Sunoco subsidiary sues insurer for refusing to cover climate-change litigation

By
3 minute read

A sign of a Sunoco gas station, damaged by Hurricane Matthew, is seen in Melbourne, Florida, U.S. October 7, 2016. REUTERS/Henry Romero

Register now for FREE unlimited access to Reuters.com
  • Question of coverage is largely untested in climate-change cases
  • AIG’s National Union said pollution exclusion nixed Aloha Petroleum's claim
  • Aloha says exclusion can’t take away explicit coverage for damage from “products”

(Reuters) - Sunoco subsidiary Aloha Petroleum is suing its former liability insurer in federal court in Hawaii, saying the company is shirking its duty to defend Aloha against the climate-change cases that local governments in Honolulu and Maui have filed against Big Oil companies.

According to the complaint filed Wednesday by attorneys at Cades Schutte, AIG’s National Union Fire Insurance Company of Pittsburgh has a duty to defend and indemnify Aloha under Commercial General Liability policies issued between 1978 and 1985, but denied any potential for 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, and Aloha expects that it will continue to incur significant additional defense costs, as the litigation progresses,” the complaint says.

Register now for FREE unlimited access to Reuters.com

Aloha’s attorneys and representatives of AIG did not immediately respond to requests for comment on Friday.

The case is of particular interest because there is a paucity of precedent on whether the pollution exclusion applies to greenhouse gases that are responsible for climate change.

In a presentation last year for the Defense Research Institute, Larry Mason of Goldberg Segalla noted 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 narrowly construed.

Also last year, Seth Lamden, now with Blank Rome, noted that state appellate courts in Illinois and a federal court in federal court in Wisconsin have found the exclusion ambiguous as applied to carbon dioxide specifically, or to legally permitted emissions from lawful products. Lamden said in an email Friday that he’s not aware of any newer decisions.

Aloha’s complaint offers a separate reason the exclusion should not apply: it alleges that the policy “specifically provides coverage for ‘products hazard,’ which includes bodily injury or property damage arising out of the named insured’s products.”

“Notwithstanding these express contractual obligations, National Union refuses to provide defense or indemnity coverage…with respect to the climate change lawsuits,” the complaint said.

In the underlying lawsuits, the local governments allege that Sunoco, Shell, ExxonMobil and other big oil companies knew about climate-related impacts from burning fossil fuels but deliberately hid them from the public.

Similar suits are pending by states and local governments across the country, including actions by the state of Rhode Island, New York City, Baltimore and cities and counties in California and Colorado.

The case is Aloha Petroleum Ltd. v. National Union Fire Insurance Co. of Pittsburgh PA, U.S. District Court for the District of Hawaii, No. 22-0372.

For Aloha Petroleum: Michael Heihre and Michi Momose of Cades Schutte

For National Union: No attorney information available

Register now for FREE unlimited access to Reuters.com

Our Standards: The Thomson Reuters Trust Principles.