September 22, 2020

Volume X, Number 266

September 22, 2020

Subscribe to Latest Legal News and Analysis

September 21, 2020

Subscribe to Latest Legal News and Analysis

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 National Law Review, Volume V, Number 183

TRENDING LEGAL ANALYSIS


About this Author

Megan R. Brillault Environmental Litigation Attorney Beveridge & Diamond New York, NY
Associate

Megan Brillault represents individuals, trade associations and businesses, including Fortune 500 companies, in complex civil and criminal environmental and toxic tort litigation, including class and mass actions.

Versed in the complexities of e-discovery, Megan helps clients implement cost-effective and fast-paced litigation solutions for all phases of discovery through post-trial proceedings. She also promotes diversity and inclusion within the firm and the legal community, working with the Leadership Council on Legal Diversity and various women's organizations.

A...

212-702-5414
John H. Kazanjian Insurance Coverage Attorney Beveridge & Diamond New York, NY
Office Managing Principal

John is one of the top-rated insurance coverage lawyers in New York, with over forty years of experience in complex civil and commercial litigation.

He helps business clients recover the insurance dollars they purchased to protect themselves from critical loss exposure when their insurance companies resist paying. John applies his mastery of insurance coverage law and a range of disciplines for each underlying matter, including environmental law, toxic tort law, and securities law, to maximize recovery.

John advises policyholders in assessing the scope of their insurance...

212-702-5420
Nicole B. Weinstein Insurance Recovery & Environmental Litigation Attorney Beveridge & Diamond New York, NY
Principal

Nicole B. Weinstein helps clients minimize and eliminate liability for contaminated sites in litigation, and to recover insurance proceeds across industries.

Nicole's practice focuses on insurance recovery and environmental litigation. She excels at identifying avenues of defense and coverage, and in distilling complicated issues into understandable terms.

Nicole has been interested in environmental matters for as long as she can remember, and has always enjoyed thinking through complex challenges. She planned to become an environmental lawyer as a student, and after...

212-702-5416