Ninth Circuit Court of Appeals Affirms that EPA Letters Regarding Potential CERCLA Liability Trigger Insurers' Duty to Defend
The Ninth Circuit Court of Appeals affirmed a judgment from the District of Oregon in Anderson Brothers, Inc. v. St. Paul Fire & Marine Insurance Co., 12-35346, wherein the District Court held that the Defendant, St. Paul Fire & Marine Insurance (hereinafter "St. Paul"), breached its duty to defend plaintiff, Anderson Brothers (hereinafter "Anderson"), when it refused to provide a defense after the insured received two (2) letters from the Environmental Protection Agency (EPA) notifying the insured of its potential liability under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The District Court held that the two (2) letters constituted "suits" under the policy and therefore should have triggered St. Paul's duty to defend. The Ninth Circuit affirmed this decision.
In January 2008, Anderson received a letter from the EPA notifying the company of its potential liability under CERCLA for environmental contamination of the Portland Harbor Superfund Site. CERCLA establishes a retroactive strict liability regime that imposes joint and several liability upon past and current landowners or operators of properties or facilities from which hazardous substances have been released or disposed into the environment. This first letter received required Anderson to submit an extremely detailed response to a questionnaire about its activities at its properties, under threat of severe civil penalties. St. Paul had issued two (2) comprehensive general liability policies (hereinafter the "Policies") to Anderson, providing coverage for damages arising from "occurrences" that happened between January 1979 – 1980 and January 1980 – 1981 for the Superfund Site that required St. Paul to defend against any "suit." Anderson provided the first letter to St. Paul and requested that St. Paul provide a legal defense and indemnity pursuant to its contractual duty to defend, however, St. Paul declined to provide a defense. In November 2009, Anderson received a second letter from the EPA identifying Anderson as a potentially responsible party (hereinafter "PRP") and encouraging Anderson to participate in settlement negotiations with the other PRPs. Anderson provided the second letter to St. Paul and again requested that St. Paul provide a legal defense under its contractual duty to defend. St. Paul again declined to provide a defense.
Anderson brought an action in the District of Oregon, alleging that St. Paul breached its duty to defend under the Policies by refusing to provide Anderson with a legal defense in response to each of the two (2) letters. In the District Court, St. Paul argued that they denied coverage because the two (2) letters received were not "suits" because they were not filed in a court of law and therefore, St. Paul was not required to defend. The District Court Judge ruled that both letters from the EPA were in fact "suits" and triggered St. Paul's duty to defend.
The Ninth Circuit Court of Appeals affirmed the District Court's decision, stating that each letter received by Anderson put the party on notice of the EPA's belief that Anderson was responsible for the release or disposal of hazardous substances at the Superfund Site and of its intent to pursue compensation for Anderson's alleged role in such releases or disposals. The Ninth Circuit also concluded that the letters constituted a "suit" and triggered St. Paul's duty to defend under the Oregon Environmental Cleanup Assistance Act (OECAA) because the letters described an action or agreement by the EPA that was against or with the insured in which the EPA in writing directed, requested or agreed that the insured take action and that such action be with respect to contamination within the State of Oregon.
Finally, the Ninth Circuit stated that the term "suit" is ordinarily ambiguous in Oregon courts, and can reasonably be interpreted to include "any attempt to gain an end by any legal process." The Ninth Circuit stated that each letter sent by the EPA was in fact an effort to gain an end by a legal process and therefore, the letters were within the scope of ambiguity of the term "suit" and triggered St. Paul's duty to defend.
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