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Policyholders Entitled to Qualified Counsel in Superfund Actions, Even if More Expensive Than Local Market

Qualified local environmental defense lawyers can be hard to find when the EPA cracks down on a Superfund site. These disputes can involve a huge number of parties, leaving implicated companies with few or no viable legal options in their area. Although coverage is likely available for defense of the Superfund action, insurance companies may dispute a policyholder’s retention of a more expensive out-of-market defense counsel.

Schnitzer Steel Industries was implicated in the Portland Harbor Superfund Site. Because all viable local legal options were conflicted through representation of other parties, Schnitzer used a firm in Los Angeles, feeling that it could only obtain qualified counsel out of the Portland area.

Its insurance company Continental Casualty disputed the retention, naming two firms that could have defended Schnitzer at market rates. Schnitzer sued for full reimbursement under its CGL policy.

A jury found that Continental failed to pay Schnitzer’s reasonable and necessary defense costs. The Ninth Circuit affirmed, finding that the jury could have reasonably determined that “no reasonable effort to locate competent non-local counsel willing to represent Schnitzer at local rates could have been successful.”

This decision is excellent for policyholders and particularly those in smaller markets, where there are fewer attorneys qualified to handle these complex cases. Under this ruling, a policyholder does not have to settle for underqualified counsel to obtain full coverage for defense costs.

If you receive a letter concerning contamination at a Superfund site, make sure you are diligent in evaluating the coverage that may be available under your liability policies.

The case is Schnitzer Steel Industries Inc. et al. v. Continental Cas. Co. et al., No. 15-35101 (9th Cir. May 31, 2016).

 

WSB

Jun 02, 2016
William S. Bennett

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