Climate Change Lawsuit: Product Hazard Coverage Or Pollution Exclusion?

Aloha Petroleum, a subsidiary of oil and gas giant Sunoco, has sued an AIG unit, accusing the insurer of breaching insurance contracts by refusing to defend it in a pair of lawsuits filed by the Hawaiian government alleging that the gas chain contributed to climate change.

In a court document obtained by Reuters, Aloha accused AIG’s insurance carrier of shirking its duty to defend and indemnify the company in two actions that alleged its fossil fuel products caused climate change-related damages.

Aloha held liability insurance policies with Pittsburgh-based AIG unit National Union Fire Insurance Co, which denied coverage based on a pollution exclusion.

The gas chain said that it has incurred more than $880,000 in defense costs related to the climate change lawsuits. It also expects legal expenses to pile up as the litigation progresses.

In its complaint, Aloha said that the exclusion should not apply, arguing that the policy ‘specifically provides coverage for ‘product hazard,’ which includes bodily injury or property damage arising out of the named insured’s products.’