Texas Court Rules EPA Proceedings Trigger Duty to Defend

In a significant win for policyholders, the Texas Supreme Court refused to revisit its 5-4 decision that a Potentially Responsible Party (PRP) letter from the U.S. Environmental Protection Agency constitutes a “suit” within the meaning of the Commercial General Liability policy.  The decision entitles policyholders to a defense under the policy.

The decision came in McGinnes Industrial Maintenance Corp. v. The Phoenix Insurance Co. et. al. and solidified the court’s earlier ruling in the same case.  McGinnes, a waste management company, received the PRP letter as a result of allegedly dumping the chemical Dioxin into pits near the San Jacinto River in the 1960’s.

Despite a dissent that felt the decision contradicted previous Texas insurance law holding that EPA proceedings do not constitute a “suit,” the court determined that the 1980 Comprehensive Environmental Response Compensation and Liability Act (CERCLA) warranted a change in Texas law.  CERCLA changed the format of EPA proceedings from the EPA having to file suit against polluters to administrative proceedings instituted through PRP letters.

As a policyholder entitled to a defense under its General Liability policy, McGinnes is now entitled to recover the more than $2 million spent on defense costs and fines in the course of the EPA action.

Click here to read the entire case alert.




Feb 04, 2016
William S. Bennett

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