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Like many issues before it, global warming has begun to cross over from the public policy arena into litigation. In the last few years, a wide range of plaintiffs have brought actions against an even wider range of defendants. More suits are sure to follow as courts grow more receptive to these novel claims and global warming remains in the public consciousness.

As with any new category of lawsuits, global warming litigation raises the question of whether corporate liability insurance will cover the losses – defense costs, settlements, damages and so forth. A review of the potentially applicable policies – for example, general liability, directors and officers liability, errors and omissions liability, and first-party property – demonstrates that the answer is “yes.” Why should this one kind of litigation be barred from coverage when the general rule is that companies’ liabilities arising from normal business operations are covered?

Nevertheless, insurers have begun to argue that the so-called “pollution exclusion,” which is included in most of these types of insurance policies, precludes coverage for liability related to climate change. According to the insurers, the emissions that cause global warming are “pollutants,” and, under the pollution exclusion, losses from the release of such pollutants are not covered.

To evaluate this position, it is necessary to take a closer look at both the global-warming litigation to date and the pollution exclusion itself.


Global warming has thus far produced three categories of lawsuits. First, states, local governments and environmental groups have challenged the inactivity (or insufficient action) of federal regulatory agencies. In Massachusetts v. EPA (2007), for example, the Environmental Protection Agency declined to regulate greenhouse gas emissions from motor vehicles because it believed that it had no authority to do so under the Clean Air Act. In a 5-4 decision, the Supreme Court held that the act’s definition of “air pollutant” encompasses greenhouse gases, and that the EPA therefore does have the power to regulate their emissions.

Second, companies have sued state governments that have adopted greenhouse gas emissions standards more stringent than the federal baseline. In Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie (2007) and Central Valley Chrysler-Jeep Inc. v. Goldstone (2007), firms in the automobile industry challenged, respectively, Vermont’s and California’s emissions standards for new cars. The federal district courts in both cases reached the same conclusion: Those standards were not expressly or otherwise pre-empted by federal law, and there was no conflict between the NHTSA’s fuel economy standards and regulatory efforts by states or the EPA.

Finally, plaintiffs have sued corporations that emit or enable the emission of greenhouse gases. In the first such case to be decided, Connecticut v. American Electric Power Co. (2005), states, local governments and environmental groups sued major utilities on a public nuisance theory, claiming that the utilities’ emissions had contributed to global warming and harmed the plaintiffs.

The federal district court ruled in the utilities’ favor on the ground that the case presented a nonjusticiable political question. According to the court, the litigation necessitated the balancing of economic, environmental, foreign policy and national security interests – a task better suited to the elected branches.


Courts, therefore, have begun to deal with legal issues related to global warming. Although no case has yet addressed insurance coverage for climate-change liability, such disputes may be just over the horizon.

The initial disputes likely will ask a crucial question: Does the pollution exclusion bar coverage for liability related to greenhouse gas emissions and damages allegedly stemming from global warming?

Pollution exclusions appear in almost all insurance policies. The exclusion typically seeks to preclude coverage for liabilities “arising out of” the release or discharge of “pollutants,” which are defined as “irritants or contaminants.”

An obvious reason why global warming liabilities should be covered by insurance policies, then, is that carbon dioxide and other greenhouse gases are not generally considered to be irritants or contaminants under the terms of the policy. Carbon dioxide is a naturally occurring gas in the atmosphere and is exhaled by humans and other organisms.

At normal atmospheric concentrations – including those that are responsible for global warming – it is also entirely healthy to breathe. A concentration of 5,000 parts per million (more than 10 times the average atmospheric concentration) is considered safe for an eight-hour workday, and it is not until its concentration hits 30,000 parts per million that it becomes dangerous.

For analogous reasons, the Wisconsin Supreme Court held in Donaldson v. Urban Land Interests Inc. (1997) that exhaled carbon dioxide in an office building is not a pollutant. The court observed that the gas is “universally present and generally harmless” and “a necessary and natural part of life.”

Nor is carbon dioxide included as a “pollutant” in any federal list of hazardous substances. The EPA lists thousands of substances that are considered to be hazardous under four separate statutes. Carbon dioxide is notably absent.

Similarly, the Comprehensive Environmental Response, Compensation, and Liability Act (Superfund) explicitly states that the term “hazardous substance” does not include oil or natural gas products. It would be quite unusual if carbon dioxide – a byproduct of converting oil and natural gas into energy – were to be treated as a pollutant when fossil fuels are not.

Furthermore, the causal link between a plaintiff’s alleged harms from global warming and a policyholder’s emissions is so attenuated that it is next to impossible to say, as one must for the pollution exclusion to apply, that the harms “arose out of” the emissions.

In a typical case, the plaintiff will allege (1) damages; that (2) allegedly are attributable to events such as flooding, storms or drought; that (3) are alleged to be the result of global warming; that (4) is caused by the discharge, all around the globe, over a period of many years, of greenhouse gases; that (5) the insured party also emits or has emitted.

Merely laying out this causal sequence reveals its highly speculative nature. Linking particular weather events to global warming (step (3)), for example, is notoriously difficult. Similarly, because no particular insured party (step (5)) is responsible for more than a tiny fraction of global historical emissions, proving causation seems unlikely.

Finally, black-letter rules of insurance contract interpretation favor coverage. Policy ambiguity, for instance, is construed against the drafter – i.e., the insurer. If there is a reasonable (as opposed to unassailable) pro-coverage reading, the relevant liabilities will therefore be covered.

An insurance contract is also interpreted in light of the parties’ reasonable expectations. Where the policyholder reasonably expected its policy to cover liabilities arising from global warming, courts will be unlikely to find the pollution exclusion applicable.

Most significantly, an insurer’s duty to defend is much broader than its duty to indemnify. Accordingly, an insurer should be held liable for defense costs as long as there is any potential for coverage – and even if such coverage is ultimately found not to exist.


In response, insurers are likely to make three principal arguments. First, the Supreme Court explicitly held in Massachusetts v. EPA that greenhouse gases are “air pollutants” under the Clean Air Act.

Second, as mentioned earlier, when emitted in large quantities (as it has been since the start of the Industrial Revolution), carbon dioxide creates global warming. Insurers will argue that a reasonable case can be asserted for labeling carbon dioxide both an “irritant,” thanks to its potential health effects, and a “contaminant,” thanks to the atmospheric change it produces.

The Michigan Court of Appeals, for example, ruled in an unpublished decision that carbon dioxide that accumulated inside a building was a pollutant, and the Minnesota Court of Appeals concluded that the pollution exclusion applied to nitrogen dioxide (another greenhouse gas).

Finally, many decisions broadly have construed the phrase “arising out of” in the pollution and other policy exclusions. Insurers will assert that the majority view appears to be that the term merely requires a “but for” relationship between the damages claimed and the released pollutants. Proximate causation, in other words, is not necessary. Accordingly, insurers may contend that the requisite causal link between greenhouse gas emissions and harm to a plaintiff is indeed present.

All of these arguments, however, ignore the contract language, the court holdings and the policy drafting history showing that the pollution exclusion was intended to preclude coverage under certain limited circumstances only for “industrial pollution” and hazardous waste disposal.

Insurers bear the burden of establishing that their interpretation of an exclusion is the only reasonable one. They cannot satisfy this burden of proof with regard to climate change.

Consequently, pursuant to several types of corporate insurance coverage programs, coverage should be available to pay for a policyholder’s defense and indemnity, if necessary, in the litigation related to global warming.

This article originally appeared in Legal Times, a publication of ALM.

LORELIE S. MASTERS and MATTHEW L. JACOBS are partners in Jenner & Block’s insurance practice in Washington, D.C., where they represent policyholders.

NICHOLAS O. STEPHANOPOULOS is an associate in that office.

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