AIG units must defend oil company against counties’ climate change suits

A federal judge ruled Thursday that two American International Group Inc. units must defend a Honolulu-based Sunoco LP unit against lawsuits brought by two Hawaii counties accusing it of misrepresenting the risk of climate change from the burning of fossil fuels.

U.S. District Judge Jill Otake of the District of Hawaii said in Aloha Petroleum Ltd. v. National Union Fire Insurance Co. of Pittsburgh, Pa., et al. that policies issued to the Sunoco LP unit in 1986 and 1987 did not have pollution exclusions.

Aloha sued AIG units National Union and American Home Assurance Co. in August 2022 seeking defense and indemnification for lawsuits brought by Honolulu and Maui counties that allege the oil company knew of the risks associated with burning fossil fuels but promoted them anyway.

The insurers moved to dismiss, arguing that the lawsuits did not involve an occurrence, or accident, and that greenhouse gases are considered a pollutant that would be subject to an exclusion.

Judge Otake certified two questions to the Hawaii Supreme Court, which said in October 2024 that Aloha’s alleged reckless conduct when promoting fossil fuels could constitute an occurrence and that greenhouse gases are a pollutant subject to the exclusion.

Aloha and the insurers then filed competing motions for partial summary judgment regarding the insurer’s defense obligations from two policies that did not have pollution exclusions.

Judge Otake said that based on the Hawaii Supreme Court’s decision, the counties’ lawsuits involve an occurrence and that the allegations of property damage are enough to establish the potential for coverage, which is all that is needed to trigger the duty to defend.

A spokesperson for AIG declined to comment. Representatives for Aloha did not respond to requests for comment.