Opinion ID: 1506273
Heading Depth: 1
Heading Rank: 2

Heading: Whether ANI should be required to reimburse the insureds for the costs of participating in the EPA Administrative Process

Text: Appellants, ANI, argue they should not be required to reimburse appellees for the costs of participating in the CERCLA proceedings because (1) the policy language provides that ANI will defend a suit, not an administrative notice, and (2) neither public policy considerations, nor the insureds' reasonable expectations, require ANI to provide a defense to the CERCLA proceedings. Appellees, Westinghouse Hittman Nuclear Incorporated and Hittman Nuclear & Development Corporation (collectively referred to as Hittman) and Atcor, Inc. and Chem-Nuclear Systems, Inc. (collectively referred to as Chem-Nuclear), (position also adopted by Commonwealth Ecology) argue the CERCLA proceedings constitute a suit requiring ANI to defend. Both the Facility and S & T policies issued by ANI provide the insurers will defend any suit against the insured alleging... bodily injury or property damage and seeking damages which are payable under the terms of the policy; but the companies may make such investigation, negotiation or settlement of any claim or suit as they deem expedient. The policies do not define the term suit or claim. ANI relies on Foster-Gardner, Inc. v. National Union Fire Ins. Co., 18 Cal.4th 857, 77 Cal.Rptr.2d 107, 959 P.2d 265 (1998), and various other cases from other jurisdictions, for the proposition that an administrative order directing an insured to take remedial action to clean up pollution is not a suit triggering a duty to defend. The Court of Appeals expressly rejected this bright line approach, distinguishing suits from claims, because it believed this approach disregards the doctrine of reasonable expectations. The rule of interpretation known as the reasonable expectations doctrine resolves an insurance policy ambiguity in favor of the insured's reasonable expectations. True v. Raines, 99 S.W.3d 439, 443 (Ky.2003). As we agree with the Court of Appeals that the term suit is susceptible of more than one interpretation, an ambiguity exists as to what actions or processes the term suit describes. And thus, such ambiguity must be resolved in favor of the insured's reasonable expectations. We believe an insurance company should not be allowed to collect premiums by stimulating a reasonable expectation of risk protection in the mind of the consumer, and then hide behind a technical definition to snatch away the protection which induced the premium payment. Moore v. Commonwealth Life Ins. Co., 759 S.W.2d 598, 599 (Ky.App.1988)(internal citations omitted). Therefore, we would not allow ANI to avoid their duty to defend the insureds in this instance by clinging to an archaic definition of suit. In this, we are persuaded by the reasoning in Johnson Controls, Inc. v. Employers Insurance of Wausau, 264 Wis.2d 60, 665 N.W.2d 257 (2003), wherein the Wisconsin Supreme Court held: [an][i]nsured's receipt of a potentially responsible party (PRP) letter from the Environmental Protection Agency (EPA) or an equivalent state agency seeking remediation or remediation costs is a suit which a comprehensive general liability (CGL) insurer has a duty to defend...; it is the functional equivalent of a suit and marks the beginning of adversarial administrative legal proceedings that seek to impose liability upon an insured, and a reasonable person in the position of the insured would expect the insurer to provide a defense. Id. at 285. The existence of a statutory system designed to forgo litigation, while achieving the same relief, minimizes the distinction between administrative claims and formal legal proceedings. See Aetna Cas. & Sur. Co. v. Pintlar Corp., 948 F.2d 1507, 1517 (9th Cir.1991). Coverage should not depend on whether the EPA may choose to proceed with its administrative remedies or go directly to litigation. Id. at 1517. For the reasons outlined above, we affirm the Court of Appeal's finding that ANI is required to reimburse the insureds for their costs in participating in the EPA administrative process.