Environmental Insurance Coverage

The proposals form part of the Green Deal Industrial Plan and aim to scale up technology and materials for the energy transition.

By Paul A. Davies, Beatrice Lo, JP Sweny, Alexander Buckeridge-Hocking, Michael D. Green, and James Bee

On 16 March 2023, the European Commission (Commission) formally proposed two legislative initiatives and announced the development of a European Hydrogen Bank as part of its program to enhance the EU’s competitiveness in green technologies and support its transition towards net zero greenhouse gas emissions by 2050.

Companies facing products or environmental liability claims should immediately consider insurance coverage from current and historical policies in light of applicable state law.

By Christine G. Rolph and Laura J. Glickman

In recent months, the highest courts of several US states have issued important pro-policyholder decisions on insurance coverage issues. The following three cases illustrate important points for policyholders:

1. Xia v. ProBuilders: The Pollution Exclusion Has Limits

The Washington Supreme Court recently addressed the scope of the pollution exclusion in comprehensive general liability (CGL) policies in Xia v. ProBuilders Specialty Insurance Co. RRG, 400 P.3d 1234 (Wash. 2017). The Court recognized that pollution exclusions are “an important tool for insurers to avoid liability stemming from loss caused by pollutants acting as pollutants where the insured paid no premiums for such coverage.” The Court noted, however, that the ProBuilders pollution exclusion clause did not exclude all pollution. Under Washington law, the rule of efficient proximate cause provides coverage “where a covered peril sets in motion a causal chain.” The Washington Supreme Court held that, so long as the initial event in a causal chain is a covered risk, an insured has coverage under the policy regardless of whether subsequent events within the chain are excluded by the pollution exclusion.

In Xia, the Court considered the injuries of a policyholder stemming from the negligent installation of a water heater that led to a release of carbon monoxide gas. The Court recognized that carbon monoxide released into a home was a “pollutant” within the meaning of the pollution exclusion, since it was a gaseous vapor or fume that could adversely affect human health. But the efficient proximate cause of that release and the policyholder’s injury was the negligent installation of the water heater, which was a covered peril. The pollution exclusion did not eliminate coverage just because an uncovered peril appeared later in the causal chain. The Court thereby forestalled the insurer’s attempt to overuse the pollution exclusion to improperly deny coverage.