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Ray Indus., Inc. v. Liberty Mut. Ins.

ELR Citation: 23 ELR 20145
Nos. Nos. 90-2152, -2220, 974 F.2d 754/(6th Cir., 09/10/1992)

The court holds that a letter from the U.S. Environmental Protection Agency notifying a potentially responsible party (PRP) that it may be liable for cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) is not a "suit" triggering an insurer's duty to defend under Michigan law. The court first holds that "suit" has a plain and unambiguous meaning that excludes the PRP letter in this case. A "suit," as that term is used both in conversation and in dictionaries, is an attempt to gain an object in the courts. The term refers to formal legal proceedings, as opposed to demands and other tactics that, however powerful, are not enforced by a court of law. The court's decision is supported by numerous decisions interpreting Michigan law. Further, the insurance policies in question distinguished between a "suit" and a "claim" in several places. The court also notes that CERCLA itself recognizes a distinction between lawsuits and PRP notice letters.

The court next holds that issues raised in the insurer's motion regarding the triggering of coverage and apportionment of defense are properly before the court. Although themotion was filed eight months after the district court's original opinion was issued and four months after the insurer's original notice of appeal, the district court ruled on the issues on remand. The court rejects the theory that the PRP is only covered by those policies in effect when the property damage was discovered and holds that every policy written during the period when waste was dumped at the contaminated site is triggered by the events causing contamination, unless pollution exclusion clauses prevent such a result. The court holds that the PRP's actions were not "sudden and accidental" within the meaning of the policies' pollution exclusion clauses, because the parties stipulated that barrels containing hazardous waste were routinely crushed at the site. The court also holds that the discharges were not brief or momentary. Because the discharges in this case were not "sudden," even though they may have involved discrete events, the pollution exclusions apply, and the insurer has no obligation under any of the policies containing the exclusions. Finally, the court holds that the insurer's duty to defend the PRP continues until either the facts demonstrate, or the complaint is limited to allegations, that the actual pollution damage is attributable only to matters that are not properly within the scope of those policies' coverage.

Counsel for Plaintiff-Appellee, Cross-Appellant
Jack Shumate
Butzel & Long
150 W. Jefferson St., Ste. 900, Detroit MI 48226
(313) 225-7000

Counsel for Defendant-Appellant, Cross-Appellee
Lee Glickenhaus
Mintz & Levin
One Financial Ctr., Boston MA 02111
(617) 542-6000

Before: RYAN, BOGGS, and BATCHELDER, Circuit Judges.