Regular readers of our blog will remember a previous post on a public nuisance lawsuit brought by the Alaskan coastal town of Kivalina against 24 energy and utility firms.

Now a state appeals court has decided what is being described as the first climate change liability insurance coverage case – a case that arose out of the underlying public nuisance lawsuit – in favor of an insurer.

Late last week the Virginia Supreme Court upheld a lower court ruling that Steadfast Insurance has no duty to defend and indemnify the energy company AES Corp.

Basically the decision hinged on the definition of occurrence in the commercial general liability (CGL) insurance policies that AES purchased from Steadfast.

In the opinion, Justice S. Bernard Goodwyn noted that under the CGL policies in question, “occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful condition.”

Justice Goodwyn wrote:

The relevant policies only require Steadfast to defend AES against claims for damages for bodily injury or property damage caused by an occurrence or accident.”

However, the Kivalina complaint had alleged that AES intentionally emitted carbon dioxide and other greenhouse gases into the atmosphere.

Justice Goodwyn further noted:

Kivalina alleges its damages were the natural and probable consequence of AES’s intentional actions. Therefore, Kivalina does not allege that its property damage was the result of a fortuitous event or accident, and such loss is not covered under the relevant CGL policies.”

According to an article in the New York Times by Lawrence Hurley of Greenwire, legal experts caution that this initial opinion in favor of insurers is just one decision that applies to only one state and one insurance policy.

A post at the ClimateLawyers blog states:

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.”

Check out the I.I.I. backgrounder on Climate Change Insurance Issues.