Supreme Court of Hawaii Rules Pollution Exclusion Bars Coverage in Aloha Petroleum Climate Change Lawsuit

The Supreme Court of Hawaii has ruled that insurance company AIG has no duty to defend Aloha Petroleum in climate change lawsuits, where it was cited because pollution exclusions in the policies at issue barred coverage. Attorneys from law firm Duane Morris explain the October 7 decision in Aloha Petroleum, LTD. v. National Union Fire Insurance Company (National Union is a subsidiary of AIG).

Aloha, along with several other major fossil fuel companies, had been sued by Hawaiian city and county governmental entities for its role in emitting greenhouse gases that contribute to global warming. Among the allegations was that the American Petroleum Institute had advised Aloha that its products were causing climate change.

The plaintiffs said that industry trade group had noted as early as the 1960s that fossil fuels would raise the earth’s temperature and bring catastrophic effects by the mid-21st century. 

The case was filed in the US District Court for the District of Hawaii. Still, the federal court asked the Hawaii Supreme Court to resolve the question of whether or not pollution exclusions in the policies at issue were applicable in this case. That court determined that CHGs are pollutants within the meaning of the pollution exclusion, and on that basis, ruled the carrier had no duty to defend.

The issue remains unresolved for Aloha; however, the company has two other policies in its insurance portfolio that do not include pollution exclusions. The Hawaiian high court sent the case back to the federal district court to address coverage issues concerning those policies.

The takeaway, according to the writers, is that Hawaii’s highest court has concluded that fossil fuels “are inherently pollutants when used in their intended manner, and held that the pollution exclusion bars coverage for resulting climate change damage whether or not an insured intended that use of its products would harm the environment.”