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Texas Supreme Court Rules that CERCLA PRP Letters and Enforcement Proceedings Are “Suits” Subject to the Duty to Defend Under Standard CGL Insurance Policies

On June 26, 2015, the Texas Supreme Court held that enforcement proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”)—including the issuance of a “PRP letter” notifying the recipient that it is a potentially responsible party—constitute a “suit” subject to the duty to defend under standard commercial general liability insurance policies, joining the substantial majority of courts that have considered the issue. McGinnes Indus. Maint. Corp. v. Phoenix Ins. Co., No. 14-0465 (Tex. June 26, 2015).

While acknowledging that “‘suit’ commonly refers to a proceeding in court,” the court held that the enactment of CERCLA effectively redefined the term to include suit-like activities by the U.S. Environmental Protection Agency (“EPA”) such as requests for information, invitations to settle, the issuance of administrative orders, and the imposition of sanctions. Slip Op. at 8-9. Reasoning that the intent of CERCLA was not to impact insurance but instead to “streamline” cleanup of contaminated sites, the court held that these suit-like activities “are the suit itself, only conducted outside a courtroom.” Id. at 9.

The court also noted that of the 16 state high courts to have previously considered the issue, only three have come to the contrary conclusion (California, Illinois, and Maine). Id. at 11-12. The last such decision, California’s, was in 1998, and since then seven state high courts have ruled in favor of insureds. Id. at 12. Texas’s decision is in line with this clear trend.

The Texas Supreme Court’s ruling confirms the benefits of an insurer’s duty to defend under historic CGL policies, where defense costs typically do not reduce policy limits, to policyholders confronting environmental liabilities.  This is a key issue for policyholders facing environmental liabilities, as it impacts an insured’s ability to negotiate with EPA and state environmental agencies to resolve cleanups without jeopardizing potential insurance recoveries.

© 2020 Beveridge & Diamond PC


About this Author

Megan R. Brillault, Environmental Law Attorney, Beveridge Diamond Law Firm

Megan Brillault represents individuals, trade associations and businesses, including Fortune 500 companies, in complex civil and criminal environmental litigation as well as insurance recovery. Versed in the complexities of e-discovery, Ms. Brillault helps clients implement cost-effective and fast-paced litigation solutions for all phases of discovery through post-trial proceedings. 

Edward Grauman, Environmental Lawyer, Beveridge & Diamond Law Firm

Edward M. Grauman’s practice focuses on high-stakes, complex commercial and environmental litigation at both the trial and appellate levels. He works with clients across a wide spectrum of industries, including chemicals, consumer products, financial services, high tech, insurance, media, oil and gas, pharmaceuticals, security services, and telecommunications. His experience across industries and subject-matter areas gives him a deep understanding of the business considerations involved in large-scale disputes and enables him to provide clients with sound strategic and tactical advice.

John Kazanjian, complex, commercial, litigation, attorney, Beveridge Diamond,

John H. Kazanjian has over thirty years of experience in complex civil and commercial litigation, including trials and appeals in federal and state courts throughout the country. He concentrates his practice on the representation of manufacturers in product liability, toxic tort and mass liability cases and policyholders in insurance coverage disputes.

Nicole Weinstein, environment, litigation, insurance attorney, Beveridge diamond

Nicole B. Weinstein focuses her practice on environmental litigation and regulatory matters, as well as insurance recovery. Prior to joining the Firm, Ms. Weinstein practiced insurance coverage with a national law firm and served as a law clerk to the Honorable Catherine M. Langlois, now retired, in the Superior Court of New Jersey, Morris and Sussex County, General Equity Division.  After her clerkship, Ms. Weinstein earned an LL.M. in environmental law from Pace University, during which time she interned with the Environmental Protection Agency, in the New York/Caribbean Superfund...