Opinion ID: 1862664
Heading Depth: 3
Heading Rank: 1

Heading: The suit issue

Text: In this case, the district court certified as doubtful the question of whether, cumulatively, the following items were tantamount to a suit that would trigger the insurer's duty to defend: (1) the May 3, 1995, letter from the United States EPA contractor notifying Jostens of a site investigation, (2) the ATEC report revealing off-site contamination, and (3) Springwood's March 1995 assertion that Jostens was obligated, as a responsible party, to fully investigate the site and study remediation options. Federated argues that there is no controlling precedent on this issue because this court has not addressed whether a combination of events may cumulatively constitute a suit. We addressed what constitutes a suit in SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 315 (Minn.1995). SCSC operated a facility that handled perchloroethylene (PCE). See id. at 308. When the Minnesota Pollution Control Agency (MPCA) found PCE contamination near the SCSC facility, it issued a Request for Information (RFI) asking SCSC to detail its PCE use. See id. at 309. Then, because SCSC indicated that PCE drippings had occurred at their facility, the MPCA required SCSC to develop remedial work plans to investigate and ameliorate PCE groundwater contamination. See id. SCSC requested reimbursement for these cleanup costs from its general liability insurers, but the insurers denied coverage. See id. After the MPCA issued a Request for Response Action (RFRA) requiring SCSC to take specific remedial action, SCSC filed suit against its insurers seeking declaratory and compensatory relief. See id. at 309-10. The district court found in SCSC's favor. On appeal, one of the insurers argued that the district court should be reversed because the RFI did not constitute a suit under the insurance policy. See id. at 315. In addressing that argument, we examined our decision in Minnesota Mining & Mfg. v. Travelers Indem., 457 N.W.2d 175 (Minn.1990) (hereinafter 3M ). There, we held that the term damages in a comprehensive general liability policy did not just refer to monetary compensation that insureds were obligated to pay for third party injuries. See id. at 178. Rather, the term damages also encompasses costs that the insured incurred while responding to state and federal agencies. See id. In SCSC, by analogy we applied this broad approach to the construction of the term damages to the interpretation of the term suit. See SCSC, 536 N.W.2d at 315. More specifically, we stated that [a]lthough we did not reach the related issue of what constitutes a suit under such a policy, it logically follows from both our analysis and our decision in 3M that the term suit, as used in a [comprehensive general liability] policy, includes actions taken by the [Minnesota EPA] in the form of an RFI. Id. In support of our holding in SCSC, we cited two cases. See id. First, we cited A.Y. McDonald Indus. v. Insurance Co. of N. Am., in which the Iowa Supreme Court cited our decision in 3M and held that an EPA demand to clean up groundwater contamination constituted a suit under a comprehensive general liability policy. 475 N.W.2d 607, 626-29 (Iowa 1991). Next, we cited the Ninth Circuit Court of Appeals decision in Aetna Cas. & Sur. Co. v. Pintlar Corp., which held that a Potential Responsible Party letter [3] issued by the EPA constitutes a suit because an ordinary person would perceive such a letter as notice of the effective commencement of a `suit' necessitating a legal defense. 948 F.2d 1507, 1516-17 (9th Cir. 1991). In light of the holding and analysis in SCSC, we conclude that SCSC provides sufficient guidance as to what constitutes a suit and that the requirement that there be substantial ground for a difference of opinion in order to properly certify a question as doubtful is not met. See Emme, 418 N.W.2d at 180. Accordingly, we hold that the district court improperly certified this issue as doubtful for the purposes of Rule 103.03(h).
The district court also certified as doubtful the question of whether Federated's duty to defend included paying all costs and fees reasonably necessary to reduce or minimize Jostens' eventual liability for damages to the State of Illinois and to Springwood. We addressed the extent to which incurred costs are defense costs in Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724, 738 (Minn.1997). Domtar operated a refining plant that was closed in 1948 and sold in 1955. See id. at 728-29. In 1987, the MPCA found that Domtar was responsible for hazardous substances found in the soil and groundwater. See id. at 729. As a result, the MPCA issued a RFRA to Domtar. See id. Domtar estimated that its liability would be $7 million, but its general liability insurers denied coverage and refused to defend. See id. Domtar filed suit against the insurers and the district court found that the insurers had breached a duty to defend and therefore owed Domtar defense costs. See id. at 730. On appeal, the insurer argued that the district court erred in concluding that investigation and compliance costs were defense costs and therefore not subject to policy deductibles or liability limits. See id. at 738. Instead, the insurer argued that such costs were required by the RFRA, were a necessary part of the remediation, and were therefore indemnity costs. See id. at 737-38. We affirmed the district court, stating that the better approach is to allow an insured to receive as defense costs those expenses reasonably necessary either to defeat liability or to minimize the scope or magnitude of such liability. Id at 738. We further stated that this approach encourages insureds to clean up contaminated property without fear that all investigation and compliance costs will thereafter be considered indemnity costs by default. Id. We concluded that while some defense costs may serve a dual purpose of complying with the RFRA, those costs are not necessarily indemnity costs. See id. Finally, because Domtar's investigation and compliance costs minimized the potentially staggering scope and magnitude of its liability, we held that the district court properly classified them as defense costs. See id. at 739. We conclude that Domtar provides a definition of defense costs sufficient to constitute controlling precedent. See Emme, 418 N.W.2d at 179. We therefore hold that the district court improperly certified the defense costs issue as doubtful under Rule 103.03(h). [4] Because we hold that the district court improperly certified both the suit and the defense costs issues as doubtful pursuant to Rule 103.03(h), we need not remand the case for specific findings in order to determine whether the questions were properly certified as important pursuant to Rule 103.03(h). Therefore, we affirm the result of the court of appeals and remand this matter to the district court for further action consistent with this opinion. Affirmed and remanded for further proceedings.