David A. O’Neill, JD
On February 10, 2017, the U.S. District Court for the Western District of Washington issued its opinion in King County v. Travelers Indemnity Co. et al. The District Court held in that case that letters from state and federal regulatory authorities designating the County as a PRP at a property damage site were the “functional equivalent of a suit,” triggering its insurers’ duty to defend under its historical general liability insurance policies.
Although its insurers argued that mere PRP notice letters were not “adversarial and coercive” enough to trigger a duty under their policies, the District Court found that the USEPA and Washington State Department of Ecology had “assumed an adversarial posture by exercising their statutory authority to designate King County as a strictly-liable PRP.” In its opinion, the court reasoned: “Once a party bears the scarlet letters ‘PRP,’ it may be called upon at any time to assume responsibility for the cleanup effort.”
Noting that both CERCLA and the Washington state MTCA are “strict-liability schemes that require responsible parties, once notified, to participate in and fund all remedial action,” the District Court found that once notified, “It makes no difference whether an insured voluntarily cleans up contamination or waits until government intervention—it is liable either way.”
The King County decision relied on the Washington Court of Appeals 2014 ruling in Gull Industries v. State Farm. In that case, the court had found that the term “suit” in general liability policies was ambiguous and may encompass claims for administrative enforcement actions if they are “adversarial and coercive” in nature. Noting that the Gull Industries decision had gone for the insurer, Travelers argued that the PRP notices in the King County case were “exactly the type of letter that the Gull court expressly found did not trigger a duty to defend.” The District Court however distinguished between the letters in Gull and those in King County, noting that the agency letters to Gull Industries stated that it had not yet determined that it was a PRP, while in the King County case the PRP designation was clear. The DOE’s letter in Gull had been a “passive acknowledgement” that voluntary remediation was underway. The Kings County letters clearly identified it as a PRP.