AUSTIN Texas Supreme Court accepted certification from the Fifth Circuit Court to decide if the Environmental Protection Agency (EPA) orders a company to clean up something is that a suit.
The high court will hear this case of if an insurer has to pay for law suits that are in fact administrative actions of government agencies in Texas law. At present, a number of such decisions have been made in Texas and throughout the nation. The decisions reached before have fallen into three categories: those that require a formal complaint by the government agency, others saying if a letter has been issued by the agency that is like a suit, while others have determined that it may depend on how coercive the action is to the company before it is considered a suit.
Presented to the courts are documents that will allege that McGinnes Industrial Maintenance Corporation, a waste disposal company, removed waste from a paper mill and released it in three ponds adjacent to the San Jacinto River during the 1960s and early 1970s.
About then McGinnes purchased commercial general liability policies from Phoenix Insurance Company and the Travelers Indemnity Company. The policies provided that the insurer shall have the right and duty to defend any suit against [McGinnes] seeking damages on account of . . . property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient.
The policies in no way defined the term suit.
So, the EPA began looking into alleged pollution of the San Jacinto in 2005. By 2007 the EPA issued a Potentially Responsible Party letter contending that it had contributed to the hazardous waste contamination at the site.
The EPA demanded that McGinnes make reimbursement, prevent further contamination, and that the company fund a Remediation/Investigation/Feasibility Study.
When the company presented this to their insurance companies, insurers indicated these were not lawsuits but government suits. McGinnes then filed a declaratory judgment action seeking a ruling. They contended that a defense was owed to them based on the policy as well as payment for more than $2 million in attorneys fees from the start of the action.
A federal district court judge granted summary judgment for the insurers, determining that the EPA CERCLA Action was not a suit triggering the duty to defend. So the company appealed to the Fifth Circuit Court with the argument that suit was ambiguous in this contest but insurers argued a suit was a court proceeding.