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Foster-Gardner Inc. v. National Union Fire Insurance Co.8/3/1998
e variety of options available to the EPA in enforcing CERCLA and state agencies enforcing such laws as the HSAA. (Ray Industries, Inc. v. Liberty Mut. Ins. Co., supra, 974 F.2d at p. 762.) Under CERCLA (and the HSAA), agencies have express authority to file a lawsuit to recover all costs of removal or remedial action. (Ibid.) Or they may chose not to file a lawsuit in a particular case. "Like other claimants, the EPA threatens litigation and makes other efforts to pressure potentially liable parties; but these threats, however seriously they may be taken, do not constitute a lawsuit." (Ibid.)
Because they conclude the term "suit" does not encompass administrative agency orders and other activity, courts have noted that the insurer would be put in the position of providing coverage for which it did not contract or receive payment. (City of Edgerton v. General Cas. Co. of Wisconsin, supra, 517 N.W.2d at p. 476, fn. 26 ["The original risk assessment becomes a nullity if the language of the policy is redefined in order to expand coverage beyond what was planned for by the insurer in the contract of insurance."].)
Finally, at least one court has held that because in that particular jurisdiction an insurer has no duty to indemnify an insured for cleanup costs pursuant to a CERCLA order, there is no duty to defend environmental agency administrative proceedings. (Becker Metals Corp. v. Transportation Ins. Co., supra, 802 F. Supp. at p. 240; see also Aetna Cas. & Sur. Co. v. General Dynamics Corp., supra, 968 F.2d at p. 714.)
b. The "functional" and "hybrid" approaches
Under the "functional" approach, any receipt of a PRP letter or other pre-complaint environmental agency activity constitutes a "suit." In a refinement of the "functional" approach, other courts have determined that a PRP letter or other pre-complaint environmental agency action is a "suit" only if it is sufficiently coercive and threatening. (Ryan v. Royal Ins. Co. of America (1st Cir. 1990) 916 F.2d 731, 741-742 [applying N.Y. law: "origins and purpose of the duty to defend seem best accommodated . . . by focusing . . . [on the] coerciveness, adversariness, the seriousness of the effort with which the government hounds an insured, and the gravity of imminent consequences"; these do not include a state environmental agency's "implied invitation to voluntary action"].) This is the "hybrid" approach. These courts essentially do not consider a mere preliminary notification to be a "suit," but conclude a proceeding becomes a "suit" if it progresses beyond the mere notification or request for voluntary action stage. Because the Order received by Foster-Gardner in this case is considerably past the mere notification stage, we need not differentiate between the two approaches here.
Under both the functional and hybrid approach, the term "suit" is deemed ambiguous, and interpreted to refer to proceedings other than those in a court of law initiated by the filing of a complaint. Some courts are persuaded that "the fact that another reasonable interpretation of the term `suit' exists simply creates an ambiguity." (Morrisville Water & Light Dept. v. United States Fidelity & Guar. Co., supra, 775 F. Supp. at p. 733.) Having found ambiguity, courts then determine that an insured would reasonably expect a defense of the administrative agency's order or other activity. (Aetna Casualty & Surety Co., Inc. v. Pintlar Corp., supra, 948 F.2d at p. 1517 [" n `ordinary person' would believe that the receipt of a PRP notice is the effective commencement of a `suit' necessitating a legal defense. The PRP letter forced Gulf to hire technical experts and lawyers to protect its interests in connection with
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