In Aloha Petroleum, Ltd. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 155 Haw. 108, 557 P.3d 837 (2024), Aloha Petroleum, Ltd. sought a defense from its liability insurers for separate lawsuits brought by Hawaiian municipalities. The municipalities alleged that, as of the 1960s, the fossil fuel industry knew “its products would cause catastrophic climate change.” The municipalities contend that “[r]ather than mitigate their emissions, defendants concealed their knowledge of climate change, promoted climate science denial, and increased their production of fossil fuels.” Defendants’ actions allegedly resulted in increased carbon emissions, which harmed and will continue to harm the municipalities.
The United States District Court for the District of Hawaii certified two questions to the Supreme Court of Hawaii, one of which was whether greenhouse gases were “pollutants” within the pollution exclusion in Aloha’s policies. The relevant policies were standard commercial general liability policies issued between 1984-1989 and 2004-2010. The polices contained “Pollution Exclusions” which varied slightly but precluded coverage for “property damage” which would not have occurred in whole or part but for the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time. The polices defined “Pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”
The Hawaii Supreme Court began its analysis by considering whether it would interpret the pollution exclusion’s language literally or limit its application to only “traditional environmental pollution.” The court held the “traditional environmental pollution” approach proper for four reasons: (1) the exclusion’s drafting history shows its purpose was “to eliminate insurer liability for classic environmental contamination”; (2) literal interpretation of the exclusion sweeps too broadly resulting in absurdities and arbitrary swathes through coverage; (3) “[a] substance is a ‘contaminant,’ and therefore a ‘pollutant,’ when it contaminates the environment”; and (4) “[a]n objectively reasonable policyholder expects the exclusion to cover classic environmental pollution.”
When applying the “traditional environmental pollution” approach, the court explained there are three elements: “(1) the release of a damaging substance, (2) into the environment, (3) that causes harm because of its presence in the environment.” The court held Aloha’s gasoline produces greenhouse gases, which accumulate in the atmosphere and trap heat. Therefore, greenhouse gases are “pollutants” because there was a (1) release of a damaging substance, (2) into the environment (the atmosphere), (3) that caused harm because of its presence in the environment (trapped heat). Thus, greenhouse gases produce “traditional environmental pollution,” meaning the resulting property damage falls within the pollution exclusion.
The court further supported its ruling that greenhouse gases are “pollutants” by finding: (1) greenhouse gases are “pollutants” when interpreting the pollution exclusion’s language literally; (2) the pollution exclusion’s language was not ambiguous; and (3) Aloha’s reasonable expectations for coverage are for product hazards that are not pollution.
This decision is notable because it appears to be the first state supreme court decision tackling whether greenhouse gas emissions fall within the scope of the general liability pollution exclusion. As climate-change lawsuits become more prevalent, we expect this issue to be litigated further in other jurisdictions.