In a 5-4 decision, the Texas Supreme Court ruled that a U.S. Environmental Protection Agency (EPA) administrative action to force cleanup under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) is a “suit” requiring insurers to defend. McGinnes Industrial Maintenance Corp. v. Phoenix Ins. Co., 2015 WL 4080146 (Tex. June 26, 2015).

Two insurers had issued policies in the 1960s which did not have pollution exclusions and, in responding to a letter from the EPA to their insured requiring remediation of pollution, contended that the letter was not a “suit” requiring action by them. In answering a certified question from the U.S. Fifth Circuit Court of Appeals, the Texas Supreme Court held that an EPA notice letter is a “suit.” It recognized that prior to the enactment of CERCLA, the EPA had to bring a lawsuit to enforce an action for cleanup and that CERCLA allows the EPA to pursue such remedy extrajudicially. The Supreme Court stated that such a remedy is no mere demand, but one that commands compliance.

The insurers argued that the letter from the EPA is a claim, not a suit, and that a holding that it is a suit would extend their duty to defend to every demand letter. The insurers further argued that if a suit includes CERCLA enforcement proceedings, then it must include any administrative proceedings. The Supreme Court disagreed, stating that EPA proceedings were unusual. It seemed heavily persuaded that a majority of jurisdictions – thirteen out of sixteen state supreme courts – to have considered this issue had sided with the insured on this definition of the term “suit.”

The dissent chided the majority for rewriting the terms of the policy which the Texas Supreme Court has repeatedly said in prior opinions that it would not do.