EPA Notice Letters Trigger Insurance Coverage
A New Jersey court recently held that the receipt of a U.S. Environmental Protection Agency (“EPA”) General Notice Letter (“GNL”) pursuant to the Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”) triggers an insurer carrier’s duty to defend. Cooper Industries LLC v. Employers Insurance of Wausau A Mutual Co., et al, case number L-9284-11.
GNLs inform recipients that they are:
- identified as PRPs at Superfund sites,
- that they may be liable for cleanup costs at the site, and
- explain the process for negotiating the cleanup with EPA.
In addition, GNLs provide information on CERCLA, the site, and may include a request for additional information.
In holding that a GNL is a “suit” which creates defense obligations, the Court relied on the fact that EPA threatened to bring enforcement proceedings against the insured if it failed to cooperate. The EPA issued the GNL which identified the insured as a potentially responsible party (“PRP”) for the pollution in the 17-stretch of the lower Passaic River and urged the insured to join a cooperative parties group participating in the investigation of the river.
The Court noted that a GNL uses the threat of legal proceedings to coerce payment or conduct by a policyholder, bringing the letter within the definition of a suit as defined in the policies. Due to CERCLA’s coercive nature, the Court found it would be naïve to consider EPA’s letter as a request for a voluntary action.
Therefore, the Court ruled EPA's issuance of a GNL can be said to establish a potentially covered claim within the meaning of the policy, and the Court ruled carriers have the burden of proving the application of the pollution exclusion.
As a result of this ruling, recipients of an EPA General Notice Letter should immediately notify their carriers and seek the advice of legal counsel.
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