Opinion ID: 3050601
Heading Depth: 3
Heading Rank: 1

Heading: Duty to Defend vs. Duty to Indemnify

Text: [13] The district court held that Industrial had no duty to defend Goodstein because the policy clearly did not cover his claim for diminution in value damages. While it is true that the duty to defend does not arise for “ ‘claims which are clearly not covered by the policy,’ ” an insurer has a duty to defend whenever “the insurance policy conceivably covers the allegations.” Woo v. Fireman’s Fund Ins. Co., 164 P.3d 454, 459 (Wash. 2007) (en banc) (quoting Kirk v. Mt. Airy Ins. Co., 951 P.2d 1124 (Wash. 1998) (en banc)) (emphasis added). According to Goodstein, the DOE’s allegations of contamination created a duty to defend, because claims for environmental remediation are potentially covered under the Industrial policy. As an initial matter, we note that whether DOE’s actions in declaring the Sternoff properties polluted constituted a “suit” within the meaning of the policy is an open issue under Washington law. The Washington Supreme Court has repeatedly declined to resolve the issue. See Olds-Olympic, 918 P.2d at 928 n.7 (observing that “[c]ase law from around the country . . . is split on what constitutes a ‘suit’ for purposes of the duty to defend in environmental cleanup cases” and declining to resolve the issue); Weyerhaeuser, 874 P.2d at 148 (same). But Industrial has not argued in this court that the government’s conduct related to the polluted properties did not constitute a “suit,” so we do not endeavor to resolve the issue. Instead, we assume that the DOE designation of the property was a “suit.” [14] So assuming, the issue is whether Industrial would have been potentially liable for response costs under the policy. Because Washington courts agree that environmental 15590 GOODSTEIN v. INDUSTRIAL INDEMNITY response costs can constitute covered “damages” under CGL policies, see Boeing, 784 P.2d at 515, we are satisfied that the DOE action implicated Industrial’s duty to defend. That Goodstein ultimately did not pay any response costs is irrelevant to whether a duty to defend existed while such response costs were potentially payable, because “[u]nder Washington law, the duty to defend and the duty to indemnify are separate obligations,” Dewitt Constr. v. Charter Oak Fire Ins. Co., 307 F.3d 1127, 1137 (9th Cir. 2002), and “should be examined independently,” Weyerhaeuser, 874 P.2d at 148. However, once Goodstein sold the properties without performing any remediation, he converted the response costs, which may have been covered under the policy, into an economic loss that clearly fell outside the scope of coverage. Hence, while the duty to defend began at the time of the DOE action, it terminated upon the sale of the properties. See Overton v. Consol. Ins. Co., 38 P.3d 322, 334 (Wash. 2002) (“An insurer’s duty to defend is a continuing one, and does not end until the underlying action is resolved or it is shown that there is no potential for coverage.”) (emphasis added). We therefore analyze the duty to defend solely with respect to the time period from the DOE action up to the sale of the properties.