The Hawaiʻi Supreme Court heard oral arguments this week on whether insurance providers must pay the legal fees of oil companies facing ongoing climate litigation.
Aloha Petroleum is a named defendant in Honolulu City and County’s and Maui County’s cases that allege several major players in the oil industry promoted disinformation about the role of fossil fuels in causing climate change.
Aloha Petroleum has filed a lawsuit against its insurance providers, National Union Fire Insurance and American Home Assurance, for breach of contract. The complaint states that the defendants failed in their duty to provide coverage for Aloha Petroleum’s legal defense costs, as laid out in its liability policy. As of April 2023, Aloha Petroleum stated that it incurred $1,400,000 in fees.
Counsel for insurance providers has argued that the costs of Aloha Petroleum’s climate litigation are not covered under its liability policy. In their view, the oil company intentionally took action that it knew would cause harm when it promoted fossil fuel products that contribute to climate change.
“The concept is that you can't decide you're going to burn down a house, go buy an insurance policy for the house, and then burn it down and collect the insurance,” said John Ellison, a senior partner at the law firm Reed Smith.
Aloha Petroleum said that until it is determined in a court of law that they had an intent to do harm with their actions, their insurance provider has a “duty to defend” them. Ellison filed an amicus brief in support of Aloha Petroleum’s argument.
“Historically, these types of claims get defended by insurance companies at the insurance companies expense,” Ellison said.
Ellison acknowledged that at the end of the day, Aloha Petroleum may be facing costs that don’t fall under their policy’s purview.
“But until that day happens, [the insurance companies] should be paying for the defense of these claims that are being brought against their policyholders,” Ellison said.
Ultimately, it will be up to the Hawaiʻi Supreme Court to determine whether Aloha Petroleum’s behavior crossed the line from reckless or negligent to knowingly harmful.
In oral arguments before the Hawaiʻi Supreme Court on Tuesday, counsel for Aloha Petroleum raised concerns that if the justices determined that the defendants did not have to pay, that could complicate liability claims for other Hawaiʻi policyholders down the line.
“I think that will set an industry position where they will never accept anything voluntarily, and it means every policyholder is going to have to fight them,” Ellison said.
The Hawaiʻi Supreme Court does not have a deadline by which it needs to issue a decision on this case, but Ellison said he anticipates a determination will be made by the end of the summer.
“Somebody on that court is really interested in this issue, and then they set a very fast briefing schedule,” Ellison said. “I really think that they want to decide this quickly.”
