Sunoco Subsidiary Sues AIG’s National Union Over Climate Change Lawsuit Coverage

Sunoco subsidiary Aloha Petroleum has filed a federal lawsuit in Hawaii against AIG’s National Union Fire Insurance Company of Pittsburgh, saying the insurer has breached its duty to defend Aloha against climate change lawsuits brought by local governments in Honolulu and Maui.

According to the lawsuit filed in U.S. District Court for the District of Hawaii, Aloha was denied coverage for defense and indemnity by National Union under the “qualified pollution exclusion.”

In March 2020, the city and county of Honolulu, the Honolulu Board of Water Supply, and the county of Maui filed lawsuits in state court against Sunoco and other oil companies, seeking to hold them accountable for the impacts of climate change – and unspecified compensatory damages. Similar suits have been filed by state and local governments across the country.

The local governments “allege that fossil fuel products, when used in the ordinary course, have contributed to emissions of carbon dioxide, and other greenhouse gases – and that the use of those products by the public have contributed to global warming,” resulting in injury and damage, Aloha outlined in its filing. In March, a state Circuit Court judge said the case could proceed to trial.

Aloha said it disputes the claims and has spent over $880,000 in costs – and will continue to incur costs – in defense of the climate change lawsuits.

The commercial general liability occurrence-based policies in question were issued between 1978 and 1985 to Aloha’s then-parent E-Z Serve Inc. Aloha said National Union could not find policies issued in 1978, 1980 and 1984 (the earlier two from Landmark Insurance Co.) but did find the 1985 contract and denied coverage in April 2021. Aloha said it assumes the same denial would apply to the other policies but added that it is entitled to a defense under one or more of the policies.

“Aloha’s alleged liability arising out of the climate change lawsuits, as well as Aloha’s costs of defending against those lawsuits, are within the coverage provided by the AIG policies,”

According to Aloha, the policy says the insurer “shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false, or fraudulent.” Additionally, the policy “specifically provides coverage for ‘products hazard’ which includes bodily injury or property damage arising out of the named insured’s products,” said Aloha.