Aloha Petroleum Ltd. v. National Union Fire Insurance Co. of Pittsburgh

In a fossil fuel company’s lawsuit seeking to compel two insurers to defend and indemnify it in climate change lawsuits brought by the City and County of Honolulu and the County of Maui, the Hawai‘i Supreme Court ruled that greenhouse gases were “pollutants” under the insurance policies’ pollution exclusion clauses. The court concluded that “[t]he exclusion bars coverage for emitting (or misleading the public about emitting) GHGs.” The court also held that an “accident” would include an insured’s reckless conduct. The Hawai‘i Supreme Court made these rulings in response to the certification of questions by the federal district court for the District of Hawai‘i.

The federal district court for the District of Hawaii denied an insurer’s motion for entry of judgment on the court’s February 2025 ruling that the insurer had a duty to defendant plaintiff Aloha Petroleum, Ltd. (Aloha) in underlying climate change-related lawsuits brought by the City and County of Honolulu and the County of Maui. Aloha and the insurer conferred after that ruling but were unable to resolve “significant disputes regarding the nature and scope” of the duty to defend. In denying the request for entry of judgment, the court found that there were still matters to resolve regarding the duty to defend claims, including the insurer’s obligation for fees incurred by Aloha’s parent company and the reasonableness of hourly rates. The court also could not conclude that there was “no just reason for delay.”

The federal district court for the District of Hawaii ruled that under two policies that lacked pollution exclusions, an insurer had an obligation to defend a fossil fuel company in climate change-related lawsuits brought by the <a href="https://climatecasechart.com/case/city-county-of-honolulu-v-sunoco-lp/">City and County of Honolulu</a> and the <a href="https://climatecasechart.com/case/county-of-maui-v-sunoco-lp/">County of Maui</a>. First, the court found that the underlying lawsuits “possibly allege an occurrence,” or “accident,” that was covered under the policies based on the standard articulated by the Hawai‘i Supreme Court. Second, on the question of whether property damage occurred during the two policies’ terms, which ran from February 1, 1986 to February 1, 1988, the court was “skeptical” that the underlying complaints’ allegations of greenhouse gas emissions during that period equated to allegations of property damage but concluded that it was not necessary to reach that issue because the underlying complaints possibly alleged property damage during the policies’ terms. In particular, the court concluded that allegations “that sea level rise has been rising since the 1960s, causing flooding, and inundating low-lying property,” were “sufficient to raise the potential or possibility of coverage” under the policies, even if there were not allegations about “exactly when the flooding took place nor precisely how it damaged property.” The court also found that undated allegations of property damage were sufficient for the fossil fuel company to meet “its very light burden to prove the possibility of coverage” in order to establish the duty to defend. Third, the court found that the insurer could not plausibly argue that it was impossible that the underlying complaints’ requests for compensatory damages sought “damages because of property damage.”