The Ninth Circuit held there is a duty to defend not only a PRP letter issued by the EPA, but also a section 104 (e) letter. Anderson Brothers, Inc. v. St. Paul Fire and Marine Ins. Co., 2013 U.S. App. LEXIS 18156 (9th Cir. Aug. 30, 2013).
The insured received two letters from the EPA notifying it of potential liability under CERCLA for environmental contamination of the Portland Harbor Superfund Site. The first letter was received in January 2008, and stated that the EPA sought the insured's cooperation in its investigation of the release of hazardous substances at the site. The letter enclosed an extensive, 82-question "Information Request" seeking information about the insured's current and former activities at the site. The letter informed the insured that its voluntary cooperation was sought, but compliance with the Information Request was required by law and failure to respond could result in an enforcement action and civil penalties of $32,500 per day. The insured tendered the 104 (e) letter to St. Paul and requested a defense and indemnity pursuant to the CGL policy. St. Paul declined to provide a defense because the letter did not constitute a "suit," which was required by the policy to trigger the duty to defend.
The second letter from the EPA, received in November 2009, was entitled "General Notice Letter for the Portland Superfund Site" and notified the insured that it was a "potentially responsible party" ("PRP"). The letter further stated PRP's may be required to take action to clean up the Site as ordered by the EPA and to reimburse the EPA for its own expenditures in cleaning the site. Finally, the letter encouraged the insured to communicate with the other PRPs to work together to allocate the cleanup costs and work through intra-party issues. The General Notice letter was also tendered to the insurer, but St. Paul once again refused to provide a defense.
The insured sued St. Paul for breach of duty to defend. The district court granted the insured's motion for partial summary judgment, concluding that both letters triggered St. Paul's duty to defend.
The 9th Circuit affirmed. A majority of courts held that a policyholder's receipt of a PRP notice from the EPA was the functional equvalent of a suit. The 9th Circuit had so held under Idaho law in Aetna Cas. & Sur. Co. v. Pintlar Corp. 948 F.2d 1507 (9th Cir. 1991). There was no reason to decide differently under Oregon law. Under an Oregon statute, any action by the EPA against an insured in which the EPA directed or requested that an insured take action was the equivalent of a suit. Both the 104 (e) letter and the General Notice Letter constituted "suits" within the meaning of this statute.
The court rejected St. Paul's argument that applying the Oregon statute to existing policies violated the contracts clause of the federal and state constitutions. Absent the statute, the court would construe the policies against St. Paul because Oregon common law had determined the word "suits" was ambiguous in the environmental context.
Thanks again to my Damon Key blogging colleague, Robert Thomas (www.inversecondemnation.com), for flagging this case.
