• Alabama Supreme Court Holds EPA Investigation Constitutes "Suit" Triggering Duty to Defend
  • January 31, 2013 | Authors: George B. Hall; George B. Hall
  • Law Firm: Phelps Dunbar LLP - New Orleans Office
  • Responding to a certified question from a federal district court in Alabama, the Alabama Supreme Court held that a U.S. Environmental Protection Agency (“USEPA”) investigation of a “potentially responsible party” (“PRP”) constitutes a “suit” under general liability insurance policies. Travelers Casualty and Surety Co. v. Alabama Gas Corp., 2012 WL 6720790 (Ala. Dec. 28, 2012).

    The insured and its predecessors-in-interest operated a manufactured gas plant for decades which allegedly caused environmental contamination. The USEPA investigated the site and notified the insured that it had been identified as a PRP that may be liable for remediation of the contamination. The insured tendered the claim to several insurers, demanding that they defend it. The insurers advised that they would investigate the claim, but that the USEPA investigation did not constitute a “suit” under their policies and, therefore, they had no obligation to defend. The insured commenced a declaratory judgment action in federal court against one of the insurers for breach of contract. The parties filed cross-motions for summary judgment on the question of the insurer’s defense obligation, and the court certified that question to the Alabama Supreme Court.

    The Alabama Supreme Court affirmatively answered the certified question, relying heavily on decisions from other states on the issue, and held that a “PRP letter” (or letter notifying a party that it is a PRP) commences an adversarial process that is the “functional equivalent of a suit brought in a court of law.” It rejected the argument that “suit” required formal court proceedings.