I didn’t have much of a choice but to include the Hawaii Supreme Court’s decision in Aloha Petroleum Ltd. v. National Union, No. SCCQ-23-515 (Haw. Oct. 7, 2024) as one of the year’s ten most significant coverage decisions.  At issue, and one of first impression nationally to my knowledge, was coverage for a petroleum company for claims, brought by municipalities, that its operations caused climate change.  The Aloha State’s top court held that no coverage was owed as greenhouse gases were “pollutants” within the policies’ pollution exclusions.

On one hand, the decision checks a lot of top ten boxes.  However, is the decision really that significant?  It depends how abundant and successful suits against parties are for allegedly contributing to climate change. For various reasons, such suits are tall tasks.  However, if even they are winnable for the petroleum companies or other alleged contributors of greenhouse gases, they must still be defended.  And these aren’t exactly who had the green light cases.  So presumably they have potentially significant defense cost exposure for insurers. 

[Even if Aloha Petroleum, for practical reasons, is not a significant decision, I am going to add it to the syllabus for my insurance coverage class at Temple Law.  It’s a nice complement to the current pollution exclusion case reading and it demonstrates the need for liability policies, written ages-ago, to respond to much-later developed exposures.  I’m also harping on about that with the students.]

While Aloha Petroleum was closely watched because of the pollution exclusion question, the court also addressed, in many pages, whether any damages were caused by an “occurrence” (accident) in the first place.  The reason being that the municipalities alleged that Aloha acted recklessly -- as it knew of the risk of emitting greenhouse gases but did so anyway.

On the “occurrence” issue, the court held that an accident includes an insured’s reckless conduct.  This decision departed from the only other state supreme court to have addressed the question.  In 2012, the Supreme Court of Virginia held in AES Corp. v. Steadfast Ins. Co. that a climate change lawsuit did not allege an “occurrence.”  Given that the “occurrence” question generally arises as frequently as climate change cases are infrequent, this aspect of case will be its legacy for Hawaii coverage law.

On the issue of the pollution exclusion, the court undertook a typical analysis – addressing whether Hawaii law should interpret the pollution exclusion broadly, which is to say literally and applicable to all manner of hazardous substances or narrowly and only applicable to “traditional environmental pollution.”  Remarkable, it has taken this long for this issue to reach the Hawaii Supreme Court.

The court, for the usual reasons when deciding so – drafting history and overbreadth [the famous “Drano” hypothetical] – concluded that the pollution exclusion is limited to “traditional environmental pollution.”  From there, it held that, for numerous reasons, greenhouse gases are traditional environmental pollution.           

Aloha may have lost the pollution exclusion issue here, but the decision is a win for policyholders concerning the exclusion generally. As the court noted, its interpretation “restricts the exclusion’s otherwise potentially limitless application.” (quoting the Illinois Supreme Cour’s decision in American States Ins. Co. v. Koloms (1997)).

I could write much more about the court’s reasoning.  But, despite the uniqueness of the pollutant at issue in coverage litigation, the court simply went down the path of countless others before it.  So I kept this analysis brief.  Plus, I am writing this on December 28 and the Pop-Tarts Bowl is starting soon.  [Update: I’m editing this on January 1.  Man, what a Pop-Tarts Bowl that was.]