Ninth Circuit Affirms that Insurers Must Defend Against Environmental Agency Demand Letters

By Kevin Clonts

In a May 11, 2016 unpublished opinion, the Ninth Circuit Court of Appeals affirmed a decision by the District Court of Oregon that an insured’s receipt of a request for information from the U.S. Environmental Protection Agency (EPA) is a “suit” for insurance purposes, thereby triggering a defense duty.

The insured, Ash Grove Cement Company, operates two cement plants that are within the Portland Harbor Superfund Site. Ash Grove received a request for information from EPA pursuant to section 104(e) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). When Ash Grove forwarded the 104(e) letter to its insurers, they denied defense, arguing that the letter was not a “suit” that triggered the defense duty under the insurance policies.

The District Court rejected this argument, holding that “[a]n administrative agency's requirement that a property owner clean up environmental contamination constitutes a ‘suit’ within the terms of an insurer's duty to defend.” Ash Grove Cement Co. v. Liberty Mut. Ins. Co., 2010 U.S. Dist. LEXIS 103763 (D. Or. Sept. 30, 2010). The court also relied on ORS 465.480, which defines a “suit” in the environmental context to include “administrative proceedings and actions taken under Oregon or federal law.”

The Ninth Circuit also rejected the insurance carriers’ argument, holding that a 104(e) letter is a “coercive information demand[]” that is “an attempt to gain an end through legal process,” and is therefore a “suit” under Oregon law. By doing so, the court reaffirmed its holding in Anderson Bros., Inc. v. St. Paul Fire & Marine Ins. Co., 729 F.3d 923, 932-33, 935 (9th Cir. 2013).

This decision reaffirms that, in the environmental context, a request for information or action issued by a federal or state agency is a “suit” that triggers an insurer’s duty to defend.

The Ninth Circuit opinion can be found here:

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