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Anderson Brothers Inc. v. St. Paul Fire and Marine Insurance Company

In Anderson Bros., Inc., v. St. Paul Fire and Marine Ins. Co., ___ F.3d ____ (9th Cir. August 30, 2013), the United States Ninth Circuit Court of Appeals affirmed the district court’s entry of judgment in favor of Anderson Brothers, Inc. (“Anderson”) regarding the duty to defend Anderson against demands made by the EPA in two separate letters regarding potential environmental contamination of the Portland Harbor Superfund site. Under Oregon law, the Ninth Circuit Court of Appeals held that the EPA letters constituted “suits” triggering a duty to defend under a general liability policy issued by St. Paul Fire and Marine Insurance Company (“St. Paul”).

The Ninth Circuit Court of Appeals described the coverage dispute as follows:

The primary question before us is whether the 104(e) Letter and the General Notice Letter are “suits” under Oregon law within the meaning of the Policies’ duty to defend. If either letter was a “suit,” St. Paul had a duty to defend Anderson, although that duty would be invoked later if only the second letter caused it to commence. Otherwise, St. Paul acted within its rights in refusing to provide Anderson with a defense.

In addition, the Ninth Circuit Court of Appeals noted the Oregon statute which defined “suit” for purposes of insurance coverage as follows:

In 1999, the Oregon legislature enacted the Oregon Environmental Cleanup Assistance Act, Or. Rev. Stat. ¶¶465.475-465.480 (“OECAA”). OECAA provides a definition for the term “suit,” and instructs courts to apply that definition when interpreting comprehensive general liability policies in cases involving administrative actions by the EPA. OECAA defines “suit” as follows:

Any action or agreement by the . . . in writing directs, requests or agrees that an insured take action with respect to contamination within the State of Oregon is equivalent to a suit or lawsuit as those terms are used in any general liability insurance policy.

Or. Rev. Stat. ¶ 465.480(2)(b). OECAA’s “savings clause,” states that the definition of “suit” applies unless the intent of the parties is shown to be contrary to the definition provided by the statute. Or. Rev. Stat. ¶ 465.480(8). Because OECAA’s statutory definition of “suit” does not apply if that definition is contrary to the parties’ intent, we first determine whether the Policies demonstrate the parties’ intended meaning of “suit,” and whether any such intent is contrary to the OECAA definition.

Thereafter, the Court of Appeals determined that Anderson and St. Paul did not express an intent contrary to the OECAA definition. Hence, the Court of Appeals applied such definition to determine whether the EPA letters qualified as suits triggering a duty to defend under the St. Paul policy. In that regard, the Court of Appeals found as follows:

Under Section 2(b) of OECAA, a particular communication between EPA and an insured entity is a “suit” if it is (1) an “action or agreement” by the EPA (2) that is “against or with” the insured (3) in which the EPA “in writing directs, requests or agrees” that the insured “take action” (4) and that such action be “with respect to contamination within the State of Oregon.” Or. Rev. Stat. ¶ 465.480(2)(b). We analyze each element in turn.

First, the EPA’s sending of each letter constituted “action.” The word “action” has both an informal and a more formal, legalistic meaning. See Webster’s Third New International Dictionary 21 (3d unabridged ed. 2002); see also Black’s Law Dictionary 31 (8th ed. 2004). It is clear that the Oregon legislature intended that, in the context of OECAA, the term “action” have its less formal definition. Section 2(b) refers to “actions or agreements” in which the EPA “directs, requests or agrees” that the insured entity take action. Or. Rev. Stat. § 465.480(2)(b) (emphasis added). A formal legal proceeding would not result in a “request” by the EPA that the insured act in a particular fashion. The statute’s use of the verb “request” makes sense only if “action” has its less legalistic meaning. In addition, the use of the term “action” elsewhere in the statute proves that “action” does not mean “formal legal proceeding.” Section 465.480(1)(a) expressly treats as separate categories “formal judicial proceedings” and “administrative proceedings and actions taken. . . under federal law.” (emphasis added). Thus, we construe the term “action” broadly in § 465.480(2)(b) as well. Applying a broad definition of “action,” we have no trouble concluding that the EPA’s sending of both the 104(e) Letter and the General Notice were “actions.”

Second, both letters are actions by the EPA “against” Anderson. “Against” means “in opposition or hostility to.” Webster’s Third New International Dictionary 39 (3d unabridged ed. 2002). There is no question that each letter is hostile to Anderson and in opposition to its interests.

Third, each letter also “directs” or “requests” that Anderson “take action.” While one might dispute whether the letters “direct” that Anderson do anything, there is no question that they “request” that it do so. The 104(e) Letter is explicit: “of cooperation” with a PRP letter “may expose the insured, and potentially its insurers, to much greater liability, including the EPA’s litigation costs”).

Forth, the actions requested by the EPA in the two letters are plainly “with respect to contamination in the State of Oregon.” They concern nothing but contamination at the Site, Anderson’s potential liability for such contamination, and EPA’s efforts to clean up the contamination.

Accordingly, we hold that both the 104(e) Letter and the General Notice Letter constitute “suits” within the meaning of OECAA.

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