October 12

Court Decision Deals Blow to Insurers Expressing Denial of Coverage

A recent New Jersey Superior Court decision added to the growing pile of jurisdictions that recognize the insurer’s denial of a duty to their insured under the “A Potentially Responsible Party (“PRP”) letter from the regulator doesn’t trigger coverage argument” as fatally flawed.

Cooper Industries, LLC v. Employers Ins. Of Wausau a Mutual Company, et al.[i] found plaintiff Cooper Industries served with a PRP letter from the U.S. Environmental Protection Agency (“EPA”) in regards to contamination of the Passaic River in Newark. Multiple parties had been identified as potentially contributing to the 17 miles of contaminated waterway, so the EPA suggested that Cooper Industries collaborate with the other PRPs to investigate and remediate the river. They also cautioned Cooper Industries that declining to participate would end in CERCLA proceedings being brought against it. As part of its response to EPA, Cooper Industries tendered a claim to its insurer, OneBeacon Insurance Company. OneBeacon’s response was a denial of coverage, justifying it with the well-worn excuse that a PRP letter isn’t a suit and therefore doesn’t trigger coverage.

Cooper Industries filed suit against OneBeacon and the court found that not only does an EPA PRP letter function as a suit, New Jersey had recognized that for over twenty years: Morton International Inc. v. General Accident and Indemnity Company of America[ii] established that ‘the actual or threatened use of legal process to coerce payment or conduct by a policyholder’ language included in the PRP letter was sufficient to trigger coverage. EPA’s PRP letter under CERCLA certainly contains the threat of legal process, including PRPs obligation to remove and remediate contamination, CERCLA’s strict liability with very few affirmative defenses, and possibility of extensive fines and damages.

Although there are certainly legitimate exceptions to coverage, the oft-repeated contention that a PRP letter doesn’t constitute a law suit triggering coverage is slowly but surely being driven towards extinction to the benefit of policyholders nationwide. If you or your company has received an EPA PRP letter, or you feel that you may be in a position of potentially receiving one in the future, your past general liability insurance policies may be of use. The search for potentially valuable, old general liability policies is a unique part of what we offer to our clients. This court decision adds more value to our efforts to find those policies, and assist our clients through what can often times be a very difficult process.
[i] Docket No. L-9284-11
[ii] 134 N.J. 1 (1993)