McGinnes Industrial Maintenance Corporation v. the Phoenix Insurance Company and the Travelers Indemnity Company
477 S.W.3d 786
| Tex. | 2015Background
- McGinnes purchased comprehensive general liability (CGL) policies drafted in the 1960s that obligate insurers to “defend any suit” seeking damages for covered bodily injury or property damage and to indemnify for “all sums [insured] shall become legally obligated to pay as damages.”
- EPA issued pre-suit PRP (potentially responsible party) letters and unilateral administrative orders under CERCLA to McGinnes seeking remediation/cost recovery for contamination.
- Dispute: whether EPA CERCLA communications and orders qualify as a “suit” under the policies such that insurers must provide a defense.
- The majority concluded CERCLA enforcement letters/administrative proceedings can be treated as the functional equivalent of a “suit,” triggering insurers’ duty to defend; Justice Boyd dissented.
- Boyd’s dissent argues the ordinary meaning of “suit” = judicial/tribunal proceeding, the policy distinguishes “claim” from “suit,” and courts must not rewrite unambiguous policy language based on subsequent changes in law or policy preferences.
Issues
| Issue | Plaintiff's Argument (McGinnes) | Defendant's Argument (Insurers) | Held |
|---|---|---|---|
| Whether EPA PRP letters and unilateral administrative orders under CERCLA are a “suit” triggering insurers’ duty to defend | PRP letters/orders are the functional equivalent of a judicial suit and thus within “suit” | “Suit” has ordinary meaning of court/tribunal proceeding; PRP letters/orders are not suits | Majority: CERCLA enforcement proceedings can be treated as a “suit” (duty to defend). Boyd (dissent): disagrees. |
| Whether courts may treat nonjudicial administrative enforcement as a “suit” based on functional-equivalence | Functional-equivalence test should apply when administrative process imposes comparable coercive consequences | Contract language is limited to “suit”; functional-equivalence would rewrite the parties’ contract | Held: Majority adopts functional-equivalence approach for CERCLA PRP letters/orders; dissent rejects it as contract re-writing. |
| Whether changes in law (post-policy enactment of CERCLA and EPA authority) justify construing “suit” to cover modern administrative enforcement | Parties would have expected coverage for environmental enforcement; modern enforcement is analogous to suits | Policies predate EPA/CERCLA; parties could not have anticipated modern enforcement; courts cannot infer unstated intent to cover later-developed proceedings | Held: Majority relies in part on modern context; dissent holds changed legal landscape cannot rewrite unambiguous policy language. |
| Whether potential insurer duty to indemnify for cleanup (if found) requires a parallel duty to defend | If policies cover cleanup “damages,” insurers ought to have duty/role to defend to avoid perverse incentives | Duty to indemnify and duty to defend are distinct; indemnity exposure alone does not negate the clear textual limitation of the duty to defend to “suits” | Held: Majority ties indemnity concerns to defense duty reasoning; dissent emphasizes statutory/textual separation of defense and indemnity obligations. |
Key Cases Cited
- Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154 (Tex. 2003) (courts may not rewrite or add terms to contracts)
- Fiess v. State Farm Lloyds, 202 S.W.3d 744 (Tex. 2006) (parties’ intent governed by what they said, not unexpressed intent)
- Don’s Bldg. Supply, Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20 (Tex. 2008) (if policy language is unambiguous, enforce as written)
- Schwartz v. Jefferson, 520 S.W.2d 881 (Tex. 1975) (defining “suit” as a court proceeding)
- Foster-Gardner, Inc. v. Nat’l Union Fire Ins. Co., 959 P.2d 265 (Cal. 1998) (refusing to treat pre-complaint administrative notices as suits; distinguishing claim vs. suit)
- BP Am. Prod. Co. v. Burton, 549 U.S. 84 (U.S. 2006) (discussing distinction between judicial proceedings and administrative proceedings for statutes of limitation purposes)
- Gen. Elec. Co. v. Jackson, 610 F.3d 110 (D.C. Cir. 2010) (summarizing EPA's enforcement options under CERCLA and noting PRP response choices)