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Oregon's Federal District Court Rules that a CERCLA §104(e) Letter is a "Suit"

In a pair of recent decisions, Oregon's federal district court confirmed that a CERCLA §104(e) letter constitutes a "suit" for purposes of a liability insurance policy, and is sufficient to trigger the insurer's duty to defend. Century Indemnity Co v. Marine Group, LLC, 2012 WL 259988 (D. Or.); Ash Grove Cement Co. v. Liberty Mutual Ins. Co., 2010 WL 3894119 (D. Or.).

Both cases arise out of the Portland Harbor Superfund Site. In the Ash Grove case, a group of companies participating in the RI/FS for the Site identified plaintiff Ash Grove Cement as a PRP in the fall of 2006. In January, 2008, the U.S. EPA sent Ash Grove a CERCLA §104(e) information request letter. Ash Grove claimed that it incurred $750,000 in fees and costs responding to EPA's letter, and tendered these costs to defendant insurers. The insurers declined to reimburse Ash Grove, asserting that their duty to defend had not been triggered because, among other things, no qualifying "suit" had been filed.

Judge King of Oregon's U.S. District Court disagreed. The court noted that Oregon's Environmental Cleanup Assistance Act (ORS 465.480) defines "suit" to include "administrative proceedings and actions taken under Oregon or federal law." The court further noted that the statute provides that an agency's written direction or request to take action with respect to contamination "is equivalent to a suit or lawsuit as those terms are used in any general liability insurance policy." Finally, the court distinguished administrative environmental proceedings from other third-party claims, noting that in the former category of claims, the insured's substantive rights and ultimately liability are affected from the start of the administrative process. Thus, the court ruled that EPA's §104(e) letter in a very real sense triggered a proceeding – a "suit" -- in which the insured was entitled to a defense.

In the Century Indemnity Co v. Marine Group, LLC, case, the U.S. District Court followed Ash Grove in holding that a cluster of communications to the insured, including a §104(e) letter, PRP notices from third-parties, and a natural resource damage assessment notice, constituted a "suit" for purposes of a liability insurance policy.

 

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