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In a case of dueling summary judgment motions, a defendant insurance company came up on the short end of the stick on two principal legal issues resulting in a summary judgment finding in favor of Plaintiff, Wells Cargo, Inc.
The insurance claims arise out of a CERCLA cost recovery proceeding initiated by the U.S. Department of Agriculture Forest Service against Wells Cargo for contamination at the North Maybe Mine in Southeast Idaho. Wells Cargo conducted mining operations at the Site from 1965-1967, when Wells Cargo was insured under policies issued by Transport Insurance.
Transport denied any duty to defend Wells Cargo in the underlying proceeding and rejected Wells Cargo’s claim for reimbursement of the costs Wells Cargo incurred in connection with an ongoing Remedial Investigation and Feasibility Study of the Site.
As to the duty to defend issue, the parties agreed that Transport had a duty to defend against suits but disagreed that the term “suits” would include a CERCLA administrative proceeding such as the one that gave rise to Wells Cargo’s insurance claim. Relying on 9th Circuit and Idaho case law, the Court had little difficulty rejecting Transport’s arguments, finding that the Government allegations against Wells Cargo, “if found to be true, created potential for liability for property damage which would be covered by the Transport policies.”
The second issue of whether RI/FS costs constitute defense costs, as advanced by Wells Cargo, or indemnity claims, as advanced by Transport, the Court admitted was less clear given the absence of guiding case law on the issue. Ultimately, however, the Court accepted Wells Cargo’s position that it had participated in the RI/FS process as a means of investigating and thus defending the contamination claims and ruled that the costs were recoverable defense costs.
While the decision did not address the type of notification/communications between the parties regarding the incurrence of RI/FS costs, if any, under the reasoning of this case, a PRP should take reasonable steps to document and notify its insurer of the purpose of its participation in RI/FS type activities to better ensure their recovery as defense costs – not indemnity claims.