Aloha Petroleum, LTD. v. National Union Fire Insurance Company of Pittsburgh, PA. Concurring Opinion by Ginoza, J [ada].

• Court: Hawaii Supreme Court
• Decided: October 7, 2024
• Docket: SCCQ-23-0000515
• Status: Published

Opinion

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Electronically Filed Supreme Court SCCQ-XX-XXXXXXX 07-OCT-2024 08:56 AM Dkt. 159 OP

IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

---o0o---

ALOHA PETROLEUM, LTD., Plaintiff-Appellant,

vs.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, and AMERICAN HOME ASSURANCE COMPANY, Defendants-Appellees.

SCCQ-XX-XXXXXXX

CERTIFIED QUESTIONS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAIʻI (CASE NO. 22-00372 JAO-WRP)

OCTOBER 7, 2024

RECKTENWALD, C.J., McKENNA, EDDINS, AND DEVENS, JJ.; WITH GINOZA, J., CONCURRING SEPARATELY

OPINION OF THE COURT BY EDDINS, J.

I. INTRODUCTION

The City and County of Honolulu and the County of Maui sued

several fossil fuel companies, including Aloha Petroleum, Ltd.,

for climate change-related harms. Aloha demands a defense in *** FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER ***

these suits from two insurance companies, National Union Fire

Insurance Company of Pittsburgh, PA and American Home Assurance

Company, both subsidiaries of American Insurance Group (AIG).

We refer to the defendants collectively as AIG.

The AIG subsidiaries issued several standard commercial

general liability (CGL) insurance policies to Aloha’s parent

company. This case is about whether those policies obligate AIG

to defend Aloha in the counties’ lawsuits.

We answer two certified questions from the United States

District Court for the District of Hawaiʻi. The first asks

whether an “accident” includes an insured’s reckless conduct.

The second asks whether greenhouse gases (GHGs) are “pollutants”

as defined in the policies’ pollution exclusions.

We answer the first question Yes, in Aloha’s favor. An

“accident” includes reckless conduct.

AIG’s policies cover an “occurrence.” The policies define

an “occurrence” as an “accident.” “Accident” is undefined. The

counties’ lawsuits allege Aloha acted recklessly – it knew of

climate risk, but emitted – and misled the public about the

dangers of emitting - greenhouse gases anyway. We hold an

“accident” includes reckless conduct for three reasons.

First, this outcome fits our precedents. This court’s

decision in Tri-S held that recklessness may be an “occurrence.”

Tri-S Corp. v. Western World Ins. Co., 110 Hawaiʻi 473, 494, 135

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P.3d 82, 103 (2006). In contrast, this court held in Caraang

that an “occurrence” requires an injury that is not “the

expected or reasonably foreseeable result of the insured’s own

intentional acts or omissions.” AIG Haw. Ins. Co., Inc. v. Est.

of Caraang, 74 Haw. 620, 636, 851 P.2d 321, 329 (1993). When an

insured acts recklessly, it knows the risk of a foreseeable

injury. A reckless insured acts “accidentally” under Tri-S, but

not under Caraang, it may seem.

We clarify what Caraang meant by “reasonably foreseeable.”

In that case’s context, Caraang referred to the reasonably

foreseeable results of an insured’s intentionally harmful

conduct. Caraang used “reasonably foreseeable” as another way

of invoking the intentional conduct exception to coverage.

Read this way, our cases are not in conflict. We follow

Tri-S’ definition of intentional harm and expected injury. We

hold that when an insured perceives a risk of harm, its conduct

is an “accident” unless it intended to cause harm or expected

harm with practical certainty. See Tri-S, 110 Hawaiʻi at 494

n.8, 135 P.3d at 103 n.8.

Second, the plain meaning of “accident” supports the idea

that an “accident” includes reckless conduct.

Third, interpreting an “accident” to include reckless

conduct honors the principle of fortuity.

Thus, we answer the first question Yes.

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We answer the second question Yes, in AIG’s favor. GHGs

are “pollutants” under the insurance policies’ pollution

exclusion clause. The exclusion bars coverage for emitting (or

misleading the public about emitting) GHGs.

Five reasons support our Yes answer. First, climate-

heating gases are an example of the “traditional environmental

pollution” that the pollution exclusion was designed to exclude.

Second, following the plain-language reading adopted by some

courts, GHGs fit the exclusion’s definition of “pollutant.”

Third, this court’s “legal uncertainty” rule does not prompt a

duty to defend here, because uncertainty about the exclusion

does not affect our outcome – GHGs are “pollutants” under any

reasonable interpretation. Fourth, because there are not two

plausible interpretations here, the exclusion is not ambiguous.

Last, Aloha’s reasonable expectation of coverage does not

stretch to encompass traditional pollution claims.

II. BACKGROUND

We summarize the underlying deceptive marketing suits, the

specific language of the insurance policies, and the parties’

arguments.

A. The Underlying Lawsuits

Aloha demands a defense in two lawsuits: City and County of

Honolulu v. Sunoco LP, and County of Maui v. Sunoco LP. Besides

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Aloha, the suits name many major oil companies as defendants,

including Exxon, Shell, Chevron, BP, and ConocoPhillips.

The suits allege that the fossil fuel industry knew

beginning in the 1960s that its products would cause

catastrophic climate change. Rather than mitigate their

emissions, defendants concealed their knowledge of climate

change, promoted climate science denial, and increased their

production of fossil fuels. Defendants’ actions, the complaint

alleged, increased carbon emissions, which have caused and will

cause significant damage to the counties.

What did the industry know? In 1965, President Johnson’s

Science Advisory Committee released a report documenting the

basic science of climate change. In a message to Congress,

President Johnson warned that “[t]his generation has altered the

composition of the atmosphere on a global scale through . . . a

steady increase in carbon dioxide from the burning of fossil

fuels.” In the following years, the American Petroleum

Institute (API), an oil industry group, commissioned additional

studies confirming the science of climate change. API

distributed these studies to its member companies. The studies

predicted that climate change would noticeably increase

temperatures around 2000 and cause catastrophic effects by the

mid-21st century.

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Privately, some defendants acted on these reports by

climate-adapting their operations, like raising offshore oil

platforms. But publicly, fossil fuel companies and their

associations promoted denial campaigns to cast doubt on climate

science.

What did Aloha know? The complaints do not allege that

Aloha had specific knowledge about climate change. Rather, they

allege that Aloha’s former parent, Phillips 66, and current

parent, Sunoco, received or should have received information

from API, other industry groups, and publicly available

scientific data. Thus, Aloha was allegedly on notice that its

products cause catastrophic climate change.

The complaints allege that “[d]efendants had actual

knowledge that their products were defective and dangerous,” and

“acted with conscious disregard for the probable dangerous

consequences of their conduct’s and products’ foreseeable impact

upon the rights of others.” Therefore, the District Court

concluded in its order to this court that the counties allege

reckless conduct.

Both lawsuits assert five causes of action. They allege

trespass (primarily entry of ocean water onto county property)

and public and private nuisance (unreasonable sale of fossil

fuels interfering with counties’ and community’s property

rights). They also allege negligent and strict liability

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failure to warn. Defendants had a duty to warn the public about

the dangers of their products, breached that duty by

affirmatively promoting fossil fuels and misrepresenting climate

change, and thus damaged the counties.

The complaints catalogue the counties’ injuries: increased

planning costs, erosion and beach loss, flooding, decreased

fresh water, damage to water infrastructure, harm to endemic

species, increased risk of extreme heat and storms, and damage

to Native Hawaiian cultural resources. The counties requested

an unspecified amount of compensatory and punitive damages,

equitable relief, disgorgement of profits, attorney fees, and

costs.

B. The Insurance Policies

Aloha alleges that AIG’s subsidiaries issued Aloha’s parent

company a series of annual liability insurance policies from

1978-1981, 1984-1989, and 2004-2010. AIG can’t find copies of

the 1978-1981 policies, so they are outside the scope of this

case.

The language in these policies evolved over the years as

the insurance industry’s standard form changed. The 1984-1987

policies defined an “occurrence” as “an accident, including

continuous or repeated exposure to conditions, which results in

bodily injury or property damage neither expected nor intended

from the standpoint of the insured.” From 1988 on, the policies

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define an “occurrence” as “an accident, including continuous or

repeated exposure to substantially the same general harmful

conditions.”

The policies’ pollution exclusions are more varied. In

their federal court briefing, the parties agreed these

variations are immaterial to this case. For our purposes, we

quote the “total” pollution exclusion from the 2004-2010

policies:

This insurance does not apply to: f. Pollution (1) “Bodily injury” or “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. . . . . (2) Any loss, cost or expense arising out of any: (a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of “pollutants”; or (b) Claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of, “pollutants.” . . . . “Pollutants” [mean] “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.”

C. U.S. District Court Proceedings

Aloha sued the AIG entities for breaching their duties to

defend, indemnify, and act in good faith. Aloha seeks a

declaratory judgment that AIG must defend and indemnify.

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AIG denied Aloha’s allegations. AIG argued that Aloha’s

conduct was intentional, therefore the counties’ lawsuits do not

raise an “occurrence” under the policies. Aloha understood

climate science, so climate-caused damage was expected, not

fortuitous, AIG said. Plus, the policies’ pollution exclusions

bar coverage for the lawsuits’ claims.

The parties cross-moved for partial summary judgment on the

duty to defend.

The District Court certified two questions to this court:

(1) For an insurance policy defining a covered “occurrence” in part as an “accident,” can an “accident” include recklessness?

(2) For an “occurrence” insurance policy excluding coverage of “pollution” damages, are greenhouse gases “pollutants,” i.e., “gaseous” “irritant[s] or contaminant[s], including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste”?

We accepted both questions and ordered briefing.

D. Supreme Court Arguments

1. Aloha’s Arguments

To Aloha, Tri-S defines an “occurrence.” That case did

three things, in Aloha’s view. By reaching the “expected or

intended” exclusion, Tri-S necessarily interpreted the

definition of an “occurrence.” 110 Hawaiʻi at 494, 135 P.3d at

103. It held that an “accident” includes recklessness. Id.

And it supplanted the earlier Caraang line of cases focused on

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the objectively foreseeable results of an insured’s intentional

conduct.

Aloha adds that Tri-S’ interpretation of the “expected or

intended” exclusion informs the meaning of an “occurrence.”

Aloha turns to the drafting history of the standard CGL policy.

From the 1960s until 1986, the standard “occurrence” definition

said it was not “expected nor intended from the standpoint of

the insured.” In 1986, the “expected or intended” language

moved from the definition of “occurrence” to a stand-alone

exclusion. Thus, Aloha says, the meaning of the provisions are

linked. Aloha argues Tri-S’ interpretation of the “expected or

intended” language should inform an “occurrence” in both pre-

and post-1986 versions of the policies.

Next, Aloha contends that Tri-S, not the Caraang line of

cases, controls the meaning of an “occurrence.” Aloha gives two

reasons.

First, Hawaiian Ins. & Guar. Co., Ltd. v. Brooks, 67 Haw.

285, 686 P.2d 23 (1984), Hawaiian Ins. & Guar. Co., Ltd. v.

Blanco, 72 Haw. 9, 804 P.2d 876 (1990), and Caraang addressed a

policyholder who commits or abets an obviously harmful violent

tort. Those cases dealt with sexual assaults and shootings.

Aloha says that makes them different than the counties’ products

liability case. Aloha writes, “the Caraang definition reflects

the fact that the resulting harms from the policyholders’

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actions in those cases were so obvious – the act and certainty

of injury were inseparable – that intent to injure a third party

could be inferred.”

Second, Aloha says that Caraang’s holding works for

intentional conduct, but doesn’t make sense when the underlying

suit alleges negligence. Caraang says an occurrence is not an

“expected or reasonably foreseeable result of the insured’s own

intentional acts”. Caraang, 74 Haw. at 636, 851 P.2d at 329

(emphasis added). But to have a viable negligence claim, the

plaintiff’s injury has to be foreseeable. No way can Caraang’s

definition apply to negligence, Aloha grumbles, because it would

exclude every negligence claim.

Rather, Aloha explains that Tri-S supplies the negligence

answer. That case defined an “expected” injury as one

“practically certain” to occur. Tri-S, 110 Hawaiʻi at 494 n.8,

135 P.3d at 103 n.8. This definition harmonizes the law. In

Aloha’s view, Caraang applies when we infer an intent to cause

injury from the obviously harmful nature of the tort, and Tri-S

applies otherwise. Aloha suggests that this court can reaffirm

Tri-S without overruling Caraang.

Aloha adds that Tri-S’ definition of “occurrence” fits the

fortuity principle. It points to a recent Wisconsin Supreme

Court decision, Dostal v. Strand, 984 N.W.2d 382 (Wis. 2023).

That case held that conduct amounting to second degree reckless

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homicide (recklessly causing death) may constitute an

“occurrence.” Id. at 393. The Wisconsin court reasoned that a

person “may engage in behavior that involves a calculated risk

without expecting — no less reasonably — that an accident will

occur . . . . Such behavior, which may be reckless for criminal

responsibility purposes, does not necessarily mean that the

actor reasonably expected the accident to result.” Id. at 392

(cleaned up).

Next, Aloha turns to the pollution exclusion. Aloha first

points to the 1986 and 1987 National Union policies, which don’t

have a relevant pollution exclusion. No matter what the

exclusion in other policies means, Aloha believes AIG owes it a

defense under these policies.

The U.S. District Court understood Aloha’s argument but

certified the pollution question anyway. It said the counties’

lawsuits “sparsely allege damages occurring before 2000” making

coverage under the 1986 and 1987 policies “apparently not

possible.” Aloha disagrees with the District Court, noting that

the duty to defend encompasses the mere possibility of coverage.

It also points to allegations of damage during the 1980s,

primarily sea level rise and erosion.

In case we do reach the exclusion, Aloha makes four further

arguments. First, it argues textually that the greenhouse gases

at issue are not “pollutants.” Aloha focuses on the words

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“irritant” and “contaminant.” “Irritant” means a substance

causes irritation to humans, Aloha contends. Thus, “irritant”

applies in personal injury claims, but not when the claim only

alleges property damage.

Nor are greenhouse gases “contaminants.” The relevant

“contaminant” here is carbon dioxide, not ocean water or rain,

Aloha says. Those liquids may contaminate and damage the

counties’ property, but carbon dioxide doesn’t directly

contaminate it.

Second, Aloha argues that the word “contaminant” must be

read in the exclusion’s context, not literally. Any substance,

even water, can become a “contaminant” if it causes bodily

injury or property damage. Taken to a literal extreme, Aloha

explains, ordinary chlorine in a pool is a “liquid”

“contaminant” “dispersed” in the pool, and thus a “pollutant”

under the policies.

Aloha contends the policy should be read in the appropriate

context: traditional environmental pollution by hazardous

wastes. Aloha turns to the drafting history of the pollution

exclusion in standard commercial liability policies. It argues

the exclusion was meant to cover environmental clean-up costs

resulting from the insured’s operations, not liability from its

finished products. Aloha also relies on federal cases holding

that the verbs in the exclusion - “discharge, dispersal,

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seepage, migration, release, or escape” - are environmental law

terms of art referring to traditional environmental pollution.

Here, there’s a difference between the counties’ suits and

an environmental suit to remediate carbon dioxide, Aloha

believes. An environmental remediation suit would be excluded,

but the counties’ suits are not.

Third, Aloha says the exclusion is ambiguous and so should

be interpreted in its favor. See St. Paul Fire & Marine Ins.

Co. v. Bodell Constr. Co., 153 Hawaiʻi 381, 383, 538 P.3d 1049,

1051 (2023) (this court reads insurance policy ambiguities in

the insured’s favor).

Fourth, a narrow view of the exclusion aligns with Aloha’s

objectively reasonable expectation of coverage. The policies

grant Aloha products liability coverage. If the pollution

exclusion barred coverage for product liability claims related

to selling gasoline - Aloha’s primary business – the coverage

would be worthless, Aloha insists. Thus, Aloha reasonably

expected coverage for damage arising out of the ordinary use of

its products.

2. AIG’s Arguments

AIG maintains that Caraang sets the standard for an

“occurrence.” Caraang holds that an “occurrence” policy does

not cover “the expected or reasonably foreseeable result of the

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insured’s own intentional acts or omissions.” 74 Haw. at 636,

851 P.2d at 329.

Here, AIG argues that climate change is the foreseeable

result of Aloha’s intentional emission of GHGs. AIG quotes this

court’s characterization of Honolulu’s suit in City & Cnty. of

Honolulu v. Sunoco LP, 153 Hawaiʻi 326, 337, 537 P.3d 1173, 1184

(2023). We described Honolulu’s theory of liability:

“Defendants knew about the dangers of using their fossil fuel

products, failed to warn consumers about those known dangers,

and engaged in a sophisticated disinformation campaign to

increase fossil fuel consumption.” Id.

AIG also turns to this court’s decisions in Brooks, Blanco,

and Caraang, three cases dealing with insurance coverage for

intentional torts. Brooks examined coverage for an insured

truck driver. As he drove, a passenger raped a woman – this was

no “accident” because the insured saw the rape happening and did

nothing to stop it. Brooks, 67 Haw. at 291, 686 P.2d at 28.

Similarly, Blanco held that an insured firing a rifle in

Blanco’s direction was not an “accident,” because a reasonable

person would expect injury to result. Blanco, 72 Haw. at 18,

804 P.2d at 881. From these cases, AIG concludes that an

“accident” depends on if a reasonable person would anticipate

injury. A policyholder’s subjective intent to injure is

irrelevant.

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Caraang itself also involved violence, AIG says. A car

passenger shot Caraang, killing him. Caraang, 74 Haw. at 624-

25, 851 P.2d. at 324. This court held that Caraang’s death was

accidental from the driver’s perspective, but intentional from

the shooter’s perspective. Id. at 637, 643, 851 P.2d at 329,

332. Thus, the car’s insurer had a duty to defend the driver,

but not the shooter. Id.

A year later, AIG continues, this court applied Caraang’s

“expected or reasonably foreseeable result of the insured’s own

intentional acts” standard in Hawaiian Holiday Macadamia Nut

Co., Inc. v. Indus. Indem. Co., 76 Hawaiʻi 166, 170, 872 P.2d

230, 234 (1994). That case involved a breach of contract action

between business partners. Id. This court held that the

problematic underlying conduct – planting macadamia seedlings

incorrectly and in breach of contract – was intentional and thus

not an accident and not an “occurrence.” Id. at 170-71, 872

P.2d at 234-35.

AIG frames this case’s legal issue as whether Tri-S

supplanted Caraang’s foreseeable result standard. AIG gives

several reasons why Tri-S did not replace Brooks, Blanco,

Caraang, and Hawaiian Holiday.

First, Tri-S did not intend to supplant Caraang, AIG says,

because it never mentions Caraang, Brooks, Blanco, or Hawaiian

Holiday. AIG notes that three former justices of this court

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joined Tri-S, but either wrote or joined combinations of

Caraang, Brooks, Blanco, and Hawaiian Holiday. The former

justices can’t have intended to silently overrule their own

prior decisions.

Second, AIG contends that Tri-S only interpreted the

“expected or intended” exclusion, not the definition of

“accident.” This view of Tri-S must be correct, AIG insists,

because Tri-S’ putative conclusion that accidents include

recklessness clashes with the bedrock principle that insurance

only covers fortuitous accidents. The plain meaning of

“accident” – something unforeseen that occurs by chance – is

inconsistent with recklessness.

AIG also points to the drafting history of the standard

policy. Before 1986, when the “occurrence” definition included

the “expected or intended” language, courts were split on the

meaning of “occurrence.” Some courts held that the word

“accident” and the expected or intended language meant the same

thing: an occurrence must be an accident neither expected nor

intended from the insured’s standpoint. 3 New Appleman

Insurance Law Practice Guide § 30.07[4]. Other courts

disagreed, holding that “accident” means accidental in nature,

and the expected or intended language confirms that those

injuries are not accidental. Id.

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The 1986 revision moving “expected or intended” to a

separate exclusion was meant to clarify the issue, AIG says.

Splitting the language made “accident” stand alone. Thus, AIG

argues, “accident” should be interpreted independently, without

considering the insured’s subjective expectation or intent to

injure.

AIG says Caraang establishes a two-step test. First, we

see if the insured acted with the intent to perform the act –

like firing a gun. If the complaint alleges unintentional

conduct – like a rifle’s inadvertent discharge, then there has

been an occurrence. Tri-S is an unintentional conduct case, AIG

says.

If the conduct was intentional, AIG argues we proceed to

step two. We examine if the resulting injuries were reasonably

foreseeable. If so, then no occurrence, and no need to address

any exclusions. Thus, AIG disagrees that the meaning of

“occurrence” and the meaning of the expected or intended

exclusion follow the same analysis. Rather, they are separate

analyses that happen at difference stages.

On the pollution exclusion, AIG disputes Aloha’s contention

that the exclusion is irrelevant because two 1980s policies lack

it. AIG’s policies only cover damage “which occurs during the

policy period.” The District Court concluded that coverage

under the 1980s policies was “apparently not possible,”

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signaling that it will dismiss Aloha’s claims under those

policies. AIG notes that Aloha presented this argument to the

District Court, which certified the question anyway. AIG

contends the pollution exclusion issue is needed to determine

AIG’s duty to defend under later policies, particularly the late

2000s policies.

Substantively, AIG argues that a layperson, Hawaiʻi law, and

the federal Clean Air Act all consider carbon dioxide a

pollutant. AIG parses the plain meaning of the words in the

pollution exclusion, arguing that greenhouse gases are

“gaseous,” “thermal” “irritants” and “contaminants.” The GHGs

that result from burning gasoline are “smoke,” “vapor,” and

“chemicals” under the exclusion. Carbon dioxide is an

“irritant” and “contaminant” because it is causing planet-

altering climate change.

Hawaiʻi’s Air Pollution Control law, Hawaiʻi Revised

Statutes (HRS) §§ 342B-71 (2022), 342B-72 (2022), 342B-73

(2022), and Hawaiʻi Administrative Rule (HAR) § 11-60.1-1 (2014)

treat GHGs as pollutants. Twenty years ago, the District of

Hawaiʻi relied on Hawaiʻi pollution statutes to hold that

concrete dust is a pollutant under an identical pollution

exclusion. See Allen v. Scottsdale Ins. Co., 307 F. Supp. 2d

1170, 1178 (D. Haw. 2004).

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Similarly, AIG says, federal law (42 United States Code

§ 7602(g)) and federal caselaw (Massachusetts v. E.P.A., 549

U.S. 497 (2007)), define GHGs as pollutants. International law,

including the 1992 United Nations Framework Convention on

Climate Change, also considers GHGs pollutants. And, AIG says,

it was widely understood long before AIG issued its policies

that carbon dioxide causes global warming.

AIG disputes Aloha’s distinction between climate change and

“traditional environmental pollution.” It claims that there’s

no basis for that distinction in the policy language. Climate

change has similar effects to traditional environmental

pollution, making Aloha’s distinction meaningless. Plus, Aloha

cannot deny that GHGs are pollutants, because in Sunoco it

claimed that the Clean Air Act regulates GHGs and thus preempts

Honolulu’s suit. See Sunoco, 153 Hawaiʻi at 339, 537 P.3d at

1186.

Last, AIG responds to Aloha’s argument that the exclusion

does not bar coverage for products liability. AIG argues that

Aloha’s misrepresentations, not its sale of gasoline, are on

trial.

III. DISCUSSION

We answer the first question Yes. An “occurrence” includes

recklessness.

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The District Court’s certified question asks us to

reconcile Tri-S and Caraang. We clarify Caraang’s description

of a “reasonably foreseeable” harm. Caraang’s “reasonably

foreseeable” language referred to an insured’s intent, not

expectation. Thus, there is no conflict between our cases.

Tri-S’ definition of “expected” controls. The standard

insurance policy’s drafting history, the plain meaning of

“accident,” and the principle of fortuity each support this

outcome.

We answer the second question Yes. Aloha’s greenhouse gas

emissions fit within the pollution exclusion.

Courts interpret the pollution exclusion differently.

There are two common divisions: (1) whether the exclusion’s

language should be read literally or only applied to

“traditional” environmental pollution and (2) whether the

exclusion is ambiguous. These divisions do not render the

exclusion ambiguous in this case. Ambiguity requires two

plausible readings, but we conclude that here GHGs are

pollutants under any plausible reading.

Emitting GHGs is traditional environmental pollution. And,

GHGs meet the exclusion’s literal definition of a pollutant;

they are “gaseous” “contaminants” that are “released” causing

“property damage.” Thus, there is no relevant legal uncertainty

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here. And, Aloha could not reasonably expect coverage for the

counties’ lawsuits, because GHGs are so clearly pollutants.

A. Coverage for “Accidents” Includes Reckless Conduct

The District Court asks whether recklessness can be an

“accident” and thus a covered “occurrence.” The court

identifies a conflict between our cases: “if Tri-S says

recklessness can be an ‘accident,’ and if Caraang’s definition

of ‘accident’ excludes risks of harms reasonably foreseeable

from the perspective of the insured - i.e., recklessness - then

there is a conflict.”

Thus, the District Court wonders, if an insured is aware of

the risk of harm and acts anyway, is that an “accident”?

Yes. Awareness of risk differs from awareness of certain

harm. Insurance covers risks. Per Tri-S, we hold that covered

“accidents” differ from non-covered expected or intended

injuries when the harm was intended or practically certain.

First, we briefly recap the duty to defend in Hawaiʻi law.

1. The Duty to Defend in Hawaiʻi Law

An insurance company owes two duties under its policy: the

duty to defend its insured from lawsuits and the duty to

indemnify its insured from liability. The duty to defend is

broader than the duty to indemnify. St. Paul, 153 Hawaiʻi at

384, 538 P.3d at 1052. If there’s a possibility that an

incident is covered under a policy – even a remote possibility –

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the insurer owes a defense. Id. at 383, 538 P.3d at 1051. This

is Hawaiʻi’s “stout” duty to defend. Id.

The duty to defend includes “mixed” actions where some

claims are covered and others are not. Id. at 384, 538 P.3d at

1052. If one allegation in the complaint is potentially

covered, the insurer must defend the whole lawsuit. Id.

This court interprets two documents to decide the scope of

the duty to defend: the insurance policy and the underlying

complaint. See Hawaiian Holiday, 76 Hawaiʻi at 169, 872 P.2d at

233.

Insurance policies are contracts and are interpreted using

the general rules of contract construction. St. Paul, 153

Hawaiʻi at 383, 538 P.3d at 1051. The possibility of coverage

depends on the policy’s words. Id.

But insurance policies are particularly one-sided

contracts. Power dynamics shape this court’s interpretation.

Insurance policies are considered contracts of adhesion. Dairy

Rd. Partners v. Island Ins. Co., Ltd., 92 Hawaiʻi 398, 411-12,

992 P.2d 93, 106-07 (2000). They often (like here) use

insurance industry standard forms. Id. Thus, we construe any

ambiguity in the policy for the policyholder and against the

insurer. St. Paul, 153 Hawaiʻi at 383, 538 P.3d at 1051. We

read the contract to the policyholder’s advantage. Id.

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The possibility of coverage also depends on the underlying

complaint. Hawaiian Holiday, 76 Hawaiʻi at 169, 872 P.2d at 233.

We look at both the facts and the causes of action alleged in

the complaint. See id. at 170–71, 872 P.2d at 234–35 (examining

both); Allstate Ins. Co. v. Pruett, 118 Hawaiʻi 174, 188, 186

P.3d 609, 623 (2008) (same). But, legal allegations alone

cannot create a possibility of coverage when the alleged facts

exclude coverage. Dairy Rd. Partners, 92 Hawaiʻi at 417, 992

P.2d at 112. We apply the complaint’s allegations to the

contract’s language to decide if there is a possibility of

coverage.

2. Tri-S, not Caraang, Controls our Approach to an “Expected” Injury

The District Court frames the issue as whether reckless

conduct can be an “accident” and thus a covered “occurrence.”

Caraang holds that if injuries are the “expected or reasonably

foreseeable result of the insured’s own intentional acts or

omissions,” they are not accidental. 74 Haw. at 636, 851 P.2d

at 329. A reckless insured knows that its conduct carries a

risk of injury but acts anyway. Recklessness, Black’s Law

Dictionary (11th ed. 2019). So under Caraang, a reckless

insured acts foreseeably and is not covered, the District Court

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By contrast, Tri-S plainly states that recklessness “does

not involve intent or expectation of injury and is thus a

covered occurrence under the policy.” Tri-S, 110 Hawaiʻi at 494,

135 P.3d at 103. An accident can include “harm that the insured

should have anticipated.” Id. at 494 n.8, 135 P.3d at 103 n.8

(cleaned up). Hence, the District Court sees a conflict.

We see less conflict than the District Court. Caraang’s

“reasonably foreseeable” language referred to intent, not

expectation. Caraang and Tri-S both ruled that an “expected”

injury is not an “accident.” Caraang didn’t define an

“expected” result, but Tri-S did. So, Tri-S’ definition

controls.

Tri-S defined an “expected” injury as one “practically

certain” to occur. Id. When an insured does not act with

harmful intent, an “accident” hinges on the certainty of the

risk. A policyholder’s awareness of a possible or probable risk

can be an “accident.” When the risk crosses the line into

“practical certainty,” it is no longer an “accident.”

We clarify Caraang. When Caraang said that the injury

cannot be “reasonably foreseeable,” it referred to cases where

the insured acted with an intent to harm others. Our law infers

from malicious intent or from especially dangerous activity the

intent to cause the harm that actually happened. Tri-S, 110

Hawaiʻi at 494 n.8, 135 P.3d at 103 n.8; 3 New Appleman on

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Insurance Law Library Edition, §§ 18.01[6][c] (2023),

18.03[2][f] (2016). Thus, from an insured’s perspective, the

resulting harm was “reasonably foreseeable.” Caraang

essentially ruled that an “accident” is not an expected result

or the result of an insured’s intentionally harmful conduct.

Tri-S defines when a result is intended or expected. Tri-S, 110

Hawaiʻi at 494 n.8, 135 P.3d at 103 n.8.

A review of insurance policy history, our cases, the plain

meaning of “accident,” and the principle of fortuity each

support this position.

a. Insurance History

The meaning of an “occurrence” in standard insurance

policies is historically tied to the “expected or intended”

exclusion that Tri-S interpreted. Before 1986, the standard

policy defined “occurrence” as “an accident, including

continuous or repeated exposure to conditions, which results in

bodily injury or property damage neither expected nor intended

from the standpoint of the insured.” 3 New Appleman on

Insurance Law Library Edition § 18.03[2][b] (2023) (emphasis

added). In that era, some courts treated the expected or

intended language like an exclusion. Christopher C. French,

Revisiting Construction Defects As “Occurrences” Under CGL

Insurance Policies, 19 U. Pa. J. Bus. L. 101, 106 (2016). In

1986, the Insurance Services Office moved the “expected or

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intended” language from the definition of “occurrence” to a

standalone exclusion, in line with that interpretation. Id.

The “expected or intended” language, now bumped to its own

exclusion, continues to inform our approach to an “accident.”

We construe insurance policies according to their entire terms.

Dairy Rd. Partners, 92 Hawaiʻi at 411, 992 P.2d at 106.

Functionally, “accident” and the “expected or intended” language

continue to define the scope of coverage. Although the analysis

now occurs in separate steps – first, determine an “accident,”

then consider the exclusion – the standard policy continues to

cover “accidents” that are not “expected or intended.” Thus, we

believe that Tri-S’ interpretation of “expected” and “intended”

is key to our analysis of an “accident.”

b. Our Precedents

The District Court believes this court’s precedents clash.

We do not believe that either precedent controls over the other

or that such a decision must be made. We decline to hold that

Tri-S silently overruled earlier cases that it did not mention.

We also reject the idea that Brooks, Blanco, Caraang, and

Hawaiian Holiday control over Tri-S’ clear-cut holding. Rather,

there is no conflict or inconsistency between Tri-S and Caraang,

because Caraang’s “reasonably foreseeable” language refers to an

insured’s intent, not an insured’s expectation.

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First, we examine Tri-S. A Tri-S employee drilled too

close to power lines. He was electrocuted. Tri-S, 110 Hawaiʻi

at 493, 135 P.3d at 102. His estate alleged that Tri-S

“wilfully and wantonly” - recklessly - failed to follow

workplace safety standards, causing the employee’s wrongful

death. Id. at 478, 135 P.3d at 87. Tri-S asserted that its

insurer owed it a defense. Id. at 477, 135 P.3d at 86.

This court concluded that the estate might prevail on a

“‘wilful and wanton’ misconduct claim based upon evidence only

of non-intentional misconduct.” Id. at 494, 135 P.3d at 103.

This court examined an Indiana Court of Appeals case, PSI

Energy, Inc. v. Home Ins. Co., 801 N.E.2d 705 (Ind. Ct. App.

2004). Relying on that decision, this court fleshed out

definitions for both “expected” and “intended” as used in the

policy.

“Intentional” conduct encompasses the intent to cause

injury, though “not necessarily the precise injury or severity

of damage that in fact occurs.” Tri-S, 110 Hawaiʻi at 494 n.8,

135 P.3d at 103 n.8. Intentional conduct “is met either by

showing an actual intent to injure, or by showing the nature and

character of the act to be such that an intent to cause harm to

the other party must be inferred as a matter of law.” Id. In

this way, Tri-S accounts for the violence and fraud of Brooks,

Blanco, Caraang, and Hawaiian Holiday type cases.

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Tri-S held that “expected” injury is “practically certain”

to occur from the insured’s subjective view. Id. Reckless

conduct – awareness of risk of harm - falls short of practical

certainty. Id. As applied to Tri-S, the employee’s death may

have been possible or probable, but the complaint did not allege

it was practically certain. Id. So Tri-S received coverage.

Tri-S provides the tools to evaluate an “accident.” It

creates a framework to assess the insured’s culpability. It

draws a line between fault and mistake. If the insured intended

to cause the harm that happened, a different harm, or acted so

dangerously that the law must infer intent to harm, then the

insured alone bears responsibility for its conduct. Likewise,

if the insured acted with “practical certainty” of harm it is

solely responsible.

But insurance coverage does not require that the insured be

blameless. Accidents that were preventable with better

foresight still deserve coverage. Preventability is inherent in

ordinary negligence. Defendants are not liable if the harm was

unforeseeable. Pulawa v. GTE Hawaiian Tel, 112 Hawaiʻi 3, 12,

143 P.3d 1205, 1214 (2006).

Both Tri-S and Caraang hold there is no insurance coverage

for “expected” injuries. Tri-S defines “expected.” It draws a

line based on the likelihood of the harm. “Expected” means

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practically certain, not somewhat likely. Tri-S, 110 Hawaiʻi at

494 n.8, 135 P.3d at 103 n.8. On this, the cases do not differ.

Caraang also holds that a “reasonably foreseeable” injury

is not an “accident.” 74 Haw. at 636, 851 P.2d at 329. Here,

we clarify Caraang.

That case involved one person, Ilmar Godinez, driving a car

while a second person fired a gun out the window, killing the

shooter’s ex-girlfriend’s new boyfriend. Caraang, 74 Haw. at

624-25, 851 P.2d at 324. This court held that from the driver’s

perspective, the shooting was an “accident” because “(1) from

Godinez’s perspective, the death was not the expected or

anticipated result of any intentional act or omission on his

part; (2) Godinez, being unaware the shooting was taking place,

obviously made no decision to refrain from preventing Nelson’s

death or otherwise mitigating the harm; and (3) Godinez did

nothing to facilitate the shooting.” Id. at 636-37, 851 P.2d at

329. Point (1) addressed Godinez’s expectation. Points (2) and

(3) showed that Godinez had no harmful intent. Because Godinez

neither expected nor intended the shooting, it was an “accident”

as to him. Id. But because the shooter fired intentionally,

his actions were not an “accident.” Id. at 643, 851 P.2d at

332.

Brooks and Blanco performed similar analyses. In Blanco,

where the insured fired a rifle toward a neighbor intending to

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frighten him, the insured’s intent precluded insurance coverage.

Blanco, 72 Haw. at 18, 804 P.2d at 881. In Brooks, a truck

driver did nothing while a passenger raped a woman in the back

of the truck. Brooks, 67 Haw. at 291, 686 P.2d at 27-28.

Though the driver claimed he didn’t intend to facilitate the

rape, this court ruled that both the driver and the passenger

acted with harmful intent and an expectation that injury would

result. Id.

In both cases, this court relied on the idea that an

insured’s intent to cause one harm precludes coverage if a

different harm results. Thus, Caraang, describing those cases,

declared, “[t]he teaching of Blanco and Brooks, however, is

that, in order for the insurer to owe a duty to defend or

indemnify, the injury cannot be the expected or reasonably

omissions.” Caraang, 74 Haw. at 636, 851 P.2d at 329. Although

perhaps worded inartfully, Caraang was referencing the

reasonably foreseeable results of an insured’s harmful intent.

This court did not aspire to define an “expected” injury as

“reasonably foreseeable.”

Thus, there is no conflict between Tri-S and Caraang.

Caraang’s “reasonably foreseeable” language applies to the

intent prong, not the expectation prong of this court’s

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analysis. Tri-S’ definition of an “expected” injury as

“practically certain” is not in tension with Caraang.

This approach best fits the logic of insurance coverage.

If we apply a “reasonably foreseeable” test to expected

injuries, we undermine a policyholder’s reasonable expectation

that an insurance policy covering “accidents” covers negligence.

See Guajardo v. AIG Hawaiʻi Ins. Co., Inc., 118 Hawaiʻi 196, 206,

187 P.3d 580, 590 (2008) (protecting lay policyholder’s

reasonable expectations). Overreading “reasonably foreseeable”

risks creating a paradox where negligence is not insured. AES

Corp. v. Steadfast Ins. Co., 725 S.E.2d 532, 538 (Va. 2012)

(Mims, J., concurring). Negligence requires foreseeability. A

plaintiff has a viable negligence claim only if they allege the

harm was foreseeable. Pulawa, 112 Hawaiʻi at 12, 143 P.3d at

1214. But if “accident” means an event where the harm was

unforeseeable, then negligence and an “accident” become mutually

exclusive. AES Corp., 725 S.E.2d at 538 (Mims, J., concurring).

Applying this reading, an event can be foreseeable and therefore

negligent, or unforeseeable and therefore an “accident.” But

negligence can never be an “accident.” Id. So negligence is

uninsured.

If “reasonably foreseeable” just means foreseeable, Tri-S

must come out differently. That case’s plaintiff alleged a

failure to follow workplace safety standards resulting in

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wrongful death. Tri-S, 110 Hawaiʻi at 478–79, 135 P.3d at 87–88.

If we apply Caraang’s “reasonably foreseeable” language broadly

to expected injuries, all kinds of commonplace misfortunes –

including workplace accidents – would not be “accidents,” thus

negating coverage.

Also, if we ruled that recklessness is not an “accident,”

we risk inviting duty-to-defend litigation due to the possibly

fine-grained distinction between a policyholder’s recklessness

and negligence.

Thus, Tri-S provides a logical and reasoned approach.

“Accidents” are not intended or practically certain from the

insured’s standpoint. This rule aligns with the risks that

liability insurance is designed to cover. It also comports with

the plain meaning of “accident,” the reasonable expectations of

policyholders, and the principle of fortuity.

3. The Plain Meaning of “Accident”

an “occurrence” as “an accident, including continuous or

conditions.” The policies don’t define an “accident.”

“Accident” is the relevant term for our plain meaning

analysis. An “occurrence” means an “accident.” 3 New Appleman

Insurance Law Practice Guide § 30.07[2] (2024 ed.) (“under this

definition, ‘occurrence’ and ‘accident’ are synonymous”); see

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also Taylor Morrison Servs., Inc. v. HDI-Gerling Am. Ins. Co.,

746 S.E.2d 587, 594 (Ga. 2013) (interpreting “occurrence” by

looking to the “usual and common meaning of ‘accident’”); AES

Corp., 725 S.E.2d at 536 (treating “occurrence” and “accident”

as synonymous).

This court interprets insurance policies using general

rules of contract construction. Dairy Rd. Partners, 92 Hawaiʻi

at 411-12, 992 P.2d at 106–07. We interpret an undefined

contractual term “according to its plain, ordinary, and accepted

sense in common speech consistent with the reasonable

expectations of a layperson.” Hart v. Ticor Title Ins. Co., 126

Hawaiʻi 448, 457, 272 P.3d 1215, 1224 (2012).

“Accident,” as ordinarily used, encompasses several shades

of meaning. As the following dictionary definitions show,

“accident” can mean unforeseen, unintended, by chance, with

negative consequences, or a combination of those concepts.

An “accident” can mean “an unforeseen and unplanned event

or circumstance.” Accident, Merriam-Webster Dictionary

https://www.merriam-webster.com/dictionary/accident

[https://perma.cc/A5C7-XDTJ]. Or, “lack of intention or

necessity: CHANCE,” as in “They met by accident rather than by

design.” Id. Or, “an unfortunate event resulting especially

from carelessness or ignorance.” Id. This last definition

encompasses the results of recklessness.

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Black’s Law Dictionary has similar definitions. An

“accident” is an “unintended and unforeseen injurious

occurrence; something that does not occur in the usual course of

events or that could not be reasonably anticipated; any unwanted

or harmful event occurring suddenly, as a collision, spill,

fall, or the like, irrespective of cause or blame.” Accident,

Black’s Law Dictionary (11th ed. 2019) (emphasis added). This

definition also includes unfortunate results of risky behaviors.

A reasonable lay insured using ordinary language may read

coverage for an “accident” to include unlikely, freak chance

events, sudden mishaps, unexpected disasters, and unforeseen

harms resulting from carelessness. This list of misfortunes

includes the results of reckless behavior. “[U]nder a common

understanding of ‘accident,’ it would seem that even if one

engages in reckless conduct, a resulting injury can still be, in

the common parlance of the word, ‘accidental.’” Dostal v.

Strand, 984 N.W.2d 382, 393 (Wis. 2023). There’s a difference

between awareness of the risk of harm and awareness of certain

harm. That difference defines an “accident.”

This understanding is really just common sense. Imagine an

on-duty taxi driver runs a red light while texting and hits a

pedestrian. The driver is reckless. See Recklessness, Black’s

Law Dictionary (11th ed. 2019) (recklessness is when “the actor

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does not desire harmful consequence but nonetheless foresees the

possibility and consciously takes the risk”).

Is this an “accident” under the driver’s standard

commercial liability policy? In ordinary language, the

collision would be a “traffic accident.” So, it should be an

“accident” under the driver’s policy.

4. The Principle of Fortuity

AIG invokes the principle of fortuity, the idea that

insurance protects against risks, not certainties. This

principle matters for the functioning of insurance in several

ways. Fortuity allows insurers to spread the risk of unplanned

incidents over a pool of customers at calculated rates. It also

prevents policyholders from committing intentional torts but

being immune to consequences because they purchased insurance.

AIG argues that the counties’ complaints allege intentional

conduct that is not fortuitous and thus not insurable. It

contends that allowing an “accident” to include recklessness is

inconsistent with fortuity.

To the contrary, including recklessness in an “accident”

honors fortuity. The reckless insured, by definition, takes

risk. A reckless insured perceives the possibility of harm.

For the purposes of insurance, recklessness is more like

negligence than intent. To quote the amicus brief that the

Complex Insurance Claims Litigation Association filed in this

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case, “in a garden variety negligence case, the plaintiff’s

complaint alleges that the defendant unreasonably disregarded

the risk that his conduct would cause the complained-of injury.”

Replace the word “unreasonably” with “consciously” and amici

have described recklessness.

The principle of fortuity is more about the concept of

chance than the insured’s culpability. After all, a negligent

insured is also culpable. Insurance exists to cover incidents

the insured didn’t see coming or otherwise think were

practically certain to occur. Excluding recklessness unduly

pinches fortuity. The appropriate dividing line is the

certainty of the harm. Tri-S preserves insurance coverage for

risks and draws the appropriate line.

5. Because We Follow Tri-S, We Do Not Follow AES Corp.

Our opinion departs from the only other state supreme court

case deciding if a climate damage lawsuit presents an

“occurrence,” AES Corp. v. Steadfast Ins. Co., 725 S.E.2d 532

(Va. 2012). Our decision differs because Virginia law and

Hawaiʻi law differ.

In AES Corp., the Virginia Supreme Court held that an

insurer had no duty to defend against a lawsuit very similar to

the one here. AES’ actions were not an “accident,” the court

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concluded, because climate change was the “natural or probable

consequence” of AES’ emissions. Id. at 537-38.

In AES Corp., the Native Village and City of Kivalina, a

community in Alaska, sued AES Corporation, an energy company.

Id. at 533. Kivalina accused AES of “damaging the village by

causing global warming through emission of greenhouse gases.”

Id. Like the counties’ lawsuits, Kivalina’s suit alleged that

AES “knew or should have known of the impacts of [its]

emissions” yet “continued [its] substantial contributions to

global warming.” Id.

AES’ commercial liability insurer, Steadfast Insurance,

defended AES against the lawsuit under a reservation of rights.

Id. at 533. Steadfast then filed a declaratory judgment action

against AES. Steadfast said it owed no defense because there

was no “property damage” caused by an “occurrence.” Id. Like

AIG, Steadfast’s policies defined an “occurrence” as “an

accident, including continuous or repeated exposure to

substantially the same general harmful condition.” Id. at 534.

Also like AIG, Steadfast argued that (1) the alleged damage

arose outside the policy periods, and (2) the pollution

exclusion barred the claims. Id. at 533.

The Virginia court found no “accident,” and thus no duty to

defend. Id. at 538. Under Virginia law, an “accident” is

“unexpected from the viewpoint of the insured.” Id. at 536. If

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an injury was the “natural or probable consequence” of the

insured’s voluntary act, it was not an “accident.” Id.

Objectively foreseeable natural or probable consequences do not

constitute an “accident,” even if the insured acted negligently.

Id. at 538.

Because Virginia law and Hawaiʻi law differ, we decline to

follow AES Corp. AES Corp.’s “natural or probable consequences”

standard is inconsistent with Tri-S’ practically certain test.

AES Corp.’s rule means that if the damage was foreseeable, there

is no “accident.” This is so even if the insured was reckless –

meaning they only perceived a risk of damage.

For the reasons discussed above, we follow Tri-S’

“practically certain” standard instead. This standard covers

the results of negligent or reckless conduct and excludes

intentional or practically certain harm. Thus, AES Corp.,

although factually similar, is legally inapposite to our case.

B. The Pollution Exclusion Encompasses GHGs

The pollution exclusion’s exact language varies between

AIG’s policies, but the differences are immaterial for our

analysis. Here is the “total pollution exclusion” from AIG’s

2004-2010 policies, which bars insurance coverage for:

f. Pollution (1) “Bodily injury” or “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.

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“Pollutants” are defined as “any solid, liquid, gaseous or

thermal irritant or contaminant, including smoke, vapor, soot,

fumes, acids, alkalis, chemicals and waste.”

As a threshold matter, we address Aloha’s argument that we

should not interpret the pollution exclusion. The 1986 and 1987

AIG policies lack a relevant pollution exclusion. So, Aloha

says, if the counties’ lawsuits allege an “occurrence” under

those policies, AIG must defend. The exclusion is immaterial.

We address the exclusion and answer Question 2. Whether

Aloha is ultimately entitled to a defense under the 1986 and

1987 policies is a question for the District Court. To award

coverage under those policies, the District Court must find that

the counties’ complaint alleges property damage during the

policies’ coverage period. In certifying the question to us,

the District Court wrote, “the underlying lawsuits sparsely

allege damages occurring before 2000.” Thus, “coverage under

those two policies is apparently not possible, making their lack

of a pollution exclusion immaterial.” We leave it to the

District Court to find whether these “sparse” damage allegations

create a possibility of coverage, something it so far said is

“apparently” not possible.

Nationally, interpretation of the pollution exclusion is

disputed – some courts read the exclusion’s language literally,

others confine the exclusion to only “traditional environmental

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pollution.” Apana v. TIG Ins. Co., 574 F.3d 679, 682-83 (9th

Cir. 2009) (collecting cases).

We believe the “traditional environmental pollution”

reading is the superior approach. We hold that what makes a

substance a “contaminant” – and thus a “pollutant” - is whether

it causes damage due to its presence in the environment.

Aloha contends that national uncertainty about the

exclusion’s meaning entitles it to coverage under this court’s

legal uncertainty rule. See Sentinel Ins. Co., Ltd. v. First

Ins. Co. of Hawaiʻi, Ltd., 76 Hawaiʻi 277, 290, 875 P.2d 894, 907

(1994). True, the pollution exclusion is nationally disputed

and this court has yet to weigh in. Apana, 574 F.3d at 682-83.

But the dispute is not coverage determinative. Under a

traditional pollution or plain language reading, emitting the

greenhouse gases that cause climate change is pollution. By

plain language, GHGs are “gaseous,” “contaminants” that are

“released” causing “property damage.” Thus, the exclusion is

not ambiguous in this case.

Aloha also argues its reasonable expectation of coverage.

Aloha reasonably expects products liability coverage. But the

pollution exclusion limits that expectation. Aloha reasonably

expects coverage for product hazards that are not pollution.

Aloha’s professed expectation of coverage cannot reasonably

encompass the allegations in the counties’ lawsuits.

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1. Greenhouse Gases are “Traditional” Environmental Pollution

We are convinced that the pollution exclusion is properly

read to encompass only “traditional environmental pollution.”

Four reasons convince us.

First, the exclusion’s drafting history reveals its

purpose: to eliminate insurer liability for classic

environmental contamination. After the 1970 Clean Air Act

amendments and many notorious environmental disasters, the

insurance industry worried about pollution-related claims. Am.

States Ins. Co. v. Koloms, 687 N.E.2d 72, 80 (Ill. 1997). In

1970, the first pollution exclusion entered the standard CGL

policy. Id.

That first exclusion, the “qualified” exclusion, prompted

significant litigation, with courts across the country reaching

contradictory results. Id. at 80-81. From an insurer’s view,

too many courts were finding coverage. MacKinnon v. Truck Ins.

Exch., 73 P.3d 1205, 1210 (Cal. 2003). Meanwhile, in 1980,

Congress enacted the Comprehensive Environmental Response,

Compensation, and Liability Act, expanding liability for

hazardous substances. Id. at 1211. As a result, in 1985, the

insurance industry revised the language, producing the

“absolute” pollution exclusion. Id. at 1210. Later, insurers

developed the “total” exclusion, the one included in the 2004-

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2010 AIG policies. 9 Jordan R. Plitt et al., Couch on Insurance

§ 127:13 (3d ed. June 2024). The revised exclusions deleted

language in the “qualified” exclusion that courts had used to

convey coverage. Koloms, 687 N.E.2d at 81.

Based on this history, the “predominate motivation in

drafting an exclusion for pollution-related injuries was the

avoidance of the enormous expense and exposure resulting from

the explosion of environmental litigation.” Id. (cleaned up).

The exclusion serves to avoid “the yawning extent of potential

liability arising from the gradual or repeated discharge of

hazardous substances into the environment.” Id. (cleaned up).

We find that purpose pertinent to the exclusion’s

interpretation.

Second, we agree with those courts who reason that the

exclusion cannot be read literally, or else it sweeps too

broadly. In a widely cited analysis, the Seventh Circuit

stressed the importance of reading the pollution exclusion’s

words in context. The court observed that the “terms ‘irritant’

and ‘contaminant,’ when viewed in isolation, are virtually

boundless, for there is virtually no substance or chemical in

existence that would not irritate or damage some person or

property.” Pipefitters Welfare Educ. Fund v. Westchester Fire

Ins. Co., 976 F.2d 1037, 1043 (7th Cir. 1992) (cleaned up). The

exclusion requires some limiting principle to avoid absurdity.

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Id. It cannot be read literally. Am. States Ins. Co. v. Kiger,

662 N.E.2d 945, 948 (Ind. 1996).

The Seventh Circuit distinguished between substances that

can irritate or contaminate, but cause harm in some other way,

and substances that cause harm due to their irritating or

contaminating nature. For instance, “reading the [exclusion]

broadly would bar coverage for bodily injuries suffered by one

who slips and falls on the spilled contents of a bottle of

Drano,” even though the spill is not commonly understood as

pollution. Pipefitters, 976 F.2d at 1043. Reading the

exclusion literally cuts an “arbitrary swath” through insurance

coverage. MacKinnon, 73 P.3d at 1217.

To avoid these problems, courts take a “common sense

approach.” Pipefitters, 976 F.2d at 1043. A plain language

analysis doesn’t mean extreme literalism. Our inquiry depends

“on the nature of the injury alleged in the underlying

complaints, not exclusively on the nature of the substance

released.” 14 Jordan R. Plitt et al., Couch on Insurance

§ 201:42 (3d ed. Nov. 2023). We believe the “nature of the

injury” covered by the pollution exclusion is classic

environmental pollution.

Third, we focus on the exclusion’s two crucial nouns,

“irritant” and “contaminant.” Irritant means “A source of

irritation: [for example] tobacco smoke, a common eye irritant.”

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Irritant, American Heritage Dictionary

https://www.ahdictionary.com/word/search.html?q=irritant

[https://perma.cc/F3CW-N3ES]. We agree with Aloha that

“irritant” is relevant to a bodily injury case, but is not

relevant to the counties’ property damage claim. We focus on

“contaminant.”

For our purpose, the pollution exclusion’s textual hinge is

the word “contaminant.” A contaminant is a substance that

contaminates(!) Contaminant, Merriam-Webster Dictionary

https://www.merriam-webster.com/dictionary/contaminant

[https://perma.cc/Z7B9-5GK4]. Contaminate means “to make

inferior or impure by admixture,” or “to make unfit for use by

the introduction of unwholesome or undesirable elements.”

Contaminate, Merriam-Webster Dictionary https://www.merriam-

webster.com/dictionary/contaminate [https://perma.cc/CW4N-57AA].

In literal terms, a substance may contaminate on a very

small scale. An unpleasant smell may contaminate a room. But

that is not how “contaminant” is ordinarily used. Typically, a

substance “contaminates” when its presence damages something –

like soil, water, or air – making it impure or unclean. A

substance is a “contaminant,” and therefore a “pollutant,” when

it contaminates the environment.

A policyholder’s reasonable expectations also come into

play. Hawaiʻi law protects a policyholder’s objectively

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reasonable expectations. Del Monte Fresh Produce (Hawaii), Inc.

v. Fireman’s Fund Ins. Co., 117 Hawaiʻi 357, 368, 183 P.3d 734,

745 (2007). A policyholder expects an exclusion titled “f.

Pollution” to apply to pollution, as that word is ordinarily

understood. Further, the total exclusion’s section (1) covers

injury and damage caused by pollutants, while section (2)

discusses costs to comply with environmental laws. Section (2)

largely refers to classic hazardous substance clean-up

scenarios. An objectively reasonable policyholder expects the

exclusion to cover classic environmental pollution. Gainsco

Ins. Co. v. Amoco Prod. Co., 53 P.3d 1051, 1066 (Wyo. 2002).

This court has long held that insurance policies “must be

construed liberally in favor of the insured and any ambiguities

must be resolved against the insurer.” St. Paul, 153 Hawaiʻi at

383, 538 P.3d at 1051. As part of this principle, basic

insuring clauses should be “interpreted broadly so as to afford

the greatest possible protection to the insured, whereas

exclusionary clauses are interpreted narrowly against the

insurer.” MacKinnon, 73 P.3d at 1213 (cleaned up). This rule

protects a policyholder’s expectations; it insists that

exceptions to coverage be spelled out clearly. Id. Here, a

traditional-pollution-only reading better protects a

policyholder’s expectation.

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For these reasons, we join those courts limiting the

pollution exclusion to traditional environmental pollution. See

Nav-Its, Inc. v. Selective Ins. Co. of Am., 869 A.2d 929, 938

(N.J. 2005) (collecting cases). Traditional environmental

pollution has three main features: (1) the release of a damaging

substance, (2) into the environment, (3) that causes harm

because of its presence in the environment. These attributes

align with what insurance industry drafters intended, what

“contaminant” means, and what a policyholder expects. Also,

these features match the plain meaning of pollution. See

Pollution, Black’s Law Dictionary (11th ed. 2019) (“The harmful

addition of a substance or thing into an environment.”).

Greenhouse gases, including carbon dioxide, produce

“traditional” environmental pollution. Aloha’s gasoline

produces GHGs. These gases accumulate in the atmosphere and

trap heat. Because they are released into the atmosphere and

cause harm due to their presence in the atmosphere, GHGs are

pollutants.

Hawaiʻi’s regulation of GHG emissions confirms that GHGs are

pollutants. Hawaiʻi’s Air Pollution Control law and

administrative regulations consider GHGs “air pollutants.” HRS

§ 342B-1 (2022); HAR § 11-60.1-1. Hawaiʻi’s Public Utility

Commission must consider GHG emissions and reducing fossil fuel

use in its decisions. HRS § 269-6(b) (Supp. 2021).

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This court respects climate science. We have held that the

Hawaiʻi Constitution’s right to a clean and healthful environment

includes the right to a stable climate system. Matter of Maui

Elec. Co., Ltd., 150 Hawaiʻi 528, 538 n.15, 506 P.3d 192, 202

n.15 (2022). We warned that “[w]ith each year, the impacts of

climate change amplify and the chances to mitigate dwindle.”

Matter of Hawaiʻi Elec. Light Co., Inc., 152 Hawaiʻi 352, 359,

526 P.3d 329, 336 (2023). This court understands that GHGs

cause environmental damage because of their presence in the

atmosphere.

Hawaiʻi’s Legislature has expressed the urgent need to

reduce GHG emissions. Hawaiʻi aims to achieve net-zero GHG

emissions by 2045. HRS § 225P-5 (Supp. 2022). In 2021, Hawaiʻi

declared a climate emergency. S.C.R. 44, S.D. 1, H.D. 1, 31st

Leg., Reg. Sess. (2021). The Legislature declared that GHG

emissions pose an existential threat to humanity and the natural

world. Id.

Despite this, Aloha’s argues its gasoline does not produce

“traditional” pollution, because the gasoline is combusted in

engines in a legal, ordinary, and intended way. Aloha relies on

one sentence from the Maryland Supreme Court, summarizing the

holding of other cases: “Some courts have held that products,

despite their toxic nature, are not ‘pollutants’ or

‘contaminants’ when used intentionally and legally.” Sullins v.

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Allstate Ins. Co., 667 A.2d 617, 621 (Md. 1995). In Aloha’s

view, “traditional” environmental pollution essentially means

only hazardous wastes.

This argument misunderstands what makes a substance a

pollutant. The legality, ordinariness, and intent of a

product’s use is irrelevant. Because a “contaminant” makes the

atmosphere impure, the operative question is whether a substance

causes pollution to the environment. See Cont’l Cas. Co. v.

Rapid-Am. Corp., 609 N.E.2d 506, 513 (N.Y. 1993).

Many products produce airborne pollution when used in their

intended way. Consider coal. Like gasoline, the ordinary,

legal, and intended purpose of coal is to burn it for energy.

Burning coal produces sulfur dioxide. U.S. E.P.A., What is Acid

Rain?, https://www.epa.gov/acidrain/what-acid-rain (May 7, 2024)

[https://perma.cc/W26K-ASD3]. Sulfur dioxide accumulates in the

atmosphere, reacts with other gases to form sulfuric acid, and

precipitates with water as acid rain. Id. To stop the problem

of acid rain, federal law regulates sulfur emissions from coal.

U.S. E.P.A., Acid Rain Program,

https://www.epa.gov/acidrain/acid-rain-program (Jan. 24, 2024)

[https://perma.cc/7NPB-BQMF]. No one questions that sulfur

dioxide from coal is a pollutant.

Pollution doesn’t just refer to unintended spills of toxic

substances. Many products – pesticides, aerosols, non-reef-safe

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sunscreen, and fossil fuels – are inherently polluting when used

in their intended way. What makes a product a pollutant is that

The distinction between widespread pollution and limited-

scale personal injury doesn’t help Aloha here. This is not a

personal injury case. Rather, reducing GHG emissions is the

most consequential environmental pollution issue our species has

faced.

The traditional pollution reading restricts “the

exclusion’s otherwise potentially limitless application to only

those hazards traditionally associated with environmental

pollution.” Koloms, 687 N.E.2d at 79. Because greenhouse gases

contaminate the atmosphere, they are clearly one of those

hazards. And, the alleged deceptive marketing about GHG that

forms the basis of the lawsuits falls within the scope of that

exclusion.

2. The Legal Uncertainty Rule Does Not Decide This Case

This court recognizes a “legal uncertainty” rule when

determining insurance coverage. Sentinel, 76 Hawaiʻi at 290, 875

P.2d at 907. When Hawaiʻi courts have not answered a nationally-

disputed legal question, there is, per se, a possibility of

coverage, and therefore a duty to defend. Id.

Sentinel’s logic implicitly requires one more step before

an insured triumphs by the legal uncertainty rule. The legal

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uncertainty must be relevant to determining coverage. National

disagreements about unrelated matters cannot form a possibility

of coverage. For Sentinel’s rule to apply, the legal issue must

be nationally disputed and coverage-determinative.

Nationally, there are two schools of thought on how to

interpret the pollution exclusion. Apana, 574 F.3d at 682. The

first school reads the words literally. So, for instance, there

is no coverage when a painter inhales paint fumes in a poorly-

ventilated, indoor space. The fumes are “gaseous,” “irritants,”

that are “released,” causing “bodily injury,” so they trigger

the exclusion. See id. (collecting cases); see also, e.g.,

Toledo v. Van Waters & Rogers, Inc., 92 F. Supp. 2d 44, 51

(D.R.I. 2000) (personal injury from fumes fell within pollution

exclusion, interpreted literally).

The second school views a literal reading as too broad. It

says the exclusion only applies to “traditional” environmental

pollution. The hypothetical injured painter’s lawsuit involves

a personal injury that is not “traditional” pollution. See

Apana, 574 F.3d at 682-83 (collecting cases); see also, e.g.,

Nautilus Ins. Co. v. Jabar, 188 F.3d 27, 30 (1st Cir. 1999)

(personal injury from fumes outside pollution exclusion).

Apana establishes that the meaning of the pollution

exclusion is legally uncertain in Hawaiʻi. In Apana, the Ninth

Circuit certified a question to this court on the exclusion’s

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meaning. 574 F.3d at 684. The Ninth Circuit described what it

called a “national debate” about the exclusion. Id. at 682. It

reviewed this court’s precedents and was uncertain how this

court would rule. Id. at 683-84. The certified question asked

us:

Does a total pollution exclusion provision in a standard commercial general liability insurance policy apply to localized uses of toxic substances in the ordinary course of business (such as when a plumber uses chemicals to open a clogged drain and an employee working nearby inhales the fumes and suffers injuries), or is it limited to situations that a reasonable layperson would consider traditional environmental pollution?

Id. at 684.

But this court never answered, because the case settled.

Apana v. TIG Ins. Co., No. 29942, 2010 WL 1434763, at *1 (Haw.

Apr. 7, 2010).

Since Apana, none of our cases have ruled on the pollution

exclusion. Until today, the exclusion’s meaning was legally

uncertain.

Here, though, this uncertainty is not coverage-

determinative. It is irrelevant to coverage. By both

traditional pollution and plain language readings, GHGs are

“pollutants.”

To demonstrate, we perform a plain language analysis. This

court interprets contract language according to its “plain,

ordinary, and accepted sense in common speech unless it appears

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from the policy that a different meaning is intended.” Dairy

Rd. Partners, 92 Hawaiʻi at 411, 992 P.2d at 106.

The pollution exclusion in AIG’s policies has three

elements. It precludes coverage when (1) “the actual, alleged,

or threatened discharge, dispersal, seepage, migration, release

or escape” of (2) “pollutants” (3) causes “property damage,” as

that term is defined. “Pollutants” means “any solid, liquid,

gaseous or thermal irritant or contaminant, including smoke,

vapor, soot, fumes, acids, alkalis, chemicals and waste.”

The counties’ complaints allege that Aloha “released”

“gaseous” GHGs and caused “property damage.” The focus is

whether GHGs are a “contaminant.”

Contaminate means “to make inferior or impure by

admixture,” or “to make unfit for use by the introduction of

unwholesome or undesirable elements.” Contaminate, Merriam-

Webster Dictionary https://www.merriam-

webster.com/dictionary/contaminate [https://perma.cc/CW4N-57AA].

Here, GHGs are contaminants. They enter the atmosphere. They

increase the atmosphere’s heat-trapping properties. They spoil

our planet’s climate system, destabilizing it for present and

future generations. By plain language and common sense,

greenhouse gases are “contaminants.”

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Under any plausible interpretation, greenhouse gases are

“pollutants.” Sentinel’s legal uncertainty rule does not decide

this case.

3. The Exclusion is Not Ambiguous

This court interprets ambiguities in the insured’s favor.

Hart, 126 Hawaiʻi at 456, 272 P.3d at 1223. But this court may

not “create ambiguity where none exists.” Id.

Ambiguity only arises when there are two plausible

interpretations. Sturla, Inc. v. Fireman’s Fund Ins. Co., 67

Haw. 203, 209-10, 684 P.2d 960, 964 (1984). What is ambiguous

in one context may not be ambiguous in another. See Cont’l Cas.

Co., 609 N.E.2d at 512. Because we interpret contract language,

we only consider if it is ambiguous here, not if it is ambiguous

in the abstract. MacKinnon, 73 P.3d at 1213.

Aloha makes two arguments that the exclusion is ambiguous:

(1) other courts have held that it is ambiguous in their cases

and (2) other courts have held that carbon dioxide or gasoline

are not pollutants, making the exclusion ambiguous as applied

here. Neither of these arguments are persuasive. GHGs are

pollutants under any reasonable interpretation.

Nationally, courts have found the pollution exclusion both

ambiguous and unambiguous. Compare Scottsdale Ins. Co. v.

Morrow Land Valley Co., LLC, 411 S.W.3d 184, 193 (Ark. 2012)

(finding pollution exclusion ambiguous) with Whittier Props.,

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Inc. v. Alaska Nat’l Ins. Co., 185 P.3d 84, 90-91 (Alaska 2008)

(finding exclusion unambiguous). But, because the exclusion is

contract language between individual parties, we do not consider

it ambiguous or unambiguous as an abstract principle of law.

Many courts recognize that the exclusion’s ambiguity

depends on the context. Cont’l Cas. Co., 609 N.E.2d at 512;

Crown Energy Co. v. Mid-Continent Cas. Co., 511 P.3d 1064, 1073

(Okla. 2022) (“The fact that pollution exclusions have been held

to be unambiguous in other settings does not mean that the

Pollution Exclusion here is unambiguous as applied.”).

The question here is whether the exclusion can reasonably

be interpreted two ways as applied to the counties’ lawsuits.

We believe the suits allege pollution under any plausible

reading.

The exclusion is also not ambiguous just because cases from

other jurisdictions hold that carbon dioxide or gasoline are not

pollutants. These cases do not create ambiguity here. For

example, the Wisconsin Supreme Court held that carbon dioxide

from exhaled breath that accumulated in a poorly-ventilated

office building was not a “pollutant” under the exclusion.

Donaldson v. Urban Land Interests, Inc., 564 N.W.2d 728, 732

(Wis. 1997). The court concluded that the exclusion was

ambiguous and an insured would reasonably expect coverage in

that case’s context. Id. at 732-33. But our case is different.

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We don’t construe the exclusion on a molecule-by-molecule basis.

Carbon dioxide may not be a pollutant in a single office

building, but it is when billions of tons are added to the

atmosphere every year. See Record carbon dioxide emissions

impeding progress on meeting climate goals, National Oceanic and

Atmospheric Administration (Dec. 5, 2023),

https://research.noaa.gov/2023/12/05/record-fossil-carbon-

dioxide-emissions-impeding-progress-on-meeting-climate-goals-

report/ (estimating 36.8 billion metric tons of GHGs emitted in

2023) [https://perma.cc/VDF8-5AT8].

The Alabama and Alaska Supreme Courts have held that

gasoline is not a pollutant when used for ordinary purposes, but

is a pollutant when it spills. Whittier Props., 185 P.3d at 87;

Federated Mut. Ins. Co. v. Abston Petroleum, Inc., 967 So.2d

705, 713 (Ala. 2007). Aloha misinterprets these cases. It

contends the difference between spilled and unspilled gasoline

is that unspilled gasoline is being used for its ordinary

purpose. This is the wrong distinction. The proper reasoning

is that unspilled gasoline doesn’t damage the environment, but

spilled gasoline does. See Abston Petroleum, 967 So.2d at 713.

That’s what makes one pollution and not the other.

The exclusion is not ambiguous as applied to GHGs.

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4. Aloha Could Not Reasonably Expect Products Liability Coverage for Pollution

This court construes an insurance policy to protect a

policyholder’s objectively reasonable expectations. Del Monte,

117 Hawaiʻi at 368, 183 P.3d at 745. Aloha argues that it

reasonably expected coverage for the counties’ lawsuits, because

AIG’s insurance policies cover products liability. Gasoline is

Aloha’s product. So, Aloha contends, denying AIG’s duty to

defend a products liability suit regarding Aloha’s gasoline

would undercut its expectation of coverage.

The problem with this argument is that it renders the

pollution exclusion meaningless. Imagine Aloha negligently sold

a customer defective gasoline and it destroyed the customer’s

engine. No question, products liability insurance would cover

that. But gasoline may create damage in other ways. It may

cause environmental contamination, because it spills and needs

to be cleaned up or because it is burned and contaminates the

atmosphere. In these contexts, a reasonable insured would

understand the spilled or burned gasoline as pollution.

Aloha reasonably expects coverage for product hazards that

are not pollution. If a business sells a product that is

inherently polluting, that fact must be part of its reasonable

expectation. To hold otherwise would write the pollution

exclusion out of the policy.

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IV. CONCLUSION

We answer the first question Yes. An “accident” includes

We answer the second question Yes. Greenhouse gases are

John M. Sylvester /s/ Mark E. Recktenwald (C. Michael Heihre, Michi /s/ Sabrina S. McKenna Momose on the briefs) for appellant /s/ Todd W. Eddins /s/ Vladimir P. Devens Christopher St. Jeanos (Terence J. O’Toole, Kari K. Noborikawa, Joseph T. Baio, Amy J. Collins Cassidy, Elizabeth J. Bower on the briefs) for appellee

Wayne R. Wagner, Edmund K. Saffery, Deborah A. DiCristofaro, Laura A. Foggan for amici curiae Complex Insurance Claims Litigation Association and American Property Casualty Insurance Association

Tred R. Eyerly, John N. Ellison, Luke E. Debevec, Rukesh A. Korde, Judy Baho for amicus curiae United Policyholders