Opinion ID: 1312578
Heading Depth: 1
Heading Rank: 2

Heading: what constitutes a suit?

Text: The expansive authority granted to state and federal agencies under CERCLA, in order to initiate environmental cleanup of hazardous waste, has had the effect of producing a flood of litigation so as to determine who will pay the cleanup coststhe PRP or the PRP's insurer. Though comprehensive analyses of insurance policy language and policy drafting records have been performed by courts across the country, there has been no definitive, nationwide resolution of the ultimate issuewhether the general comprehensive liability policythe CGLimposes a duty to defend a federal or state demand for environmental remediation and cleanup costs. [13] Instead, courts have developed competing definitions of what constitutes a suit when environmental cleanup is required. The CGL, which emerged onto the insurance industry scene in the early 1940's, provided broad, comprehensive insurance and served as a replacement for specific risk policies. See Paul V. Majkowski, Note, Triggering the Liability Insurer's Duty to Defend in Environmental Proceedings: Does Potentially Responsible Party Notification Constitute a Suit?, 67 St. John's L. Rev. 383, 384 n.3 (1993). [14] The duty to defend clause in most CGL policies beginning in 1973 stated that the company shall have the right and duty to defend any suit against the insured seeking damages on account of such [covered] bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent.... See Donald E. Sharpe & Jean K. Shaffer, The Parameters of an Insurer's Duty to Defend, 19 Forum 555, 556 (1984). [15] The specific language in the comparable clause of the General Casualty policy at issue in this case reads in pertinent part: The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of A. bodily injury or B. 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 bodily injury or 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, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements. (Emphasis added.) When ES&G and the City responded to the EPA and DNR letters, both were involved in an administrative procedure pursuant to CERCLA. Therein lies the heart of the dispute: does the duty to defend in a CERCLA proceeding arise at this administrative level? The controversy is further complicated by the fact that CERCLA was designed to have an anti-litigation bias. 42 U.S.C. sec. 9622(a) states that [w]henever practicable ... [the EPA] shall act to facilitate [settlement] agreements ... in order to expedite effective remedial actions and minimize litigation. Therefore, notice letters have been used by the EPA as a primary method to effect voluntary settlements with PRPs. However, if a PRP chooses to ignore the notice letter, it may face liability for recovery costs into the tens of millions of dollars resulting from EPA-initiated cleanup. Some courts have concluded that PRP letters have a unique nature within the context of a CERCLA administrative proceeding. These courts have held that the receipt of PRP letters is the functional equivalent of a suit because (a) the letters maintain a confrontational and adversarial posture, and (b) they create the spectre of devastating financial consequences if voluntary cooperation is not forthcoming. As a result, PRP liability for immediate and long-range cleanup and remediation costs necessitates a legal defense. [16] [6] We conclude that neither a PRP letter nor a comparable notification letter by a state agency such as the DNR triggers the insurers' duty to defend. Though the court of appeals was correct when it concluded that the PRP letters to the City and ES&G did not trigger the insurers' duty to defend, it should have arrived at the same conclusion regarding the DNR letters. Those letters stated in pertinent part: On November 6, 1989, the Department forwarded to you the CERCLA 104(a) responses it received as part of a potential responsible party (PRP) search for the Edgerton Sand and Gravel landfill site. These responses were forwarded to you as part of a joint effort to begin remediation of the known environmental impacts from the site. To date the Department has not received any progress reports on your efforts to arrange for a PRP clean up of the landfill. In our November 6, 1989, letter the Department stated that failure of the PRP's to reach agreement on a clean up plan would force the Department to pursue heaving the site included on the Superfund National Priorities List (NPL). The environmental problems associated with this site dictate that remediation work begin soon. Consequently, the Department will allow you only another 30 days from the date of this letter to propose a PRP implemented remediation work plan.... The work plan must contain a detailed discussion of the tasks to be performed and a timeline for the tasks to occur.... Also, a legally enforceable contract between the Department and the PRP's must be signed within 60 days after a PRP workplan is submitted to the Department, to ensure that the work is completed properly and on schedule. The DNR then went on to state that if an acceptable work plan was not submitted by the deadline date, it would pursue the following action: (a) an attempt to have the landfill listed on the NPL as quickly as possible and (b) legal action under state authorities to have the site investigated and cleaned up. The DNR also referred to statutory authority under secs. 144.43 to 144.79, Stats., by which the DNR could order the City and ES&G to remediate damage caused by the landfill. [17] Neither letter has the attributes of a suit. See Detrex Chem. Industries v. Emp. Ins. of Wausau, 681 F. Supp. 438, 446 (N.D. Ohio 1987) ([A] claim for damages made against [the insured] that might result in its legal liability is not synonymous with a `suit' so as to trigger [the insurer's] duty to defend....) (Emphasis added.) [18] This court has recently examined the attributes of a suit in State v. P.G. Miron Const. Co., Inc., 181 Wis. 2d 1045, 512 N.W.2d 499 (1994), wherein we defined suit as `any proceeding by one person or persons against another or others in a court of law in which the plaintiff pursues, in such court, the remedy which the law affords him for the redress of an injury or the enforcement of a right, whether at law or equity.' Miron, 118 Wis. 2d at 1053 (quoting Black's Law Dictionary 1434 (6th ed. 1990)) (emphasis added in Miron) (the use of arbitration under a contract between a private party and the state does not violate the doctrine of sovereign immunity because arbitration does not subject the state to suit). Thus, the primary attribute of a suit is that parties to an action are involved in actual court proceedings, initiated by the filing of a complaint. Despite the dissent's attempt to expand the definition of the word suit, definitions of suit or legal process all involve a court action. [19] The clearest example of this is the fact that the parties to the instant case were made part of a suit when a declaratory action was begun to identify General Casualty's and Aetna's obligations under the insurance policies. Rather than initiating a suit, the letters from the EPA and the DNR to General Casualty and Aetna were used to gather information regarding hazardous substances at the site, as well as to call for voluntary action by the City and ES&G in the process of cleanup. [20] The court of appeals concluded that additional correspondence in February, 1991, from the DNR's Bureau of Legal Services moved the proceedings beyond the information-gathering stage. Specifically, the court referred to the following language of the letter: WDNR intends to pursue listing of this site on the NPL unless potentially responsible parties (PRPs) for the site enter into a contract with WDNR to undertake investigation and clean-up activities.... The purpose of this letter is to notify you that unless a PRP group signs a contract with WDNR for this site by May 31, 1991, WDNR will request that this site be listed on the NPL.... For NPL sites, U.S. EPA adheres to a very strict timeframe for negotiation of Administrative Consent Orders. These Consent Orders generally require, among other things, strict compliance with the NCP [National Contingency Plan], reimbursement of agency oversight costs ... liquidated damages for noncompliance and the potential for treble damages. If the negotiation of a Consent Order is not successful, U.S. EPA may issue an Order requiring the PRPs undertake specific action or undertake the action and sue to recover its costs from the PRPs. U.S. EPA may seek forfeitures for non-compliance and treble damages may also be available. Indeed, this correspondence indicates that there was some movement beyond the fact-gathering stage. However, there was no movement into the realm of a suit. The correspondence served to inform the PRPs of action which may be pursued, or not, depending upon the response by the City or ES&G. This letter cannot be considered the equivalent of a service of process so as to initiate a suit. However, the court of appeals adopted the reasoning of Ryan v. Royal Ins. Co. of America, 916 F.2d 731 (1st Cir. 1990), [21] in which the court articulated a fourpart test to determine if a PRP letter was the functional equivalent of a suit: (a) the letter's coerciveness; (b) the letter's adversariness; (c) the seriousness of effort with which the government hounds an insured; and (d) the gravity of the imminent consequences. Id. at 741. The court of appeals then concluded that the EPA and the DNR had assumed an adversarial approach toward the City and ES&G and that devastating financial consequences would result from a failure to enter into the requested contract. Therefore, there existed a degree of compulsion which necessitated a defense. We disagree with the conclusion of the court of appeals. Though the tone of the correspondence may be termed confrontational, neither the EPA's PRP letters nor the DNR letters by themselves impose liability. Also, if the City or ES&G failed to respond to the letters, that failure alone would not authorize the assessment of fines. Instead, something more in the form of a court proceeding would be required to force or compel the insured to take action or suffer serious consequences. See Professional Rental v. Shelby Ins., 75 Ohio App. 365, 375, 599 N.E.2d 423, 430 (1991) (emphasis in original). For example, the EPA could issue, and then seek to have enforced, an administrative order pursuant to 42 U.S.C. sec. 9606(a) or 9604(e)(5)(A); [22] it could seek an injunctive order in federal district court under 42 U.S.C. sec. 9606(a); [23] or it could initiate a cost recovery action under 42 U.S.C. sec. 9607. [24] Id. Indeed, the February 8, 1991, letter from the DNR stated that if the City and ES&G did not sign the proposed contract and the site was listed on the NPL, primary responsibility for cleanup activities would shift to the EPA. If that had occurred, then the EPA administrative orders may come into play. Prior to that time, the DNR offered the City and ES&G options under which all concerned parties might cooperate in order to clean up and remediate the landfill. [25] None of the options offered by the DNR rose to the level of a court proceeding. [7-9] If the EPA's conduct in sending the PRP letter or the DNR's letter requesting site remediation is construed as initiating a suit seeking damages, the duty to defend would be mandated under the terms of the policy. Such a result would create a duty for the insurer for which it had not contracted. [26] This court has stated that the primary goal in interpreting insurance policies is to ascertain and carry out the true intentions of the parties. See Kremers-Urban Co. v. American Employers Ins., 119 Wis. 2d 722, 735, 351 N.W.2d 156 (1984). As a result, the words of a policy are to be given their plain and ordinary meaning. Id. The meaning of the terms of the policy is assessed by a reasonable person in the position of the insured and that reasonable insured's expectations of coverage. Id. However, an insured's expectations may not be satisfied in contradiction to policy language which clearly identifies the scope of the insured's coverage. Thus, [w]here the parties have contracted to limit recovery to a specific quantifiable type of remedy, a court should not alter the insurance contract to include other types of remedies not contracted for by the parties and that may not be presently quantifiable. Shorewood School Dist., 170 Wis. 2d at 369. We find no ambiguity in the term suit as it has been used in the insurance policies. Suit denotes court proceedings, not a functional equivalent. The dissent believes that a reasonable policyholder would view letters from a federal or state agency advising an insured of liability as a suit. To the contrary, the word suit is easily understood and unambiguous to a reasonable policyholder. The proof is in the decisions that hold that a PRP letter is the functional equivalent of a suit. Either there is a suit or there is not. When there is no suit, there is no duty to defend. Therefore, [t]o determine whether a duty to defend exists, the complaint claiming damages must be compared to the insurance policy and a determination made as to whether, if the allegations are proved, the insurer would be required to pay the resulting judgment. The insurer need only look at the allegations within the four corners of the complaint to make such a determination. Id. at 364-65. Construing either the EPA's PRP letter or the DNR letters as the functional equivalent of a suit would be contrary to present Wisconsin insurance law since (a) the insurer would have to look beyond the four corners of the complaint in order to assess whether a potentially covered claim exists, and (b) the insurer would be put in the position of anticipating a coverage expectation for which it did not contract or receive payment. In this case, no complaint has been filed which would initiate a suit and invoke the insurers' duty to defend. [27] Therefore, no matter how coercive the language of the DNR letter was considered to be, it was used within the realm of an administrative proceeding. It did not have the effect of initiating a suit.