AIG units need not defend against climate change suits

The Hawaii Supreme Court said Monday that units of American International Group Inc. are not obligated to defend a Honolulu-based Sunoco LP unit against two lawsuits accusing it of misrepresenting the risk of climate change from the burning of fossil fuels.

The court, in answering two certified questions from a federal judge in Hawaii, based its ruling on a finding that greenhouse gases are a pollutant subject to an exclusion in the policies issued by the AIG units, saying they “spoil our planet’s climate system, destabilizing it for present and future generations.” The case is Aloha Petroleum Ltd. v. National Union Fire Insurance Co. of Pittsburgh, Pa. et al.

The state high court also found that allegedly reckless conduct could be considered an occurrence triggering an insurer’s defense obligations.

Aloha sued National Union Fire Insurance and American Home Assurance Co. to require them to provide a defense against lawsuits filed by two Hawaii counties — Honolulu and Maui — that alleged oil companies knew as early as the 1960s that burning fossil fuels would cause climate change.

The counties said they sustained property damage from climate change and face higher costs when preparing for and responding to catastrophic weather events, court records show.

The AIG units countered that they were not required to provide a defense because Aloha acted intentionally when marketing fossil fuels and that pollution exclusions in their policies barred coverage.

AIG declined to comment. Representatives for Aloha did not respond to a request for comment.