ANDERSON BROTHERS, INC., an Oregon corporation, Plaintiff-Appellee, State of Oregon, Intervenor-Appellee, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a Minnesota Insurance Company, Defendant-Appellant.
Nos. 12-35346, 12-35454
United States Court of Appeals, Ninth Circuit
August 30, 2013
729 F.3d 923
This is precisely what the FMCSA did in this case. The Agency notified Dandino that, upon Agency approval of its name change, it had 30 days to “establish that it is in full compliance with the statute and the insurance regulations.” Dandino failed to provide evidence to the Agency that it was in compliance within the requisite 30-day period.5 Since it had not received proof of Dandino‘s compliance, the Agency revoked Dandino‘s registration. Flouting the Agency‘s decision, Dandino carried freight for hire during the period when it was not authorized by the Agency.
In response to Dandino‘s action, the FMCSA fined Dandino for violating the DOT‘s regulations. The regulation Dandino violated states that “a motor vehicle providing transportation requiring operating authority must not be operated [w]ithout the required operating authority.”
In challenging the fine imposed by the Agency, Dandino misunderstands the nature of the Agency‘s action against it. Dandino argues that it was, at all pertinent times, registered under Chapter 139, and that “the only revocation was of operating authority.” But the revocation of its “operating authority” is the very thing for which Dandino was fined, specifically for operating “without the required operating authority” in violation of
Finally, Dandino argues that it was arbitrary and capricious for the DOT to define “operating authority,” a term it uses in its regulations, to mean “registration” as defined under Chapter 139. This argument has no relevant legal support whatsoever, and Dandino cites none. Accordingly, we reject it.
DISMISSED.
Seth Row (argued), Parsons, Farnell, & Grein, LLP, Portland, OR, for Plaintiff-Appellee Anderson Brothers, Inc.
David B. Thompson (argued), Senior Assistant Attorney General, Salem, OR, for Intervenor-Appellee State of Oregon.
Thomas A. Gordon (argued) and Andrew Moses, Gordon & Polscer, LLC, Portland, OR, for Defendant-Appellant St. Paul Fire and Marine Insurance Company.
Laura A. Foggan, Wiley Rein LLP, Washington, D.C., for Amicus Curiae Complex Insurance Claims Litigation Association.
Before: ALEX KOZINSKI, Chief Judge, and STEPHEN REINHARDT, and MARSHA S. BERZON, Circuit Judges.
REINHARDT, Circuit Judge:
The Comprehensive Environmental Response, Compensation, and Liability Act,
Anderson‘s general liability insurer, Defendant-Appellant St. Paul Fire and Marine Insurance Co. (“St. Paul“), declined to provide Anderson with a legal defense. Under the comprehensive general liability policies in question, St. Paul has a duty to defend Anderson against “suits” for activi
We affirm.
I
Anderson is an Oregon corporation that owned and leased property, falling within the boundaries of the Portland Harbor Federal Superfund Site (“the Site“). St. Paul issued two comprehensive general liability policies (“the Policies“) to Anderson,1 providing coverage for damages arising from “occurrences” that happened between January 1979-80 and January 1980-81, respectively. St. Paul‘s relevant obligations under the Policies, which include a duty to defend Anderson, are as follows:
The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of: property damage to which this insurance applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the Insured seeking damages on account of such 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....
(Emphasis added.)
The EPA listed the Site as a “Superfund” site in December 2000.2 See 65 Fed. Reg. 75179, 75182 (Dec. 1, 2000). On or around January 18, 2008, Anderson received a letter from the EPA, issued pursuant to Section 104(e) of CERCLA,
Anderson tendered the 104(e) Letter to St. Paul, and requested that St. Paul provide a legal defense and indemnity pursuant to its contractual duty to defend. St. Paul declined to provide a defense.
In November 2009, Anderson received a second letter from the EPA entitled “General Notice Letter for the Portland Harbor Superfund Site” (“the General Notice Letter“). The General Notice Letter explained that under sections 106 and 107 of CERCLA,
EPA has evaluated information in connection with the investigation of the Site performed to date and believes that Anderson Brothers, Inc. and Specialty Truck Parts3 may be a PRP with respect to the Site.... EPA has reason to believe that hazardous substances have been or are being released from the facility(ies) located at [properties owned and leased by Anderson] in Portland, Oregon, into the ‘study area’ for [the Site]....
The General Notice Letter also “encourage[d] communication between [Anderson], other PRPs, and EPA” and enclosed a list “of PRPs identified to date for the Site.” The letter urged Anderson to communicate with a “Convening Group” in which “PRPs work together to allocate the cleanup costs and work through intra-party issues to prepare for future negotiations with EPA for performance of the cleanup and reimbursement of response costs after EPA has issued its Record of Decision for the [Site.]” Participation in the Convening Group “will avoid litigation and significant transaction costs to you and your company.” The General Notice Letter was a form letter, identical to the one sent out to all PRPs at the Site.
Anderson tendered the General Notice letter to St. Paul, again requesting that St. Paul provide a legal defense under its contractual duty to defend. St. Paul again refused to provide a defense.
II
Anderson sued St. Paul in district court, alleging that St. Paul breached its duty to defend under the Policies by refusing to provide Anderson with a legal defense in response to each of the two letters. After the parties filed cross-motions for summary judgment, the State of Oregon intervened on Anderson‘s behalf in order to defend the constitutionality of the Oregon Environmental Cleanup Assistance Act, which provides a legislatively-imposed definition of “suit” in comprehensive general liability policies, as discussed below.
The district judge granted Anderson‘s motion for partial summary judgment from the bench, concluding that both letters triggered St. Paul‘s duty to defend. The parties stipulated to the resulting damages in order to obtain a final judgment. St. Paul appealed.
Anderson then moved for attorney‘s fees pursuant to
III
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.
A
The Policies here are standard-form comprehensive general liability policies. See Susan J. Miller & Philip Lefebvre, 1 Miller‘s Standard Insurance Policies Annotated 421.5 (2013 Supp.) (replicating the 1973 standard form comprehensive general liability policy that was in use when the Policies were issued). Identical policies were issued by insurers nationwide at the time the Policies were purchased. Because the EPA is engaged in Superfund remediation projects across the nation, it comes as no surprise that the question whether a letter from the EPA initiating proceedings under CERCLA constitutes a “suit” has been widely litigated. This question has divided state courts as well as federal courts applying contract law of the several states.
Although the legal question here is one of state contract law, the nature of the federal CERCLA regime is relevant to the contractual interpretation issues. CERCLA imposes strict liability on all entities that have owned or operated “facilities”4 at which hazardous substances were “disposed.” See Carson Harbor Village, Ltd. v. Unocal Corp., 270 F.3d 863, 870 (9th Cir. 2001) (en banc); see also
“Once an entity is identified as a PRP,” the EPA has broad authority to compel it “to clean up a contaminated area or reimburse the Government for its past and future response costs.” Burlington Northern & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 609 (2009); see also Pakootas v. Teck Cominco Metals, Ltd., 452 F.3d 1066, 1072-73 (9th Cir. 2006) (summarizing the various tools at the EPA‘s disposal to arrange for a contaminated site to be cleaned up at PRPs’ ultimate expense). A PRP‘s failure to cooperate with any reasonable order from the EPA at a contaminated site can result in significant civil liability. See Pakootas, 452 F.3d at 1073. These broad powers give the EPA strong leverage to compel PRPs to settle. Indeed, “encourag[ing] early settlement between [PRPs] and environmental regulators” is one of CERCLA‘s central purposes. California Dep‘t of Toxic Substances v. Hearthside Residential Corp., 613 F.3d 910, 915 (9th Cir. 2010); see also Interim Guidance, 53 Fed. Reg. at 5298.
It is vital for a PRP to participate in settlement talks at the earliest possible opportunity because “[n]on-settling PRPs may be held jointly and severally liable for the entire amount of response costs minus the amount of the settlement.” United States v. Aerojet Gen. Corp., 606 F.3d 1142, 1152 (9th Cir. 2010). Furthermore, non-settling PRPs may not file a contribution action against settling PRPs “regarding matters addressed in the settlement.”
In light of the effect on a PRP of failing to voluntarily participate in CERCLA settlement negotiations, it is perhaps not surprising that the “huge majority of U.S. courts hold that a policyholder‘s receipt of a PRP notice5 from the U.S. EPA ... is the ‘functional equivalent’ of a ‘suit.‘” Land O’ Lakes, Inc. v. Employers Mut. Ins. Co. of Wis., 846 F. Supp. 2d 1007, 1020 (D. Minn. 2012) (quoting 2 Tod Zuckerman & Mark Raskoff, Environmental Insurance Litigation: Law and Practice § 12:33 (2011)); see also id. at nn. 16-17 (collecting 11 state supreme court decisions holding that PRP letters trigger “suits” and 3 state supreme courts holding to the contrary). Indeed, this court was one of the first courts to adopt that now-majority view. See Aetna Cas. & Sur. Co. v. Pintlar Corp., 948 F.2d 1507, 1516, 1517 (9th Cir. 1991) (applying Idaho law).
In Pintlar, we held, under Idaho contract law, that a PRP notice “is the effective commencement of a ‘suit’ necessitating a legal defense.” Id. We explained that once the EPA has identified a possible PRP, “[i]n order to influence the nature and costs of the environmental studies and cleanup measures, the PRP must get involved from the outset.” Id. Failure to cooperate with any requests by the EPA “may expose the insured, and potentially its insurers, to much greater liability, including the EPA‘s litigation costs.” Id. Accordingly, we held that insurance coverage “should not depend on whether the EPA may choose to proceed with its administrative remedies or go directly to litigation.” Id.
With these observations in mind, we turn to the immediate questions before us, i.e. whether there is any reason to reach a different result under Oregon law than the one we reached in Pintlar, and, if so, whether the same conclusion is justified
B
In 1999, the Oregon legislature enacted the Oregon Environmental Cleanup Assistance Act,
Any action or agreement by the ... [EPA] against or with an insured in which ... the [EPA] 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.
How to determine the meaning of a disputed term in a particular insurance policy is a question of state law. Like most states, Oregon determines the intent of parties to an insurance contract by looking first to the plain meaning of any disputed terms and then to the structure and context of the policy as a whole. See Gonzales v. Farmers Ins. Co. of Or., 345 Or. 382, 196 P.3d 1, 3 (2008); Hoffman Constr. Co. of Alaska v. Fred S. James & Co., 313 Or. 464, 836 P.2d 703, 706-07 (1992). If the parties’ intent cannot be determined by doing so, the policy is construed against the insurer, because “any reasonable doubt as to the intended meaning of [an ambiguous] term will be resolved against the insurance company and in favor of extending coverage to the insured.” N. Pac. Ins. Co. v. Hamilton, 332 Or. 20, 22 P.3d 739, 742 (2001) (quotation marks omitted); accord Hoffman, 836 P.2d at 707.
Fortunately, our task is made relatively simple by two decisions of Oregon‘s intermediate appellate court that hold the term “suit” ambiguous as used in comprehensive general liability policies not materially distinguishable from the ones at issue here. See Underwriters at Lloyd‘s London & Excess Ins. Co. v. Mass. Bonding & Ins. Co., 235 Or. App. 99, 230 P.3d 103 (2010), rev. denied, 349 Or. 173, 243 P.3d 468 (2010); Schnitzer Inv. Corp. v. Certain Underwriters at Lloyd‘s of London, 197 Or. App. 147, 104 P.3d 1162 (2005), aff‘d on other grounds, 341 Or. 128, 137 P.3d 1282
Although one definition of “suit” is that the term refers to a lawsuit, Schnitzer recognized that “[o]ne of the ordinary meanings of the word ‘suit’ is ‘the attempt to gain an end by any legal process.‘” 104 P.3d at 1168 (quoting Webster‘s Third New International Dictionary 2286 (unabridged ed. 2002)); see also School Dist. No. 1, Multnomah Cnty. v. Mission Ins. Co., 58 Or. App. 692, 650 P.2d 929, 937 (1982) (using the latter definition and referring to the 1976 edition of Webster‘s New International Dictionary). Presumably because Oregon courts are obligated to interpret a policy in the policyholder‘s favor when neither the plain language nor the structure and content of the policy evince any specific intended meaning by the parties, Schnitzer relied on the broader meaning of “suit.” 104 P.3d at 1168-69. Applying that definition, Schnitzer held that the policyholder had been subjected to an environmental “suit” because communications between itself and Oregon‘s Department of Environmental Quality “described the factual basis on which [the agency] sought to hold plaintiff liable for the cost of the environmental cleanup.” 104 P.3d at 1169.
Massachusetts Bonding reaffirmed Schnitzer, holding that
[l]ike the policies at issue in Schnitzer Investment Corp. and McCormick & Baxter Creosoting, the policies here do not define “suit.” Nor are we persuaded that any of the other terms of the policies provide sufficiently clear contextual guidance regarding the parties’ intended meaning. Accordingly, we see no reason to reach a different interpretation of the term “suit” than we reached in our previous cases.
230 P.3d at 117.
The teaching of Massachusetts Bonding and Schnitzer is that under Oregon law, at least in environmental cases, the word “suit” is ordinarily ambiguous. Therefore, such a policy necessarily does not demonstrate any intent of the parties that would be contrary to OECAA‘s statutory definition of the term. We see no reason to believe that the Oregon Supreme Court would hold otherwise.9 Accordingly, we apply OECAA‘s definition of “suit” here.10
St. Paul offers two arguments against our applying OECAA‘s definition of “suit.”
Similarly, both the 104(e) Letter and the General Notice Letter at issue here were attempts by EPA “to gain an end by a[] legal process” and, therefore, were within the scope of ambiguity of the term “suit.” The 104(e) letter compelled Anderson to respond to an intrusive questionnaire the answers to which exposed it to extensive liability—plainly an end obtained through legal process. As to the General Notice Letter, by specifically alleging that “EPA has reason to believe that hazardous substances have been or are being released” and “encourag[ing]” Anderson to communicate with “other PRPs” in order to “avoid litigation and significant transaction costs,” it left little doubt that EPA was seeking to obtain Anderson‘s cooperation through the legal process of identifying Anderson as a PRP.11 In light of the unique role settlement and coercive information demands play in CERCLA, there is little doubt that each letter was an attempt to gain an end through legal process.
Second, St. Paul points out that the Policies’ duty to defend clauses distinguish between suits (which insurers must defend) and claims (which insurers may investigate and settle, but need not necessarily defend). It argues that interpreting the letters at issue here as having triggered a “suit” effectively writes the word “claim” out of the policy because, in St. Paul‘s view, the letters at issue here are, at most, demand letters, and the word “claim” refers to pre-litigation communications such as demand letters. See, e.g., Foster-Gardner, Inc. v. Nat. Union Fire Ins. Co., 18 Cal. 4th 857, 77 Cal. Rptr. 2d 107, 959 P.2d 265, 280-81 (1998) (accepting this argument under California law); Lapham-Hickey Steel Corp. v. Protection Mut. Ins. Co., 166 Ill. 2d 520, 211 Ill. Dec. 459, 655 N.E.2d 842, 847 (1995) (same under Illinois law).
We agree with St. Paul that a “claim” can include any communication that is “a demand of a right or supposed right” or “a demand for compensation, benefits, or payment,” Webster‘s Third International Dictionary 414 (1976 ed.), and therefore includes most demand letters sent by a third party to a policyholder. St. Paul errs, however, when it suggests that classifying the two letters as “suits” rather than mere “claims” would render the term “claim” nugatory. The letters here are not normal demand letters. They are formal steps in a legal process administered by the EPA that inexorably leads to the EPA seeking to hold property owners strictly liable for environmental contamination. Therefore, treating the letters as “suits” does not diminish the meaning of the term “claim” as it is used in the Policies; “claim” continues to refer to normal demand letters.
Unlike a normal demand letter, neither letter made a demand that Anderson was free to ignore. With respect to the General Notice Letter, as we explained in Pintlar:
Unlike the garden variety demand letter, which only exposes one to a potential threat of future litigation, a PRP notice carries with it immediate and severe implications. Generally, a party asserting a claim can do nothing between the occurrence of the tort and the filing of the complaint that can adversely affect the insureds’ rights. However, in a CERCLA case, the PRP‘s substantive rights and ultimate liability are affected from the start of the administrative process.
Pintlar, 948 F.2d at 1516. Similarly, Anderson could not disregard the 104(e) letter. That letter expressly warns Anderson that its failure to respond (or its submission of an “incomplete, ambiguous or evasive” response) could result in a fine of up to $32,500 per day. No “garden variety” demand letter that is a mere “claim” could impose such a requirement upon the recipient.12 Accordingly, the Policies’ “claim or suit” language does not demand the narrow interpretation of “suit” that St. Paul urges.
C
Having concluded that Anderson and St. Paul did not express an intent contrary to the OECAA definition, we now apply the OECAA definition to that term. 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.”13
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.
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: “[Y]ou are hereby requested to respond to the Information Request attached to this letter.” (Emphasis added.) The General Notice Letter is slightly more circumspect; it “encourage[s]” Anderson to contact other PRPs to participate in settlement discussions. Nonetheless, the EPA‘s not-so-veiled threat that participation in the convening group is necessary to “avoid litigation and significant transaction costs to you and your company” leaves little question that the General Notice Letter is (at least) a request that Anderson take action. See Pintlar, 948 F.2d at 1517 (noting that “[l]ack of cooperation” with a PRP letter “may expose the insured, and potentially its insurers, to much greater liability, including the EPA‘s litigation costs“).
Fourth, the actions requested by the EPA in the two letters are plainly “with respect to contamination within 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.
D
Finally, St. Paul argues that applying OECAA‘s definition of “suit” would violate the Contracts Clauses of the United States and Oregon Constitutions because
IV
Alternatively, St. Paul argues that even if the letters are “suits,” neither triggered the duty to defend because they do not allege conduct covered under the Policies. St. Paul‘s argument is based on the fact that neither letter specifically demands that Anderson pay compensation for the release of hazardous substances from its property. St. Paul‘s factual observation is true, but its legal conclusion does not follow.14
There is no requirement under Oregon law that a suit against a policyholder contain a demand for specific damages in order to trigger the duty to defend. It is sufficient that the suit contain allegations that, if proven, “could impose liability for the conduct covered by the policies[.]” Massachusetts Bonding, 230 P.3d at 116. In determining whether a suit alleges conduct covered by the policy “[t]he insurer has a duty to defend if the complaint provides any basis for which the insurer provides coverage” and any ambiguities in the scope of coverage must be resolved in the insured‘s favor. Ledford v. Gutoski, 319 Or. 397, 877 P.2d 80, 83 (1994) (emphasis in original). The “analysis focuses on the allegations in the complaint rather than the claims identified in it.” Nat. Union Fire Ins. Co. of Pittsburgh Pa. v. Starplex Corp., 220 Or. App. 560, 188 P.3d 332, 347 (2008) (quotation marks and alteration omitted) (emphasis in original). Thus, St. Paul‘s argument that “[a]t no point do[] the [two letters] seek the payment of ‘damages’ for property damage or bodily injury” is of no avail. The letters need only allege facts which, if proven, would ultimately render Anderson liable for CERCLA damages.14 Here, interpreting any ambiguity in the letters in Anderson‘s favor, see Ledford, 877 P.2d at 83, both letters triggered the duty to defend. Each letter put Anderson on notice of the EPA‘s belief that Anderson was responsible for the release or disposal of hazardous substances at the Site and of its intent to pursue compensation for Anderson‘s alleged role in such releases or disposals. We therefore hold that both letters alleged conduct covered under the policies and,
CONCLUSION
We hold that both the 104(e) Letter and the General Notice Letter were “suits” within the meaning of the Policies. In addition, the letters alleged facts sufficient to alert Anderson to its potential liability for environmental contamination under CERCLA. We therefore hold that St. Paul breached its duty to defend Anderson. We also affirm the attorney‘s fee award in Anderson‘s favor in light of our holding on the merits.
AFFIRMED.