Potential Steps Forward for Climate Change Liability

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This guest post comes from Nina Tandon, a recent graduate of Boston University School of Law and the Fletcher School who is currently a legal fellow in ERI’s office in Washington, D.C.


Legal liability for climate change impacts, long a goal of environmental activists, is inching its way onto the radar screen for important players in our world economy – insurance companies and, perhaps, even nation-states.

Who should pay in climate change lawsuits – the corporations or their insurance?

Earlier this month, the Virginia Supreme Court handed down a decision that freed insurance companies from the responsibility for paying their insured clients for climate change-related damage, particularly when the gas emissions are foreseen consequences of the insured’s intentional acts. In plain English, what this means is that companies that emit greenhouse gases in the regular course of their operations (like electric companies) won’t be able to collect from their insurance companies in the event that they are sued for damage caused by the gas emissions.

The case, AES Corp. v. Steadfast Ins. Co., considered whether the Steadfast Insurance Company is responsible for defending its client, AES, against lawsuits related to AES’s greenhouse gas emissions. In a separate and ongoing case, citizens of Kivalina, Alaska, have sued AES, an electric company, over the harmful environmental effects of AES’ emissions of carbon dioxide and other greenhouse gases. The court held that because the greenhouse gas emissions were a “natural and probable consequence” of AES’ intentional acts, the emissions did not qualify as an “accident” that would be covered under the terms of the insurance agreement between AES and Steadfast. In other words, AES has to defend and pay any damages itself.

Although the state supreme court’s decision isn’t binding on the courts of other states and does not affect federal law, precedent begets precedent in the U.S. legal system, and this case will be looked to for guidance on the issue. Insurance companies may breathe a collective sigh of relief at the ruling, but the door remains open for greenhouse gas emitters to be held liable for the environmental harm caused by their emissions.

Are nation-states responsible for greenhouse emissions in their territory?

Across the world, the Pacific island nation of Palau announced this week that it is seeking an advisory ruling from the United Nations’ International Court of Justice (ICJ) on whether nation-states have a legal responsibility to ensure that any activities on their territory that emit greenhouse gases do not harm other nation-states.

Palau is particularly impacted by climate change, as rising sea levels resulting from the emissions of greenhouse gases could devastatingly swamp the archipelago. The argument, according to President Toribiong, is a strong one, as both past ICJ decisions and the U.N. Convention on the Law of the Sea mandate States to ensure that their actions do not cause environmental harm to other States.

Should the ICJ issue the requested ruling in Palau’s favor, states or state actors could potentially be held liable for failing to sufficiently police their greenhouse gas emissions. However, ICJ rulings are non-binding, and while they are looked to as influential evidence of the existence of customary international law, the enforcement of the latter is a controversial topic amongst States and the international legal community (to say the least).

Both cases reflect that the movement to hold actors responsible for their greenhouse gas emissions could be gaining traction through the legal system. Being held legally accountable is generally a strong motivator for corporations and states alike.

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