(Article from Insurance Law Alert, September 2016)
For more information, please visit the Insurance Law Alert Resource Center. Addressing a matter of first impression under New Jersey law, a New Jersey trial court ruled that a PRP letter is a “suit” for purposes of triggering an insurer’s duty to defend. Cooper Indus., LLC v. Employers Ins. of Wausau a Mut. Co., 2016 WL 4581506 (N.J. Super. Ct. Essex Cnty. Aug. 30, 2016).
The Environmental Protection Agency identified Cooper as a “potentially responsible party” for contamination at a particular site. The notice alleged that Cooper was responsible for remediation of the site and requested participation in a group settlement. The EPA warned that Cooper’s failure to comply would result in enforcement proceedings under CERCLA. Cooper sought a defense from OneBeacon under a general liability policy. OneBeacon refused to defend on the basis that no “suit” had been filed, as required by the policy. Cooper thereafter sought a declaration that OneBeacon was required to pay the costs of defending the PRP letter, among other things. The court granted Cooper’s partial summary judgment motion, ruling that a PRP letter triggers an insurer’s duty to defend.
The court rejected OneBeacon’s “plain meaning” approach to the term “suit” and instead joined the “majority of courts” in concluding that a PRP letter is a suit for purposes of an insurer’s defense obligation. In particular, the court cited the Texas Supreme Court’s decision in
McGinnes Indus. Maint. Corp. v. Phoenix Ins. Co., 477 S.W.3d 786 (Tex. 2015) (discussed in our
July/August 2015 Alert), which reasoned that EPA proceedings are not merely the functional equivalent of a suit, but rather “are the suit itself, only conducted outside a courtroom.” The court expressly distinguished other administrative actions that involve voluntary conduct, which are not considered to be “suits” under New Jersey law, noting that PRP letters are coercive in nature.