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Case Note:
State of Connecticut v. Amer. Electric Power Co., 582 F.3d 309 (2d Cir. 2009)
Green Light for Global Warming Suits Against Power Plants Could Have a Big Impact

by ~ Seth V. Jackson (Web Site)

State of Connecticut v. Amer. Electric Power Co., 582 F.3d 309 (2d Cir. 2009)

Shoring up the legal foundation for a recent spate of global warming lawsuits, a September 2009 decision by the U.S. Court of Appeals for the Second Circuit ruled for the first time that public nuisance claims arising from global warming could be brought against power plants. Since this decision, leading industry commentators have speculated in blogs and articles that these global warming cases may ultimately have a significant effect on the insurance and reinsurance industry. Although the insurance impact of this trend remains speculative, a better understanding of the Second Circuit decision may assist insurers and reinsurers in understanding increasingly likely future developments.

“Causal link between heightened greenhouse gas concentration and global warming

In Connecticut v. American Electric Power, eight states (including California, New York and Connecticut), the City of New York and several private land trusts brought two related lawsuits in federal court in New York against multiple power plants. Asserting that the defendant power companies are “substantial contributors to elevated levels of carbon dioxide and global warming, the States complaint alleges a causal link between heightened greenhouse gas concentrations and global warming and claims further that a proportional relationship exists between carbon dioxide emissions and the increased temperature in the Earth’s climate.

The complaints do not seek money damages, but instead request injunctive relief to “abate[] . . . defendants ongoing contributions to a public nuisance. In particular, the plaintiffs allege that that the defendants emissions may cause a variety of future environmental injuries such as smog, significant beach erosion, increased wildfires, and more droughts and floods. The plaintiffs also claim that the defendants activities will cause extensive future economic harm because of their effect on property, ecology, and public health.

States Complaint Initially Dismissed as “Legislative [in] Nature

The power companies moved to dismiss both lawsuits arguing, in part, that there is no recognized federal common law cause of action to abate greenhouse gas emissions that allegedly contribute to global warming. The district court agreed.

Like most earlier rulings in this area of the law, the district court dismissed the complaints on the grounds that these are not “simple nuisance claim[s] of the kind courts have adjudicated in the past. More specifically, the district court labeled the issues as “transcendently legislative [in] nature. The court underscored the inaction of Congress in the climate change arena as a reason for dismissing the claim.

Federal Common Law Nuisance Claim

The Second Circuit reversed, permitting the lawsuits to move forward.

The Second Circuit’s landmark decision explores the evolution of public nuisance law in the United States, from the English law applied by the American Colonies to the earliest United States Supreme Court case in 1907. As the Second Circuit explains, the prevailing common law public nuisance standard was not established until the mid-1970s when the U.S. Supreme Court adopted the Restatement (Second) of Torts, 821B, definition of a public nuisance as “an unreasonable interference with a right common to the general public.

Employing the Restatement definition, the Second Circuit found that the plaintiffs allegations against the power plants successfully stated a claim for nuisance. Specifically, the following allegation was held to meet both the “unreasonable interference and “a right common to the general public prongs of the test:

    [Defendants emissions] constitute a substantial and unreasonable interference with public rights in the plaintiffs jurisdictions, including, inter alia, the right to public comfort and safety, the right to protection of vital natural resources and public property, and the right to use, enjoy and preserve the aesthetic and ecological values of the natural world.

The Second Circuit also considered and rejected a slew of arguments put forward by the defendants. Collectively, these arguments may now be viewed as easing the path, and even creating a road map for future “global warming plaintiffs. More specifically, the Second Circuit determined:

  • that there is no requirement that an alleged public nuisance be “simple, in the sense that it is easily perceived by the senses, like a foul odor;
  • that there is no requirement that the plaintiffs be able to trace the harm directly to a specific out-of-state source (the defendants argued that emissions were not traceable because they mix with other greenhouse gases in the atmosphere);
  • that there is no requirement that the nuisance must be “poisonous or “noxious (as defendants argued, carbon dioxide is neither);
  • that there is no requirement that the alleged harm be present or imminent (defendants argued that all harm was future injury);
  • and that a series of federal statutes which “touch on greenhouse gases—including the Clean Air Act—do not “displace the federal common law of public nuisance.

Finally, the Second Circuit considered the defendants arguments that the private land trusts lacked standing—as non-public (non-governmental) entities—to bring suit to enjoin an alleged public nuisance. Turning again to the Restatement (821 C), the Second Circuit resolved this question by asking “whether the Trusts would ‘have the right to recover damages’” and whether the private trusts alleged that they had “suffered a harm different from that suffered by other members of the public.

In a ruling which paves the way for other private entities to bring climate-based public nuisance claims, the Second Circuit found that because the Trusts have “legally recognized missions to preserve ecologically sensitive land areas and because they are large land owners who hold their land open for public use and enjoyment, they meet the “special injury test for private plaintiffs to bring public nuisance claims.

Possible Impact on Insurance and Reinsurance

Like target defendants in the emerging-issue claims of prior decades (i.e., Superfund, lead paint, asbestos), utilities and other defendants facing global warming lawsuits most likely will attempt shift the burden of these claims to their insurers. The Second Circuit’s decision touches on issues that are likely to be litigated in the insurance context. For example:

  • Given the “legislative nature of these claims (as described by the district court, but rejected by the Second Circuit) and the request for injunctive relief, are they “suits for “damages, as required by typical general liability insurance policies?
  • Are enforcement-type lawsuits by sovereigns third-party claims?
  • Do these actions allege “property damage or “bodily injury, and if so, when did it occur?
  • Is the risk a “known loss so as to be uninsurable?
  • Do total pollution exclusions apply to preclude coverage?
  • Is global warming an “occurrence?

In the context of the Second Circuit lawsuit, many of these issues seem esoteric. For example, to the extent that “property damage or “bodily injury are alleged (if at all), they appear to be alleged as future, hypothetical consequences of present conduct.

However, by allowing private parties to state a claim for public nuisance, the Second Circuit opinion foreshadows lawsuits to come. Prior decisions had uniformly dismissed global warming actions. See e.g., State of Connecticut v. Amer. Electric Power Co., 406 F. Supp. 2d 265 (S.D.N.Y. 2005); People of the State of California v. General Motors Corp. et al., 2007 U.S. Dist Lexis 68547 (N.D. Cal. Sept. 17, 2009); Comer v. Nationwide Mut. Ins. Co., 2006 WL 106645 (S.D. Miss. Feb. 23, 2006).

This more-skeptical trend continues in some courts, see Native Village of Kivalina v. Exxon Mobil Corp., 663 F. Supp. 2d 863 (N.D. Cal. 2009) (dismissing public nuisance global warming claims by an Alaskan village), but the Second Circuit opinion hints at a possible sea change.

Indeed, hard on the heels of this decision, a three-judge panel of the usually more conservative Fifth Circuit followed the Second Circuit’s lead, reversing a Mississippi federal court ruling that had dismissed a putative class action against petro-chemical companies. Comer v. Murphy Oil Co., 585 F.3d 855 (5th Cir. 2009). In the Mississippi action, the plaintiffs are private parties, and they allege that the defendants activities increased global warming, which had, in turn, increased the ferocity of Hurricane Katrina.

Demonstrating the developing nature of this body of law, the Comer decision is now pending rehearing before the entire court. 598 F.3d 208 (5th Cir. Feb. 26, 2010), and in the first global warming declaratory judgment action brought by an insurer, the Virginia Supreme Court is now expected to hear an appeal from a ruling granting an insurer’s summary judgment motion on the grounds that the Native Village of Kivalina lawsuit, described above, does not involve an “occurrence. Steadfast Ins. Co. v. AES Corp., 2010 Va. Cir. LEXIS 35 (Va. Cir. Ct. Feb. 5, 2010). Plainly, these types of cases are in their infancy. If the underlying lawsuits are permitted to proceed—following the Second Circuit decision—defendants will almost certainly argue that they have insurance for these actions. Although traditional coverage requirements and exclusions suggest that there should not be coverage for such claims, this will not prevent coverage litigation. Indeed, in this context in particular, it is fair to conclude that the Second Circuit decision is the very tip of the iceberg.Our aim is to supply cheap burberry bags,replica iwc watches,replica cartier watches and replica breitling at very affordable prices.


Seth Jackson may be reached at sjackson@zelle.com.

 2010 Zelle Hofmann Voelbel & Mason LLP. All Rights Reserved.

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