AIG’s National Union Fire Insurance Company of Pittsburgh owed Aloha a duty to defend and indemnify the company under Commercial General Liability policies issued between 1978 and 1985, but denied any potential coverage based on the pollution exclusion.
“To date, Aloha has incurred more than $880,000 in defense costs in connection with the Climate Change lawsuits,” the complaint states. “Aloha expects to incur significant additional defense costs as the litigation progresses.”
On Friday, Aloha’s attorneys and AIG representatives did not immediately respond to requests for comment.
The case is especially interesting because there is little precedent on whether the pollution exclusion applies to greenhouse gases that cause climate change.
Larry Mason of Goldberg Segalla noted in a presentation last year for the Defense Research Institute that the Virginia Supreme Court found that the exclusion applied in a 2012 climate-change case, but its decision has been “often criticized” and should be interpreted narrowly.
Last year, Seth Lamden, now with Blank Rome, noted that state appellate courts in Illinois and a federal court in Wisconsin found the exclusion ambiguous when applied to carbon dioxide specifically, or legally permitted emissions from lawful products. In an email Friday, Lamden stated that he is not aware of any newer decisions.
The exclusion should not apply, according to Aloha’s complaint, because the policy “specifically provides coverage for ‘products hazard,’ which includes bodily injury or property damage arising out of the named insured’s products.”
“Despite these express contractual obligations, National Union refuses to provide defense or indemnity coverage…with respect to the climate change lawsuits,” according to the complaint.
The underlying lawsuits allege that Sunoco, Shell, ExxonMobil, and other major oil companies were aware of the climate-related effects of burning fossil fuels but purposefully concealed them from the public.
Across the country, similar lawsuits are pending, including actions by the states of Rhode Island, New York City, Baltimore, and cities and counties in California and Colorado.