Opinion
SCCQ-23-0000515
10-07-2024
ALOHA PETROLEUM, LTD., Plaintiff-Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, and American Home Assurance Company, Defendants-Appellees.
John M. Sylvester (C. Michael Heihre, Michi Momose, Honolulu, on the briefs) for appellant Christopher St. Jeanos (Terence J. O’Toole, Honolulu, 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, Honolulu, Laura A. Foggan for amici curiae Complex Insurance Claims Litigation Association and American Property Casualty Insurance Association Tred R. Eyerly, Honolulu, John N. Ellison, Luke E. Debevec, Rukesh A. Korde, Judy Baho for amicus curiae United Policyholders RECKTENWALD, C.J., McKENNA, EDDINS, AND DEVENS, JJ.; WITH GINOZA, J., CONCURRING SEPARATELY
CERTIFIED QUESTIONS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAI‘I (CASE NO. 22-00872 JAO-WRP)
John M. Sylvester (C. Michael Heihre, Michi Momose, Honolulu, on the briefs) for appellant
Christopher St. Jeanos (Terence J. O’Toole, Honolulu, 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, Honolulu, Laura A. Foggan for amici curiae Complex Insurance Claims Litigation Association and American Property Casualty Insurance Association
Tred R. Eyerly, Honolulu, John N. Ellison, Luke E. Debevec, Rukesh A. Korde, Judy Baho for amicus curiae United Policyholders
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 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 Hawai‘i 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 "acci- dent." "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 Hawai‘i 473, 494, 135 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.
[1] 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 Hawai‘i 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.
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 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.
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 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 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.
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 Hawai’i 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 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’ 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 Hawai‘i 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, Postal v. Strand, 405 Wis.2d 572, 984 N.W.2d 382 (2023). That case held that conduct amounting to second degree reckless homicide (recklessly causing death) may constitute an "occurrence." Id., 405 Wis.2d 572, 984 N.W.2d 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., 405 Wis.2d 572, 984 N.W.2d 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 "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, 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 Hawai'i 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 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 Hawai‘i 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.
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 Hawai‘i 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 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.
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," 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, Hawai‘i 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.
Hawai‘i’s Air Pollution Control law, Hawai‘i Revised Statutes (HRS) §§ 342B-71 (2022), 342B-72 (2022), 342B-73 (2022), and Hawai‘i Administrative Rule (HAR) § 11-60.1-1 (2014) treat GHGs as pollutants. Twenty years ago, the District of Hawai‘i relied on Hawai‘i 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).
Similarly, AIG says, federal law (42 United States Code § 7602(g)) and federal caselaw (Massachusetts v. E.P.A., 549 U.S. 497, 127 S.Ct. 1438, 167 L.Ed.2d 248 (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 Hawai'i 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.
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 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
[2] 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"?
[3] 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 Hawai‘i law.
1. The Duty to Defend in Hawai‘i Law
[4, 5] 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 Hawai‘i at 384, 538 P.3d at 1052. If there’s a possibility that an incident is covered under a policy – even a remote possibility – the insurer owes a defense. Id. at 383, 538 P.3d at 1051. This is Hawai‘i’s "stout" duty to defend. Id.
[6] 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.
[7] 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 Hawai‘i at 169, 872 P.2d at 233.
[8] Insurance policies are contracts and are interpreted using the general rules of contract construction. St. Paul, 153 Hawai‘i at 383, 538 P.3d at 1051. The possibility of coverage depends on the policy’s words. Id.
[9–11] 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 Hawai‘i 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 Hawai‘i at 383, 538 P.3d at 1051. We read the contract to the policyholder’s advantage. Id.
[12–15] The possibility of coverage also depends on the underlying complaint. Hawaiian Holiday, 76 Hawai‘i 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 Hawai'i 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 Hawai‘i 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 reasons.
[16] 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 Hawai‘i 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."
[17] 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 Hawai‘i at 494 n.8,135 P.3d at 103 n.8; 3 New Appleman on 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 Hawai‘i 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 intended" language from the definition of "occurrence" to a standalone exclusion, in line with that interpretation. Id.
[18] 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 Hawai'i 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.
First, we examine Tri-S. A Tri-S employee drilled too close to power lines. He was electrocuted. Tri-S, 110 Hawai‘i 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.
[19] "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 Hawai‘i 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.
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.
[20, 21] 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 Hawai‘i 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 practically certain, not somewhat likely. Tri-S, 110 Hawai‘i 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, Umar 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 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 foreseeable result of the insured’s own intentional acts or 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 analysis. Tri-S’ definition of an "expected" injury as "practically certain" is not in tension with Caraang.
[22] 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 Hawai‘i Ins. Co., Inc., 118 Hawai‘i 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., 283 Va. 609, 725 S.E.2d 532, 538 (2012) (Mims, J., concurring). Negligence requires foreseeability. A plaintiff has a viable negligence claim only if they allege the harm was foreseeable. Pulawa, 112 Hawai‘i 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 wrongful death. Tri-S, 110 Hawai‘i 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.
[23] 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 policy holders, and the principle of fortuity. 3. The Plain Meaning of "Accident"
AIG’s policies cover an "occurrence." The policies define an "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful 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 also Taylor Morrison Servs., Inc. v. HDI-Gerling Am. Ins. Co., 293 Ga. 456, 746 S.E.2d 587, 594 (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).
[24] This court interprets insurance policies using general rules of contract construction. Dairy Rd. Partners, 92 Hawai‘i 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 Hawai‘i 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.ee/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.
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.’ " Postal v. Strand, 405 Wis.2d 572, 984 N.W.2d 382, 393 (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 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 policy-holders 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 fortui- tous 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.
[25] 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 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.
[26] 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., 283 Va. 609, 725 S.E.2d 532 (2012). Our decision differs because Virginia law and Hawai‘i 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 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 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 Hawai‘i 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
[27] 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.
"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 pollution." Apana v. TIG Ins. Co., 574 F.3d 679, 682-83 (9th Cir. 2009) (collecting cases).
[28] 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 Hawai‘i, Ltd., 76 Hawai‘i 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.
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, 177 Ill.2d 473, 227 Ill.Dec. 149, 687 N.E.2d 72, 80 (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., 227 Ill.Dec. 149, 687 N.E.2d at 80-81. From an insurer’s view, too many courts were finding coverage. MacKinnon v. Truck Ins. Exch., 31 Cal.4th 635, 3 Cal. Rptr.3d 228, 73 P.3d 1205, 1210 (2003). Meanwhile, in 1980, Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act, expanding liability for hazardous substances. Id., 3 Cal. Rptr.3d 228, 73 P.3d at 1211. As a result, in 1985, the insurance industry revised the language, producing the "absolute" pollution exclusion. Id. 3 Cal.Rptr.3d 228, 73 P.3d at 1210. Later, insurers developed the "total" exclusion, the one included in the 2004-2010 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, 177 Ill.2d 473, 227 Ill.Dec. 149, 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.
[29] 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. 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, 31 Cal.4th 635, 3 Cal.Rptr.3d 228, 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." Irritant, American Heritage Dictionary https://www.ahdictionary.com/word/search.html?q=irritant [https://perma.cc/F3CW-N3 ES]. 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].
[30] 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. Hawai‘i law protects a policyholder’s objectively reasonable expectations. Del Monte Fresh Produce (Hawaii), Inc. v. Fireman’s Fund Ins. Co., 117 Hawai‘i 357, 368, 183 P.3d 734, 745 (2007). A policy-holder 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).
[31] 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 Hawai‘i 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, 31 Cal.4th 635, 3 Cal.Rptr.3d 228, 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.
[32] 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., 183 N.J. 110, 869 A.2d 929, 938 (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.").
[33] 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.
Hawai‘i’s regulation of GHG emissions confirms that GHGs are pollutants. Hawai‘i’s Air Pollution Control law and administrative regulations consider GHGs "air pollutants." HRS § 342B-1 (2022); HAR § 11-60.1-1. Hawai‘i’s Public Utility Commission must consider GHG emissions and reducing fossil fuel use in its decisions. HRS § 269-6(b) (Supp. 2021).
This court respects climate science. We have held that the Hawai‘i Constitution’s right to a clean and healthful environment includes the right to a stable climate system. Matter of Maui Elec. Co., Ltd., 150 Hawai‘i 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 Hawai‘i Elec. Light Co., Inc., 152 Hawai‘i 352, 359, 526 P.3d 329, 336 (2023). This court understands that GHGs cause environmental damage because of their presence in the atmosphere.
Hawai‘i’s Legislature has expressed the urgent need to reduce GHG emissions. Hawai‘i aims to achieve net-zero GHG emissions by 2045. HRS § 225P-5 (Supp. 2022). In 2021, Hawai‘i 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. Allstate Ins. Co., 340 Md. 503, 667 A.2d 617, 621 (1995). In Aloha’s view, "traditional" environmental pollution essentially means only hazardous wastes.
[34] 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., 80 N.Y.2d 640, 593 N.Y.S.2d 966, 609 N.E.2d 506, 513 (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 sunscreen, and fossil fuels – are inherently polluting when used in their intended way. What makes a product a pollutant is that it causes damage due to its presence in the environment.
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, 177 Ill.2d 473, 227 Ill.Dec. 149, 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
[35, 36] This court recognizes a "legal uncertainty" rule when determining insurance coverage. Sentinel, 76 Hawai‘i at 290, 875 P.2d at 907. When Hawai‘i 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 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 Hawai‘i . In Apana, the Ninth Circuit certified a question to this court on the exclusion’s 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."
[37] 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 from the policy that a different meaning is intended." Dairy Rd. Partners, 92 Hawai‘i 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."
Under any plausible interpretation, greenhouse gases are "pollutants." Sentinel’s legal uncertainty rule does not decide this case.
3. The Exclusion is Not Ambiguous
[38] This court interprets ambiguities in the insured’s favor. Hart, 126 Hawai‘i at 456, 272 P.3d at 1223. But this court may not "create ambiguity where none exists." Id.
[39] 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., 80 N.Y.2d 640, 593 N.Y.S.2d 966, 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, 31 Cal.4th 635, 3 Cal.Rptr.3d 228, 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., 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., 80 N.Y.2d 640, 593 N.Y.S.2d 966, 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., 211 Wis.2d 224, 564 N.W.2d 728, 732 (1997). The court concluded that the exclusion was ambiguous and an insured would reasonably expect coverage in that case’s context. Id., 211 Wis.2d 224, 564 N.W.2d, at 732-33. But our case is different. 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.
4. Aloha Could Not Reasonably Expect Products Liability Coverage for Pollution
[40] This court construes an insurance policy to protect a policyholder’s objectively reasonable expectations. Del Monte, 117 Hawai‘i 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.
IV. CONCLUSION
We answer the first question Yes. An "accident" includes recklessness.
We answer the second question Yes. Greenhouse gases are "pollutants."
CONCURRING OPINION BY GINOZA, J.
I join the majority opinion with regard to the second question (Question 2). For the first question (Question 1), I respectfully concur and write separately to more fully explain my position.
Question 1 certified to this court asks:
1) For an insurance policy defining a covered "occurrence" in part as an "accident," can an "accident" include recklessness?
For purposes of this case, I answer Question 1 "yes," so long as the harm is not expected or intended.
Coverage for indemnity and the duty to defend under an insurance policy "depends, in the first instance, on the language of the particular policy involved." Hawaiian Ins, & Guar. Co. v. Brooks, 67 Haw. 285, 289, 686 P.2d 23, 26 (1984) (citations omitted); see also Dairy Road Partners v. Island Ins. Co., 92 Hawai‘i 398, 413, 992 P.2d 93, 108 (2000).
Like the majority, I conclude this court’s decision in Tri-S Corp. v. Western World Ins. Co., 110 Hawai‘i 473, 135 P.3d 82 (2006), sets out the relevant authority on the issue. In Tri-S, the underlying claims against the insured included allegations of "wilful and wanton misconduct" which this court noted included recklessness. Id. at 493, 135 P.3d at 102. Given evidence of non-intentional conduct in Tri-S, "the possibility exist[ed] that [the insured] could be found liable for recklessness, which does not involve intent or expectation of injury[.]" Id. at 494, 135 P.3d at 103 (emphasis added). Thus, this court held that the conduct alleged in the underlying complaint constituted an "occurrence" (defined as an "accident" in the policy) for . purposes of the duty to defend. Id. at 481, 494, 135 P.3d at 90, 103.
Here, the United States District Court for the District of Hawaii (District Court) articulates an apparent conflict between Tri-S and our prior decision in AIG Haw. Ins. Co. v. Est. of Caraang, 74 Haw. 620, 851 P.2d 321 (1993). In particular, the District Court points to language in Caraang that states, for a duty to defend or indemnify to apply, "the injury cannot be the expected or reasonably foreseeable result of the insured’s own intentional acts or omissions." 74 Haw. at 636, 851 P.2d at 329 (emphasis added). The District Court questions how "recklessness" (which can be defined as consciously disregarding a known risk) can be covered under Tri-S, when Caraang states the injury cannot be the expected or "reasonably foreseeable result" of the insured’s intentional acts or omissions.
As discussed below, the passage from Caraang sought to summarize this court’s prior holdings in Hawaiian Ins. & Guar. Co. v. Blanco, 72 Haw. 9, 804 P.2d 876 (1990) and Hawaiian Ins. & Guar. Co. v. Brooks, 67 Haw. 285, 686 P.2d 23 (1984). The passage dealt with non-coverage when harm is expected or intended. The "reasonably foreseeable" language pertained to the intended harm exception to coverage, which this court in Blanco, Brooks and Caraang applied in a manner to honor the reasonable expectations of policyholders as to whether there would be coverage for dangerous intentional conduct.
In Dairy Road Partners, this court overruled Blanco and Brooks "to the limited extent that they imply that an insurer may rely upon extrinsic facts that may be subject to dispute in the underlying lawsuit as a basis for disclaiming its duty to defend where the complaint in the underlying lawsuit alleges facts within coverage." 92 Hawai‘i at 422, 992 P.2d at 117.
In Tri-S, on the other hand, conduct alleged to be reckless, that did not reach the level of expected or intended harm, was deemed an accident triggering the duty to defend.
In this light, Caraang, Blanco and Brooks are consistent with Tri-S and the "expected or intended" injury exclusions discussed in Tri-S. In footnote 8 of Tri-S, this court adopted the following standards for the "expected or intended" injury exclusions based on Indiana case law:
The intent aspect … contemplates the volitional performance of an act with an intent to cause injury, although not necessarily the precise injury or severity of damage that in fact occurs. It 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.
Expected injury means injury that occurred when the insured acted even though he was consciously aware that harm was practically certain to occur from his actions. However, the definition of expected does not exclude harm that the insured should have anticipated. Consciousness of the likelihood of certain results occurring is determined by examination of the subjective mental state of the insured.
Tri-S, 110 Hawai‘i at 494 n.8, 135 P.3d at 103 n.8 (underline emphases added) (citations, quotation marks and brackets omitted) (quoting PSI Energy, Inc. v. Home Ins. Co., 801 N.E.2d 705, 728 (Ind. App. 2004)).
Question 1 does not ask us to consider expected or intended injury exclusions, but I agree with the majority that the exclusions discussed in footnote 8 in Tri-S are relevant to setting the outer limit to an "accident" under a standard liability policy. Tri-S, 110 Hawai‘i at 494 n.8, 135 P.3d at 103 n.8. In addition to the reasons discussed by the majority on this point, PSI Energy, Inc. v. Home Ins. Co., 801 N.E.2d 705, 724 (2004) provides:
It is generally recognized that "the insurance doctrine of ‘implied exception’ serves to guard against the hazard of loss intentionally caused by the insured, or arising out of the insured’s careless lack of concern." Eric Holmes, 16 Appleman Insurance 2d § 116.1 at 6 (2000). "As used in this context, the phrase implied exception refers to a basis for an insurer’s non-liability that is not expressed anywhere in the contract but is said to be implicit in the nature of the agreement and the circumstances to which it applies." Id. (emphasis in original). Pursuant to this exception, which is predicated on an application of fortuity, even if there is no express policy language, "there is an implied exception that denies liability insurance coverage for harm ... intentionally inflicted by the insured." Id. at 8.
(Emphases added.)
I. District Court’s Order Certifying Question 1
In certifying Question 1 to this court, the District Court explains that Plaintiff Aloha Petroleum, Ltd. asserts that Defendants National Union Fire Insurance Company of Pittsburgh, PA, and American Home Assurance Company have a duty to defend in two underlying lawsuits. The District Court concludes that the parties’ dispute as to Question 1 hinges on whether recklessness can amount to an "accident," given how the term "accident" has been defined by this court.
The subject policies cover "occurrences" causing property damage during the policy period. An "occurrence" is defined to mean "accident," in relevant part, but "accident" is not further defined.
The District Court points to the discussion in Tri-S about the possibility that the defendant could be found liable for recklessness, not involving intent or expectation of injury, and thus there was a covered occurrence in that case. 110 Hawai‘i at 494, 135 P.3d at 103. Given the statement in Tri-S that "recklessness … is thus a covered occurrence," the District Court presents the conundrum that prompted Question 1:
If recklessness can be an "occurrence" ("accident") under Tri-S, then what to make of the multiple Hawai‘i Supreme Court decisions defining an "accident" to require injuries that are neither the "expected [n]or reasonably foreseeable result of the insured’s own intentional acts or omissions"? E.g., Caraang, 74 Haw. at 636, 851 P.2d at 329 (emphasis added) …. TriS says that an "accident" is not expected, as does Caraang, so no conflict there. The conflict arises from Tri-S implying that an "accident" can be the result of recklessness, and Caraang saying that an "accident" cannot be "reasonably foreseeable" from the insured’s perspective, a standard almost synonymous with the subjective foreseeability required by recklessness.
(Emphasis added) (footnote omitted).
II. Discussion
In my view, the purported conflict which prompts Question 1 arises when "reasonably foreseeable" is detached from "intentional acts or omissions" and the rest of the key passage from Caraang. The full passage from Caraang states:
The 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 foreseeable result of the insured’s own intentional acts or omissions.
74 Haw. at 636, 851 P.2d at 329. This passage in Caraang is illuminated by the context and rulings in Blanco and Brooks, which dealt with conduct where harm was either expected or intended (even if a different type of harm was intended) and this court expressed that it would honor the "reasonable expectations" of policyholders as to whether such intentional conduct or omissions would be covered or defended. See Blanco, 72 Haw. at 18, 804 P.2d at 881; Brooks, 67 Haw. at 290-91, 686 P.2d at 27-28; see also Caraang, 74 Haw. at 635-36, 643, 851 P.2d at 328-29, 332. When the full passage from Caraang is read in context with Brooks and Blanco, it fits well within the standards for expected and intentional injury exclusions later adopted by this court in Tri-S.
In Brooks, an insured driver did nothing when he was aware that a woman was being raped in the back of the truck he was driving. This court rejected his claim that he did not expect or intend the harm, noting the objectively reasonable expectations of insureds should be honored, but it was unreasonable for the insured driver to think he would be covered in this situation. 67 Haw. at 291, 686 P.2d at 27-28.
In Blanco and Caraang, insureds fired gunshots intending to frighten someone but instead an injury resulted in Blanco and a death resulted in Caraang. This court’s analysis in those cases included honoring the reasonable expectations of policyholders and, given the intentional act of firing a gun at someone, whether it was reasonably foreseeable to the insured that injury would occur.
Brooks, Blanco and Caraang applied principles that were later expressly adopted in footnote 8 of Tri-S under the "intended injury" exclusion, including inferring the intent to cause injury as a matter of law given the nature of the intentional conduct.
Regarding the intent to injure exclusion, it has been explained that:
Courts will … often infer intent to injure in circumstances where the injurious results are obvious and conclude that the act was not an "accident." For example, most states will infer intent to injure in a sex abuse case, regardless of the insured’s claim that no injury was intended.
3 Martha A. Kersey, New Appleman on Insurance Law Library Edition, § 18.02[6][c] (Jeffrey E. Thomas & Francis J. Mootz III eds., 2024). Moreover, as to situations in which courts will infer intent to injure as a matter of law,
[m]any jurisdictions have recognized that the intent to injure, especially when guns or sexual abuse are involved, can be inferred as a matter of law based on the egregious nature of the act involved and the accompanying foreseeability or certainty of harm. In these cases, courts infer intent regardless of the insured’s testimony that no harm was intended.
Id. at § 18.03[2][f] (emphases added); see also Allstate Ins. Co. v. Herman, 551 N.E.2d 844, 846 (Ind. 1990) (where insured fired four gun shots in the general direction of a group fleeing a scene, injuring an individual, the Indiana Supreme Court held as a matter of law that the insured shooter "deliberately committ[ed] an act which any reasonable person would deem calculated to cause injury[,]" and thus intentional act exclusion precluded coverage (emphasis added) (citing Auto-Owners Ins. Co. v. Smith, 376 N.W.2d 506 (Minn. App. 1985))); State Farm Fire & Cas. Co. v. Williams, 355 N.W.2d 421, 424 (Minn. 1984) (where underlying claim against insured was for the intentional act of nonconsensual sexual assault, court inferred intent to cause bodily injury as a matter of law precluding coverage and noting that "neither the insured nor the insurer in entering into the insurance contract contemplated coverage against claims arising out of nonconsensual sexual assaults"); Woida v. North Star Mutual Ins. Co., 306 N.W.2d 570 (Minn. 1981) (en banc) (where insureds armed with rifles, knowing a vehicle was occupied, proceeded with their plan to shoot at the vehicle, intent to cause injury was inferred as a matter of law); Amco Ins. Co. v. Haht, 490 N.W.2d 843, 845 (Iowa 1992) ("The intent to cause the injury may be either actual or inferred. Intent may be inferred from the nature of the act and the accompanying reasonable foreseeability of harm. In addition, once intent to cause injury is found, it is immaterial that the actual injury caused is of a different character or magnitude than that intended." (emphasis added) (citations and internal quotation marks omitted)); Am. Fam. Mut. Ins. Co. v. Wubbena, 496 N.W.2d 783, 785 (Iowa Ct. App. 1992) ("[W]e believe that it can be inferred as a matter of law that when a person shoots a bb gun at another, there is the intent to cause bodily injury. Some harm is inherent in and inevitably results from such an act. The character of the act of pointing a bb gun at another is such that physical harm can be foreseen as accompanying it." (emphasis added)).
A. Brooks
In Brooks, a woman was raped in the back of a pick-up truck and the driver, although aware of what was happening, failed to do anything. 67 Haw. at 289, 686 P.2d at 26. The woman filed an underlying lawsuit and the insurer of the truck brought a declaratory relief action which raised the following question:
We are called upon to decide whether an insurer who issued an automobile liability policy to the owner of a truck is obligated to defend and assume the liability for damages when a claim for damages is asserted against a driver who did nothing to prevent the rape of a female passenger by another passenger in the truck’s rear section.
Id. at 289, 686 P.2d at 26.
The automobile liability policy in Brooks provided coverage for "bodily injury … caused by an occurrence" and further provided that "occurrence means an accident … which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." Id. at 289-90, 686 P.2d at 26-27.
The court stated that "[w]e are guided in the task by the broad principle that the objectively reasonable expectations of policy-holders and intended beneficiaries regarding the terms of insurance contracts will be honored[.]" Id. at 290-91, 686 P.2d at 27 (emphases added) (quotation marks and brackets omitted) (quoting Robert E. Keeton, Insurance Law Rights at Variance With Policy Provisions, 83 Harv. L. Rev. 961, 967 (1970); then citing Sturla, Inc. v. Fireman’s Fund Ins. Co., 67 Haw. 203, 209–10, 684 P.2d 960, 964 (1984)). Viewing the incident from the driver’s perspective, the court rejected his claim that he did not intend or expect the rape to happen. Id. at 291, 686 P.2d at 27-28. The court pointed to the driver’s affidavit in which he acknowledged he could see the incident taking place, but did not do anything to prevent or mitigate the harm to the woman. Id. at 291, 686 P.2d at 28.
The court explained:
Given these circumstances, we can only conclude the "occurrence" in question was not one for which coverage was afforded [the driver]. From his standpoint, it was not an accident that resulted in bodily injury neither expected nor intended. Though we are committed to honor the objectively reasonable expectations of an intended beneficiary of an insurance contract … it was definitely unreasonable for [the driver] to think Continental’s automobile liability policy would protect him from liability in this instance[.]
Id. (emphases added).
In Brooks, this court thus held that the injury to the woman due to the driver’s omission to act was, from his perspective, both intentional and expected. He could not reasonably expect to be covered. This holding under the circumstances in Brooks is consistent with footnote 8 in Tri-S.
B. Blanco
Blanco involved an insured who intentionally fired a rifle toward his neighbor intending to frighten him, but instead injured the neighbor. 72 Haw. at 11, 18, 804 P.2d at 877- 78, 881. It was unclear if the neighbor was hit by a bullet or by a stone due to a ricochet. Id. at 18, 804 P.2d at 881. This court held there was no accident and thus no duty to defend. Id. The court reasoned that physical injury from the insured’s intentional act of shooting the rifle was something a "reasonable man" in the insured’s position should have anticipated, and noted its position in Brooks "that the reasonable expectation of policyholders regarding terms of insurance policies will be honored." Id. (emphasis added).
A homeowner’s policy for the insured in Blanco provided coverage for "bodily injury … caused by an occurrence" and defined "occurrence" as "an accident." 72 Haw. at 11-12, 804 P.2d at 878. The policy also had an exclusion for bodily injury "which is expected or intended by the insured." Id. at 11, 804 P.2d at 878.
Regarding the neighbor’s wife, who witnessed her husband being shot and suffered emotional distress, the evidence indicated the insured saw her and that the insured knew the neighbor had a wife. Id. This court held the harm to the wife likewise was not an accident:
regardless of whether [the insured] saw [the neighbor’s wife], it is clear that a reasonable man in [the insured’s] position, firing a rifle intentionally in the direction of a woman’s husband, would anticipate, and hence expect, that that woman might suffer emotional injury and distress at witnessing the incident. Accordingly, with respect to [the neighbor’s wife] also, there was no accident and hence no occurrence and, therefore no duty to defend.
Id.
Given the insured’s intentional act of firing the rifle at his neighbor, this court noted that it would honor the reasonable expectations of policyholders, and concluded there was no accident, even when a different harm occurred than was intended. Id. Blanco is consistent with footnote 8 in Tri-S because, although there was not an "actual intent to injure," the Blanco court essentially determined that "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." Tri-S, 110 Hawai‘i at 494 n.8, 135 P.3d at 103 n.8.
C. Caraang
In Caraang, the occupants of an insured vehicle were the driver and a passenger. 74 Haw. at 624, 851 P.2d at 324. Their vehicle was being chased by another vehicle, and the passenger in the insured vehicle fired a gun at the other driver. Id. at 625, 851 P.2d at 324. The other driver was killed. Id. At the time of the shooting, the driver of the insured vehicle did not know that his passenger had a gun. Id. at 632-33, 851 P.2d at 327. The issues before this court included whether the insurer had a duty to defend and indemnify the driver and passenger of the insured vehicle based on whether the death of the other driver resulted from "accidental harm." Id. at 635-36, 642-43, 851 P.2d at 328-29, 331-32.
In Caraang, this court analyzed auto liability coverage that was required under governing statutes. 74 Haw. at 633-35, 851 P.2d at 328. The applicable statutes required liability coverage for damages arising out of "accidental harm." Id. at 635, 851 P.2d at 328. There was also an intentional act exclusion in the policy. Id. at 624, 851 P.2d at 324.
Regarding the coverage for the driver of the insured vehicle, this court reasoned as follows:
The question whether [the other driver’s] death constituted "accidental harm" must be answered from the viewpoint or perspective of the person — in this instance, [the insured driver] — claiming the status of an insured. In this connection we have ruled that "if the insured did something or … failed to do something, and the insured’s expected result of the act or omission was the injury, then the injury was not caused by an accident and therefore not … within the coverage of the policy. …" Blanco, 72 Haw. at 16, 804 P.2d at 880 (insured fired rifle in victim’s direction, intending to frighten but instead injuring him; injury held to be reasonably foreseeable and therefore not accidental from insured’s viewpoint; consequently, insurer had no duty to defend); see also Brooks, 67 Haw. at 292, 686 P.2d at 27–28 (from perspective of insured truck driver, sexual assault of hitchhiker in rear section of vehicle by insured’s co-worker not accidental where insured aware of attack but chose not to do anything to prevent or
mitigate harm to victim, thereby facilitating commission of act; insurer held to have no duty to defend or indemnify)….. The 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 foreseeable result of the insured’s own intentional acts or omissions . The analysis thus comes full circle; whether an injury is caused by a motor vehicle "accident" or by an insured’s intentional act is determined from the viewpoint or perspective of the insured.
In the present case, the trial court’s unchallenged FOF simply do not support its conclusion that, as to [the insured driver], [the other driver’s] death did not arise out of a motor vehicle accident. On the contrary, the FOF unequivocally establish that: (1) from [the insured driver’s] perspective, the death was not the expected or anticipated result of any intentional act or omission on his part; (2) [the insured driver], being unaware the shooting was taking place, obviously made no decision to refrain from preventing [the other driver’s] death or otherwise mitigating the harm; and (3) [the insured driver] did nothing to facilitate the shooting. In fact, it appears that [the insured driver’s] constant effort was to elude [the other driver] via the instrumentality of the truck, and he was wholly unaware that [his passenger] was in possession of a firearm until after the shooting occurred. Accordingly, from [the insured driver’s] viewpoint or perspective [the other driver’s] death was accidental.
Id. at 635-37, 851 P.2d at 328-29 (emphases added). This analysis in Caraang considered whether there was accidental harm by ruling out that the other driver’s death was the expected or intended result of the insured driver’s conduct. In other words, before ultimately holding there was coverage for accidental harm, the court considered whether the death of the other driver was either expected or intended from the perspective of the insured driver. Likewise, the key passage in Caraang was addressing both of these potential reasons for there not to be accidental harm.
With respect to coverage for the passenger who shot at the other vehicle, he "claimed that he merely intended to frighten [the other driver] by striking his vehicle." Id. at 642-43, 851 P.2d at 332. In analyzing whether the other driver’s death was accidental from the perspective of the passenger, this court reasoned:
Granting, arguendo, that [the passenger] fired the gun in [the other driver’s] direction intending to frighten him, "[t]hat physical injury might result from such an action is certainly something which a reasonable man in [the passenger’s] position should have anticipated and expected." See [Blanco, 72 Haw. at 18, 804 P.2d at 881]. We hold that the trial court was correct in concluding, from [the passenger’s] viewpoint or perspective, that the shooting death of [the other driver] did not arise out of an auto accident, but rather was intentionally caused. We have recognized in the past that the objectively reasonable expectations of policyholders and intended beneficiaries regarding terms of insurance policies will be honored. See, e.g., Blanco, 72 Haw. at 18, 804 P.2d at 881; Brooks, 67 Haw. at 290–91, 686 P.2d at 27. Thus, assuming that [the passenger] was otherwise a "covered person" under the policy (an issue we need not reach in this opinion), and in light of the exclusion from liability coverage of any person who intentionally causes bodily injury, [the passenger] "could not reasonably expect to be covered or defended" with respect to [the other driver’s] death. See Blanco, 72 Haw. at 11, 15, 18–19, 804 P.2d at 878–79, 881. Accordingly, we hold that the trial court was correct in concluding as a matter of law that AIG owes [the passenger] no duty to defend and indemnify with respect to the tort claim.
Id. at 643, 851 P.2d at 332 (emphases added).
Similar to and based on Blanco, this court determined that given the passenger’s intentional act of firing a gun at the other vehicle, the death of the other driver was something a "reasonable man" should have anticipated, even if he only intended to frighten the other driver. Further, this court again articulated that it would honor the "objectively reasonable expectations of policyholders" and that the passenger could not reasonably expect to be covered. This court thus ruled "as a matter of law" that there was no coverage given the intentional act of firing the gun in this case. Because the intentional act precluded coverage, the court did not need to address whether the death was expected from the perspective of the passenger.
In sum, the "reasonably foreseeable" language in the key passage from Caraang is part of the analysis this court utilized in Brooks, Blanco and Caraang to honor the "objectively reasonable expectations" of policyholders, such that they would not be covered for dangerous intentional acts such as firing a gun at another person or allowing a woman to be raped while aware it was happening. The analysis was part of this court’s decisions to essentially infer an intent to cause harm as a matter of law, even when the insured claimed there was no intent to cause injury. In short, Brooks, Blanco and Caraang are consistent with Tri-S. In Tri-S, the holding was that reckless conduct, that did not involve intended or expected injury, was a covered occurrence or accident.
III. Conclusion
For the reasons discussed above, I respectfully concur with the majority regarding Question 1. I join the majority with regard to Question 2.