By Christina M. Carroll and Christopher Baker (May 14, 2012)

On a petition for rehearing, the Supreme Court of Virginia once again held that an insurer has no duty to defend a utility company against a lawsuit alleging property damage resulting from greenhouse gases (GHGs) emitted in the regular course of business. In AES Corporation v. Steadfast Insurance Company, the court arrived at the same conclusion it did last fall, holding that the underlying climate change liability claims did not constitute an “occurrence” under AES's commercial general liability (CGL) policy. The court concluded that there can be no “occurrence” giving rise to coverage where the underlying complaint alleges that AES intentionally emitted GHGs and the “natural and probable consequence of such emissions is global warming and damages such as Kivalina suffered.” Given the court had granted rehearing and the composition of the court had changed, some had predicted a drastically different outcome. But only the concurrence, which questioned whether there can ever be CGL coverage for negligence in Virginia, changed significantly on rehearing. Because the court again decided the case on the occurrence issue, the court did not reach the issue of whether the pollution exclusion might apply in this context.