McCarter & English on Conflicting Interpretations of “Occurrence”: Lessons From the First Climate Change Liability Insurance Case, AES Corporation v. Steadfast Insurance Company

McCarter & English on Conflicting Interpretations of “Occurrence”: Lessons From the First Climate Change Liability Insurance Case, AES Corporation v. Steadfast Insurance Company

J. Wylie Donald and David Kane and Lauren Ciancia   By J. Wylie Donald, David C. Kane, and Lauren E. Ciancia, McCarter & English, LLP

The recent decision in AES Corp. v. Steadfast Insurance Co., in which the Supreme Court of Virginia found no "occurrence" in an underlying suit that alleged property damage resulted from the policyholder's intentional emission of greenhouse gases, demonstrates the need for corporate policyholders to do their homework when a coverage dispute arises.  Courts nationwide have split on interpretation of "occurrence."  Some adhere to an "objective" approach, which generally considers the "natural and probable" consequences of a policyholder's actions, while others follow a "subjective" analysis, which assesses only the policyholder's intent.

As the AES opinion makes clear, Virginia follows the "objective" approach, thereby setting a more restrictive standard than most states for demonstrating an underlying lawsuit alleges an "occurrence."  After summarizing the AES opinion, this commentary provides an overview of the conflicting approaches to interpreting "occurrence" across the country.  Finally, the commentary demonstrates that, had the court hearing the dispute applied the law of one of the majority of jurisdictions applying a more policyholder-friendly standard, the policyholder may have secured coverage.  The lesson is straightforward:  corporate policyholders that conduct business in a number of states should consider how each interprets "occurrence" prior to or at the inception of coverage litigation.

Mr. Donald is a partner and Mr. Kane and Ms. Ciancia are associates in the Insurance Coverage Group of McCarter & English, LLP.

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Case Law Resources -

Lexis.com subscribers can access the Lexis enhanced version of AES Corp. v. Steadfast Ins. Co., 282 Va. 252 (Va. 2011) with core terms, case law links, and Shepard's.

Lexis.com subscribers can access the Lexis enhanced version of the trial court decision in Steadfast Ins. Co. v. AES Corp., 2010 Va. Cir. LEXIS 35 (Va. Cir. Ct. Feb. 5, 2010) with core terms, case law links, summary judgment motion briefs, and Shepard's.

Lexis.com subscribers can access the Lexis enhanced version of Native Village of Kivalina v. Exxon Mobil Corp., 663 F. Supp. 2d 863 (N.D. Cal. 2009) with summary, headnotes, and Shepard's.

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