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September 2013

Under Oregon Law, EPA Letters Are “Suits” Triggering Liability Insurer’s Duty to Defend

On Aug. 30, the Ninth U.S. Circuit Court of Appeals held that a liability insurer had a duty to defend its insured against two letters from the Environmental Protection Agency (EPA) under Oregon law.  The EPA letters notified the insured of its potential liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court found that these letters qualified as “suits” within the meaning of the at-issue liability policies.

In Anderson Brothers, Inc. v. St. Paul Fire and Marine Ins. Co., et al., Anderson owned and leased certain properties falling within the boundaries of the Portland Harbor Superfund Site.  Anderson received two letters from the EPA notifying Anderson of its potential liability under CERCLA for environmental contamination of the site.  

The first letter, sent in January 2008, issued by the EPA pursuant to §104(e) of CERCLA, required Anderson to respond to a questionnaire about Anderson’s operations at the properties.  The 104(e) letter advised that while the EPA was seeking Anderson’s voluntary cooperation, compliance with the request was required by law and failure to respond could result in an enforcement action and civil penalties of $32,500 per day for noncompliance.

Anderson tendered the 104(e) letter to its commercial general liability insurer, St. Paul. St. Paul declined to defend on the basis that pursuant to the terms of the policies issued to Anderson, St. Paul was obligated to defend only “suits” and the EPA letter was not a “suit.”

In November 2009, Anderson received a second letter from the EPA titled “General Notice Letter for the Portland Harbor Fund Site,” in which the EPA explained that under CERCLA, parties identified as “potentially responsible parties” (PRPs) may be required to clean up environmental contamination, reimburse the EPA for cleanup costs, and pay damages for contamination.  The EPA identified Anderson and a company it formerly owned as PRPs with respect to the site.  

The notice letter enclosed a list of other PRPs for the site and encouraged Anderson to communicate with a “Convening Group” in which the PRPs “work together” to allocate cleanup costs and “prepare for future negotiations with the EPA for performance of the cleanup and reimbursement of response costs.”  The EPA also advised that by participating in the Convening Group, Anderson would “avoid litigation and significant transaction costs.”

Anderson tendered the notice letter to St. Paul again seeking a defense.  St. Paul declined based on the lack of a “suit” within the meaning of its policies.

Anderson sued St. Paul in district court, alleging St. Paul breached its duty to defend Anderson with respect to the two EPA letters.  Both parties moved for summary judgment.  The district court granted Anderson’s motion, finding that both letters triggered St. Paul’s duty to defend.  St. Paul appealed.

A three-judge panel from the Ninth Circuit unanimously affirmed the district court’s order.  The Ninth Circuit agreed that “in light of CERCLA’s unique liability regime, which is designed to promote settlement with the EPA instead of litigation,” the EPA letters qualified as “suits.”  The Ninth Circuit explained the importance of a PRP’s participation in early settlement talks given that “non-settling PRPs may be held jointly and severally liable for the entire amount of the response costs minus the amount of the settlement.” For that reason, the Ninth Circuit chose to follow those other courts that have concluded that an insured’s receipt of a PRP notice from the EPA “is the functional equivalent of a ‘suit.’ ” 

The Ninth Circuit found no reason to reach a different result under Oregon law.  It noted two decisions from Oregon appellate courts that found the term “suit” as used in liability policies ambiguous.  It also found support in the Oregon Environmental Cleanup Assistance Act, which defined the term “suit” as used in liability policies to include actions by the EPA in which an insured was directed to take action with respect to contamination in the state of Oregon.  

The Ninth Circuit rejected St. Paul’s argument that the EPA letters were only “claims” and that the policies’ defense provisions distinguished between “suits” and “claims” and obligated St. Paul to defend only “suits.”  The Ninth Circuit found that the term “claim” as used in the policies referred to “normal demand letters” and that the EPA letters were not normal demand letters because they sought to “hold property owners strictly liable for environmental contamination.” 

The Ninth Circuit also rejected St. Paul’s argument that even if the EPA letters were “suits” they did not trigger coverage under the policies because the letters did not seek the payment of “damages” for property damage.  The Ninth Circuit found that because “the letters alleged conduct covered under the policies,” St. Paul’s duty to defend was triggered.    

Click here for the opinion.

The opinion in Anderson Brothers, Inc. v. St. Paul Fire and Marine Ins. Co., et al. (August 30, 2013) (9th Cir. 2013) 2013 U.S. App. LEXIS 18156 is not final.  It may be modified on rehearing or review may be granted by the U.S. Supreme Court.  These events would render the opinion unavailable for use as legal authority.

This and other case bulletins, as well as other publications of Gordon & Rees LLP, may be found at


Matthew S. Foy
Laura G. Ryan