Anderson Bros. MSJ 104(e) Request Granted

Seth H. Row

From: [email protected]

Sent: Thursday, October 13, 2011 1:11 PM

To: [email protected]

Subject: Activity in Case 3:11-cv-00137-MO Anderson Brothers, Inc. v. St. Paul Fire and Marine Insurance Company Order on motion for partial summary judgment

Page 1 of 1

10/14/2011

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U.S. District Court

District of Oregon

Notice of Electronic Filing The following transaction was entered on 10/13/2011 at 1:10 PM PDT and filed on 10/11/2011

Docket Text: MINUTES of Proceedings: Oral Argument regarding Motion for Partial Summary Judgment (Plaintiff's) [7] and defendant's Cross Motion for Partial Summary Judgment Against Plaintiff [22]. Order DENYING defendant's cross motion for partial summary judgment [22] and GRANTING plaintiff's motion for partial summary judgment [7], as stated on the record. Seth H. Row present as counsel for plaintiff(s). Thomas A. Gordon and Stephanie M. Parent present as counsel for defendant(s).(Court Reporter Bonita Shumway.) (dls)

3:11-cv-00137-MO Notice has been electronically mailed to: Thomas A. Gordon [email protected], [email protected] Stephanie M. Parent [email protected], [email protected] Seth H. Row [email protected], [email protected] Andrew S. Moses [email protected], [email protected] Kristopher L. Kolta [email protected], [email protected] 3:11-cv-00137-MO Notice will not be electronically mailed to:

Case Name: Anderson Brothers, Inc. v. St. Paul Fire and Marine Insurance CompanyCase Number: 3:11-cv-00137-MOFiler:Document Number: 49(No document attached)

Seth H. Row, OSB #021845 [email protected] PARSONS F A R N E L L & GREIN, LLP 1030 SW Morrison Street Portland, Oregon 97205 Telephone: (503)222-1812 Facsimile: (503) 274-7979

Attorneys for Plaintiff Anderson Brothers, Inc.

UNITED STATES DISTRICT COURT DISTRICT OF OREGON PORTLAND DIVISION

ANDERSON BROTHERS, INC., an Case No: 11-CV-00137-MO Oregon corporation.

Plaintiff, PLAINTIFF'S MOTION FOR

V. PARTIAL SUMMARY JUDGMENT

ST. PAUL FIRE AND MARINE Pursuant to Fed. R. Civ. P. 56 INSURANCE COMPANY, a Minnesota insurance company, REQUEST FOR ORAL A R G U M E N T

Defendant.

I. CONFERRAL STATEMENT

The undersigned counsel certifies that counsel for Plaintiff Anderson Brothers, Inc.

("Anderson" or "Plaintiff) has conferred with counsel for St. Paul Fire and Marine Insurance

Company ("St. Paul") and the parties were unable to resolve the issues presented by this Motion.

II. MOTION

Pursuant to Fed. R. Civ. P. 56, Plaintiff moves the Court for an Order granting partial

summary judgment in its favor as follows:

Page 1 ~ PLAINTIFF'S MOTION FOR PARTIAL S U M M A R Y JUDGMENT

Case 3:11-cv-00137-MO Document 7 Filed 05/12/11 Page 1 of 2 Page ID#: 44

1. On Plaintiffs First Claim for Relief, partial summary judgment on St. Paul's

liability for breach of contract as to Policy Numbers 587JD7640 and 587JE180 as to the

Anderson 104(e) Request, as that is defmed in the Complaint;

2. On Plaintiffs First Claim for Relief, partial summary judgment on St. Paul's

liability for breach of contract as to Policy Numbers 587JD7640 and 587JE180 as to the General

Notice Letter ("GNL"), as that is defmed in the Complaint;

3. On Plaintiffs Second Claim for Relief, partial summary judgment and a

declaration that St. Paul has an obligation to defend Plaintiff under Policy Numbers 587JD7640

and 587JE 180 against the Anderson 104(e) Request and the GNL, as both are defmed in the

Complaint in this matter, and specifically that the duty to defend includes the alternative dispute

resolution process underway in connection with the Site;

This Motion is supported by Plaintiffs Memorandum In Support of Motion for Partial

Summary Judgment, the Declaration of Seth H. Row In Support of Plaintiff s Motion for Partial

Summary Judgment; the Declaration of Martha Sharp In Support of Plaintiff s Motion for Partial

Summary Judgment; and the Declaration of John W. Anderson In Support of Plaintiff s Motion

for Partial Summary Judgment, all filed contemporaneously herewith.

DATED this 12* day of May, 2011.

PARSONS F A R N E L L & GREIN, LLP

By: /s/Seth H. Row Seth H.Row, OSB #021845 Telephone: (503)222-1812


Page 2 - PLAINTIFF'S MOTION FOR PARTIAL S U M M A R Y JUDGMENT


Seth H. Row, OSB # 021845 Email: [email protected] PARSONS F A R N E L L & GREIN, LLP 1030 SW Morrison Street Portland, Oregon 97205 Telephone: (503)222-1812 Facsimile: (503) 274-7979


UNITED STATES DISTRICT COURT DISTRICT OF OREGON PORTLAND DIVISION

ANDERSON BROTHERS, INC., an Case No: 11-CV-00137-MO Oregon corporation.

Plaintiff, MEMORANDUM IN SUPPORT OF

V. PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a Minnesota insurance company,

Defendant.

Page 1 - M E M O R A N D U M IN SUPPORT OF PLAINTIFF'S MOTION FOR PARTIAL S U M M A R Y JUDGMENT


TABLE OF CONTENTS

Page No.

L INTRODUCTION 2

II. STATEMENT OF BASIC M A T E R I A L FACTS 3

A. The Policies 3

B. Anderson's Property Identified Within Superfund Site 3 C. The 104(e) Request 4 D. The General Notice Letter 6 E. Tender & Denial By St. Paul 7

in . A R G U M E N T 8

A. St. Paul Breached the Policies By Refusing to Defend the 104(e) Request 8 1. The O E C A A Governs the Scope of an Insurer's Duty to Defend

Environmental Claims 8 2. The 104(e) Request Was a "Suit" Under the O E C A A 11 3. The 104(e) Request Triggered the Defense Obligation 13 4. Because the 104(e) Request Was a "Suit," St. Paul Had a Duty to Defend,

Which It Breached 16 5. St. Paul's Duty to Defend the 104(e) Request Is Continuing 16

B. St. Paul Breached the Policies By Refusing to Defend the G N L 16 1. The G N L Is a "Suit" Under the O E C A A & Controlling Ninth Circuh Case

Law 17 2. The GNL Triggered the Defense Obligation 18 3. Because the GNL Was a "Suit," St. Paul Had an Obhgation to Defend, Which

It Breached 19

C. Anderson Is Entitled to Declaratory Judgment that St. Paul Has an Obligation to Defend Anderson 19

1. Legal Standard for Declaratory Judgment 19 2. The Defense Obligation for the GNL Includes the Ongoing A D R Process.... 19

IV. CONCLUSION 20

Page i - T A B L E OF CONTENTS


TABLE OF AUTHORITIES

Cases Page No.

Aetna Casualty and Surety Company v. Pintlar Corporation, 948 F.2d 1507, 1516 (9* Cir. 1991) 11, 18

Ash Grove Cement Co. v. Liberty Mutual Ins. Co. et al., No. 09-239-KI, 2010 WL 3894119 (D. Or. Sept. 30, 2010) 11

Carson Harbor Vill, Ltd v. Unocal Corp., 270 F.3d 863, 870 (9th Cir. 2001) 15

Fireman's Fund Ins. Co. v. Ed Niemi Oil Co., Inc., 2005 W L 3050460 (D. Or. 2005) 10

GE Prop. & Cas. Ins. Co. v. Portland Community Coll., 2005 WL 2044315 (D. Or. 2005) 10, 14

GerlingAm. Ins. Co. v. Wagner Constr. Co., No. CV-98-1156-K1, 1999 WL 962468 (D. Or. 1999) 10

Grabhorn, Inc. v. Metropolitan Service Dist. 624 F.Supp.2d 1280, 1284 (D. Or. 2009) 14

Hiebert V. Farmers Ins. Co. ofOregon, 172 Or. App. 13, 17, 18, 18 P.3d 397 (2001) 12

Ledford v. Gutoski, 319 Or. 397, 399-400, 877 P.2d 80 (1994) 10, 13

North Pacific Ins. Co. v. Wilson Distributing Serv., Inc., 138 Or. App. 166, 169, 908 P.2d 827 (1995) 10

Northwest Environmental Advocates V. U.S. E.P.A., 537 F.3d 1006, 1026 -1027 (9* Cir. 2008) 14

Sch. Dist No. 1 V. Mission Ins. Co., 58 Or. App. 692, 703-04, 650 P.2d 929 (1982) 10

Schnitzer Investment Corp. v. Certain Underwriters at Lloyd's of London, 197 Or. App. 147, 156-57, 104 P.3d 1162 (2005), a f f d in part, 341 Or. 128, 137 P.3d 1281 (2006) 10

Spring Vegetable Co. v. Hartford Cas. Ins. Co., 801 F.Supp. 385, 391 (D. Or. 1992) 11

United States v. Cannons Engineering Corp etal, 899 F.2d 79, 93 (1'̂ Ch. 1990) 15

W. Equities, Inc. v. St Paul Fire & Marine Ins. Co., 184 Or. App. 368, 371, 56 P.3d 431 (2002) 10

XDP, Inc. v. Watumull Properties Corp., 2004 WL 1103023 (D.Or. May 14, 2004) 15

Page ii - T A B L E OF AUTHORITIES


TABLE OF AUTHORITIES cont'd

Statutes Page No.

28 U.S.C. § 2201(a) 19 28 U.S.C. § 2461 5 31 U.S.C. § 3701 5 42 U.S .C. §§ 9607(a) (cost recovery) and 9613(f)(1) (contribution) 15 42 U.S.C. § 9601(9) 15 42 U.S.C. § 9607(a)(l-2) 15 ORS 465.478 18

Page iii - T A B L E OF AUTHORITIES


Plaintiff Anderson Brothers, Inc. ("Anderson" or "Plaintiff) submits the following

Memorandum In Support of Plaintiff s Motion for Partial Summary Judgment. This

Memorandum is supported by the Declaration of Seth H. Row In Support of Plaintiff s Motion

for Partial Summary Judgment ("Row Dec."); the Declaration of Martha Sharp In Support of

Plaintiffs Motion for Partial Summary Judgment ("Sharp Dec."); and the Declaration of

John W. Anderson In Support of Plaintiff s Motion for Partial Summary Judgment ("Anderson

Dec"), all filed contemporaneously herewith.

I. INTRODUCTION

This is an environmental insurance coverage dispute involving policies sold by defendant

St. Paul Fire and Marine Insurance Company ("St. Paul") to Anderson and to its predecessor-in-

interest. Specialty Truck Parts, Inc., over a period of years in the 1970s and early 1980s.

Plaintiff brought this action against St. Paul to enforce its statutory and contractual rights to a full

and complete defense for environmental claims against Plaintiff related to the Portland Harbor

Superfund Site ("Site"). Plaintiff owns or leases property within the boundaries ofthe Site.

Plaintiff received several demands and claims against it relating to the Site, including two letters

from the Environmental Protection Agency, the first called the "104(e) Request," and the second

a "General Notice Letter" (aka a "PRP letter" or "GNL"). Plaintiff tendered both to St. Paul, but

St. Paul has refused to defend, in breach of its contracts of insurance. Plaintiff brings this

Motion now, before discovery has been completed, because its rights are being jeopardized by

the lack of a full and complete defense in connection with the Site, and because the material facts

relating to this Motion are uncontested.

/////

/////



II. STATEMENT OF BASIC MATERIAL FACTS

A. The Policies

St. Paul sold to Anderson several insurance policies, including the following

Comprehensive General Liability ("CGL") contracts of insurance (collectively referred to

hereinafter as "the Policies"):

Policy Number Effective Dates Insured

587JD7640 1/21/79-1/21/80 Anderson

587JE3180 1/21/80-1/21/81 Anderson

Row Dec, Exs. A & B . Each of the Policies provides for coverage, and defense, as follows:

The Company will pay on behalf of the insured all sums which the Insured shall become legally obligated to pay as damages because of:

Coverage A. bodily injury or

Coverage B. property damage

to which this insurance applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even i f any of the allegations of the suit are groundless, false or fraudulent, and may take such investigation and settlement of any claim or suit as it deems expedient, but the Company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the Company's liability has been exhausted by payment of judgments or settlements.

Id. The Policies do not contain a defmition of the term "suit." Id.

B. Anderson's Property Identified Within Superfund Site

Anderson is an Oregon corporation with its principal place of business in Portland,

Oregon. Anderson Dec.,T| 2. Anderson operates and has operated as a truck wrecking, servicing.



and storage company. Anderson Dec.,^ 3. During the period 1975 to 1985 Anderson leased

property known as Tax Lots 400, 1000, and 1100, which are part of property loiown as 4621 NW

St. Helens Road, Portland, Oregon. Anderson Dec.,Tf 5. Anderson also purchased, itself, an

adjacent parcel, known as Tax Lot 200, in 1976. Anderson Dec.,T| 6.

C. The 104(e) Request

The United States Environniental Protection Agency ("EPA") has identified an 11-mile

stretch of the lower Willamette River, and properties along that stretch, as the "Portland Harbor

Superfund Site" (hereinafter "Site").^ Tax Lots 400, 1000, 1100 and 200 are all within the land

area that is part of the Site. Sharp Dec, Tf2.

On or shortly after November 6, 2006, Anderson received a letter from an attorney for

Chevron U.S.A., Inc., which the author stated was a participant in the Lower Willamette Group

("LWG"). Anderson Dec, Ex. C. The L W G letter indicated that Anderson had been identified

as a potentially responsible party ("PRP") in connection with the Site. Id. The letter threatened

to bring a lawsuit against Anderson for contribution to costs that had been incurred by the L W G ,

if Anderson did not sign a tolling agreement. Id. Anderson did not sign the tolling agreement.

Anderson Dec, ^9.

On or shortly after January 18, 2008, Anderson received a letter from the EPA that

demanded information from Anderson pursuant to the authority of Section 104(e) of the

Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42

U.S.C. § 9604(e) ("104(e) Requesf). Anderson Dec, Ex. A . The 104(e) Request sought

' Anderson acquired a company known as Specialty Trucli Parts, Inc. ("Specialty") in 1973. Anderson Dec, \ 4. On or about September 16, 1992, Specialty dissolved. Id. Specialty purchased several policies from St. Paul as alleged in the Complaint. However, those policies are not at issue in this Motion as to St. Paul's breach of contract or declaratory relief, because St. Paul has indicated that it believes that there are issues of fact regarding successorship, and successor liability, that would preclude summary judgment as to those policies. ^ See the EPA's map of the Portland Harbor Superfund Site, at

http://yosemite.epa.gov/rl0/CLEANUP.NSF/0/6312f7efl7518912882573990068d67d/$FILE/Portlandharbormaplg. jpg (last visited May 2, 2011).



responses to 82 separate questions (not including numerous sub-parts and compound elements of

those questions). Id. The Instructions accompanying the 104(e) Request provided that Anderson

was obligated to "[p]rovide responses to the best of Respondent's ability, even i f the information

sought was never put down in writing or if the written documents are no longer available." Id.

They further provided that Anderson was obligated to "[sjeek out responsive information from

current and former employees/agents." Id. In the 104(e) Request, EPA noted that it was seeking

information "from current and past landowners, tenants, and other entities believed to have

information about activities that may have resulted in releases or potential threats of releases of

hazardous substances to the Site." Id. The 104(e) Request went on to note that "[tjhis

information will be used for the purposes of determining the need for response, or choosing or

taking any response action at the Portland Harbor Superfund Site, and to identify additional

potentially responsible parties for performing the cleanup." Id. It also made clear that

compliance with the 104(e) Request was "required by law." Id. The 104(e) Request warned

that:

[f]ailure to respond fully and truthfully to the Information Request by the due date provided below may result in an enforcement action by EPA. Under Section 104(e)(5)(B) of CERCLA, 42 U.S.C. § 9604(e)(5)(B), pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461, as amended by the Debt Collection Improvement Act of 1996, 31 U.S.C. § 3701, EPA is authorized to commence an action to assess civil penalties of not more than $32,500 per day for each day of noncompliance against any person who unreasonably fails to comply with an Information Request.

Id. The Instructions accompanying the 104(e) Request required Anderson to provide responsive

information notwithstanding objections, and warned that objecting without providing responsive

information could subject Anderson to the penalties listed above. Id. The Instructions also

warned Anderson that submission of cursory responses when other responsive information was

available would be considered noncompliance, and that "[ijncomplete, evasive, or ambiguous



answers shall constitute failure to respond" and could subject Anderson to the penalties listed

above. Id.

Anderson retained attorney Martha Sharp to assist it in responding to the 104(e) Request.

Sharp Dec, | 3 . Sharp and Anderson retained an environmental consultant to assist Sharp, and

Anderson, in performing the investigation required by the 104(e) Request. Sharp Dec, f4.

Sharp prepared a detailed response to the 104(e) Request, as required by the terms of the request.

Sharp Dec, ^5. Sharp, and the environmental consultant, spent hundreds of hours retrieving,

assembling, and analyzing historical and current documents and information about the properties

and activities on those properties. Sharp Dec, [̂6. Anderson submitted its initial response to the

104(e) Request on June 16, 2008.^ Sharp Dec, \1.

D. The General Notice Letter

Shortly after November 13, 2009, Anderson received a letter from the EPA entitled

"General Notice Letter for the Portland Harbor Superfund Site in Portland, Oregon." Anderson

Dec, Ex. B ("GNL Letter"). This letter stated that "EPA has determined that Anderson

Brothers, Inc. and Specialty Truck Parts may be responsible under C E R C L A for cleanup of the

Site or costs EPA and others have incurred in cleaning up the Site." Id. The letter goes on to

state that "EPA has reason to believe that hazardous substances have been or are being released

from the facilities located at 5275 N W St. Helens Road, 5315 N W St. Helens Road, and 4621

NW St. Helens Road & adjacent Tax Lots 200 & 300 in Portland Oregon, into the 'study area'

for the Portland Harbor Superfund Site, which is River Mile 2 to River Mile 12." Id. The letter

informed Anderson that " E P A is encouraging PRPs [potentially responsible parties] to convene a

mediated allocation process," described an ongoing ahernative dispute resolution ("ADR")

process known as the "Convening Group," and provided a contact for the Convening Group. Id.

^ Anderson is under a continuing duty to supplement its 104(e) Response if it comes across additional responsive information. Anderson Dec, Ex. A .



The GNL Letter received by Anderson is based on a standard-form GNL letter used by

EPA. Sharp Dec, 1̂9, Ex. A.

In response to the GNL Letter, Anderson investigated participating in the Convening

Group as EPA directed. Sharp Dec, |10. However, Anderson learned that the costs of

participating in the Convening Group, including paying an attorney to participate in the group on

its behalf and the "buy in" costs required of participants (to fund the operations of the group,

including costs for neutrals) were beyond its means. Sharp Dec, ^11; Anderson Dec, ^9.

Anderson has, through its attorney Ms. Sharp, continued to monitor the process underway

involving other "PRPs" at the Site and to do what it can to limit its liability at the Site, including

attending meetings hosted by the EPA. Sharp Dec, f 12.

E. Tender & Denial By St. Paul

Anderson, through its attorney, tendered the 104(e) Request to St. Paul on March 10,

2008. Sharp Dec, Ex. B. On March 27, 2008, St. Paul acknowledged receipt ofthe tender.

Sharp Dec, Ex. C. On September 10, 2008, St. Paul denied the tender. Sharp Dec, Ex. E. On

September 22, 2008 Anderson requested that St. Paul reconsider its denial. Sharp Dec, Ex. F.

On October 14, 2008, St. Paul again denied the tender. Sharp Dec, Ex. G. On June 17, 2009,

Anderson again demanded that St. Paul accept the tender. Sharp Dec, Ex. H. On June 24, 2009,

St. Paul again denied the tender. Sharp Dec, Ex. I.

On November 20, 2009, Anderson tendered the GNL letter to St. Paul. Sharp Dec, Ex. J.

On March 26, 2010, St. Paul denied the tender. Sharp Dec, Ex. K. On March 31, 2010,

Anderson again wrote to St. Paul encouraging it to reconsider its denial. Sharp Dec, Ex. L.

Anderson wrote to St. Paul on May 27, 2010 and July 6, 2010, again requesting that St. Paul

reconsider its denial of the tender. Sharp Dec, Exs. M and N . On July 14, 2010, St. Paul

repeated its denial of the tender. Sharp Dec, Ex. O. On July 29, 2010, Anderson wrote to



St. Paul informing it of statements made by the EPA at a meeting on July 27, 2010, the

importance of St. Paul agreeing to defend Anderson in light of EPA's statements, and the

prejudice that Anderson was suffering as the result of not being defended by St. Paul. Sharp

Dec, Ex. P. On October 6, 2010, Anderson again requested that St. Paul reconsider its denial.

Sharp Dec, Ex. Q.

III. ARGUMENT

The 104(e) Request from the EPA was sufficient to trigger the duty to defend under the

Liberty Mutual policies because the 104(e) Request is a "suif under the Oregon Environmental

Cleanup Assistance Act ("OECAA"), which governs this dispute."^ The GNL also

unquestionably triggered the duty to defend under the OECAA.

A. St. Paul Breached the Policies By Refusing to Defend the 104(e) Request.

1. The O E C A A Governs the Scope of an Insurer's Duty to Defend Environmental Claims.

The Oregon Environmental Cleanup Assistance Act (OECAA) was passed to assist in the

"fair and efficient resolution of environmental [insurance] claims while encouraging voluntary

compliance and regulatory cooperation." ORS 465.478. The O E C A A governs the scope of an

insurer's duty to defend an environmental claim because it requires that courts use a specific rule

of construction when attempting to define the terms "lawsuit" or "smt" (which in older insurance

policies - including the St. Paul policies - are not defined) ^ for purposes of interpreting an

insurance contract. ORS 465.480(2). The O E C A A specifies that the term "suif in an insurance

policy shall be given a specific, and broad, interpretation as to environmental claims. ORS

465.480(2)(b).

* There is no question that Oregon coverage law applies to this dispute. ^ The statute contains a "savings clause" that provides that "The rules of construction set forth in this section do not apply i f the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy." ORS 465.480(7). Where, as here, a term is undefined in the policy (as is the term "suit" in the St. Paul policies), the statutory rule of construction will control.



The OECAA provides specific rules of construction for insurance policies in coverage

actions such as this one:

(2) Except as provided in subsection (7) of this section, in any action between an insured and an insurer to determine the existence of coverage for the costs of investigating and remediating environmental contamination, whether in response to governmental demand or pursuant to a written voluntary agreement, consent decree or consent order, including the existence of coverage for the costs of defending a suit against the insured for such costs, the following rules of construction shall apply in the interpretation of general liability insurance policies involving environmental claims:

* * * *

(b) Any action or agreement by the Department of Environmental Quality or the United States Environmental Protection Agency against or with an insured in which the Department of Environmental Quality or the United States Environmental Protection Agency in writing directs, requests or agrees that an insured take action with respect to contamination within the State of Oregon is equivalent to a suit or lawsuit as those terms are used in any general liability insurance policy.

ORS 465.480(2) & (2)(b) (emphasis added). "Sui f is defined for purposes ofthe O E C A A as

follows:

(1) As used in this section: (a) "Suh" or "lawsuit" includes but is not limited to formal judicial proceedings, administrative proceedings and actions taken under Oregon or federal law, including actions taken under administrative oversight of the Department of Environmental Quality or the United States Environmental Protection Agency pursuant to written voluntary agreements, consent decrees and consent orders.

ORS 465.480(l)(a).

Taken together, these O E C A A sections provide that i f an insured and an insurer are in

litigation over coverage of "the costs of investigating and remediating environmental

contamination," ORS 465.480(2), the court shall interpret the term "suif in the policy to mean

"any action... against... an insured in which... the Department of Environmental Quality or the

United States Environmental Protection Agency in writing directs, requests or agrees that an

insured take action with respect to contamination within the State of Oregon..."

ORS 465.480(2)(b). Page 9 - M E M O R A N D U M IN SUPPORT OF PLAINTIFF'S MOTION FOR PARTIAL

S U M M A R Y JUDGMENT


The O E C A A acts to further broaden Oregon's aheady-broad law on the duty to defend.

GEProp. & Cas. Ins. Co. v. Portland Community Coll, 2005 W L 2044315, at *3 (D. Or. 2005)

(unpublished) (duty to defend under Oregon law is separate from and broader than its duty to

indemnify); North Pacific Ins. Co. v. Wilson Distributing Serv., Inc., 138 Or. App. 166, 169, 908

P.2d 827 (1995); Ledford v. Gutoski, 319 Or. 397, 403, 877 P.2d 80 (Or. 1994) ; Fireman's Fund

Ins. Co. V. Ed Niemi Oil Co., Inc., 2005 WL 3050460, at *1 (D. Or. 2005) (unpublished) ("[T]he

duty to defend is based on a possibility of coverage. Specifically, this involves the possibility

that the insurer might be liable to indemnify the insured based on the factual allegations asserted

in the complaint against the insured.").'' An insurer is required to defend a "suit" if the

complaint "contains some allegations of conduct or damage ... that fall within policy coverage or

can reasonably be interpreted to fall within coverage..." Ledford, 319 Or. at 400.

The O E C A A is consistent with Oregon's generally expansive approach to defense.

Oregon courts have in several situations found a duty to defend to have been triggered before a

formal complaint was filed against the insured. See Schnitzer Investment Corp. v. Certain

Underwriters at Lloyd's of London, 197 Or. App. 147, 156-57, 104 P.3d 1162 (2005), a f f din

part, 341 Or. 128, 137 P.3d 1281 (2006) (finding, under pre-OECAA law, that the tendering of

correspondence and demands from the Department of Environmental Quality ("DEQ") and a

consent order with DEQ was the "functional equivalent of a judicial complaint" and therefore

triggered the insurer's duty to defend, and citing Sch. Dist. No. I v. Mission Ins. Co., 58 Or. App.

692, 703-04, 650 P.2d 929 (1982) for proposition that administrative proceeding may be a "suit"

under insurance policy); GerlingAm. Ins. Co. v. Wagner Constr. Co., No. CV-98-1156-Kl, 1999

WL 962468 (D. Or. 1999) (permitting recovery of pre-lawsuh defense fees); Spring Vegetable

^ A l l doubts or ambiguities in the allegations of a complaint are resolved in favor of defense coverage. W. Equities,

Inc. V. St Paul Fire & Marine Ins. Co., 184 Or. App. 368, 371, 56 P.3d 431 (2002).



Co. V. Hartford Cas. Ins. Co., 801 F.Supp. 385, 391 (D. Or. 1992) (finding that notice to the

insurer of a court's oral ruling that opened the door for potential indemnity coverage was

sufficient to trigger defense coverage).

2. The 104(e) Request Was a "Su i f Under the O E C A A .

(a) The Ash Grove Decision

In September, 2010, Judge King held that a 104(e) request was a "smt" under the

OECAA. Ash Grove Cement Co. v. Liberty Mutual Ins. Co. et a/.. No. 09-239-KI, 2010 WL

3894119 (D. Or. Sept. 30, 2010). In Ash Grove the plaintiff received a 104(e) request nearly

identical to the letter received by Anderson. Ld. at 2010 WL 3894119 at *2. Judge King held

that a 104(e) request fits within the OECAA's provision directing that the term "suit" in an

insurance policy be interpreted to include letters from the EPA that can be considered an

"action" "against" the insured in which the EPA requests that the insured "take action with

respect to contamination." Ld. at *4. Judge King noted that compliance with a 104(e) request is

required by law (CERCLA), as stated in the 104(e) letter itself, and that i f an entity fails to

respond fully in a timely manner, the EPA "can commence an action for civil penalties of up to

$32,500 per day..." Id

Judge King also noted that the Ninth Circuit's decision in Aetna Casualty and Surety

Company v. Pintlar Corporation, 948 F.2d 1507, 1516 (9* Ch. 1991), supports the finding that a

104(e) request triggers a duty to defend. In Pintlar the Ninth Circuh held that a "PRP notice"

triggered the duty to defend, despite the fact that the PRP letter is merely part of an EPA

administrative process. at 1516.

Judge King noted that the 104(e) request is part of the C E R C L A administrative process

just like the PRP notice discussed in Pintlar.



Unlike the garden variety demand letter, which only exposes one to a potential threat of future litigation, a PRP notice carries with it immediate and severe implications. Generally, a party asserting a claim can do nothing between the occurrence of the tort and the filing of the complaint that can adversely affect the insureds' rights. However, in a C E R C L A case, the PRP's substantive rights and ultimate liability are affected from the start of the administrative process... In many instances, it is more prudent for the PRP to undertake the environmental studies and cleanup measures [resulting from the PRP letter] itself than to await the EPA's subsequent suit in a cost recovery action.

Ash Grove, 2010 WL 3894119 at *5 (quoting Pintlar, 948 F. 2d at 1517); see also Ash Grove,

2010 WL 3894119 at *5 ("The Pintlar court's rationale for construing a PRP notice applies to a

[§ 104(e)] letter as well...").

Therefore, it is clear that Judge King found that a 104(e) request - and the named target's

response to h - was part of a compulsory administrative process that permitted the targeted entity

to have some influence on hs liability for the Superfund site. The 104(e) request is simply one

starting point for the administrative process.

Judge King also found that treating a 104(e) request as a "suh" was consistent with

Oregon law on the duty to defend and interpretation of insurance contracts generally:

A reasonable insured could interpret the § 104(e) letter as an "effort to impose on policyholders a liability ultimately enforceable by a court," triggering the need for a defense, see Pintlar, 948 F.2d at 1516, and the insured is entitled to the advantage of the court's interpreting the policy provision against the drafting party.

Ash Grove, 2010 WL 3894119 at *5, a/̂ o citing Hiebert v. Farmers Ins. Co. ofOregon, 172 Or.

App. 13, 17, 18, 18 P.3d 397 (2001).

(b) Anderson's 104(e) Request Falls Within the Ash Grove Analysis.

The 104(e) Request received by Anderson is nearly identical to the 104(e) request in the

Ash Grove matter as discussed by Judge King. The Anderson 104(e) Request contained the same

language quoted by Judge King relating to compliance being required by law and penalties for

non-compliance. Anderson Dec, Ex. A. The Anderson 104(e) Request contained "82 questions,



with subparts," and as in Ash Grove "required [Anderson] to seek information from former

employees and agents, as well as documents." Ash Grove, 2010 W L 3894119 at *2; Anderson

Dec, Ex. A .

Therefore, analytically the Anderson 104(e) Request falls within the Ash Grove analysis,

and Anderson submits that the same analysis should be applied. The Anderson 104(e) Request

was an "action" "against" the insured in which the EPA "directed" that Anderson "take action"

in connection with contamination. ORS 465.480(2)(b).

3. The 104(e) Request Triggered the Defense Obligation.

Not only was the 104(e) Request a "suit" under the Policies, due to the interpretative

mandate of the O E C A A , but it also satisfied the other factors in the Policies to trigger the duty to

defend. As set out above, under the Policies St. Paul must defend any "suit" "against the insured

seeking damages on account of... property damage [to which this insurance applies]." Row

Dec, Exs. A & B .

Two aspects of Oregon law on the duty to defend are critical in evaluating whether the

104(e) Request triggered the duty to defend: first, Oregon law is clear that if the "complaint

provides any basis for which the insurer provides coverage" the duty to defend exists; second,

"[a]ny ambiguity in the complaint with respect to whether the allegations could be covered is

resolved in favor ofthe insured." Ledford v. Gutoski, 319 Or. 397, 399-400, 877 P.2d 80 (1994).

Here, the facts alleged in the 104(e) Request provide a basis for coverage. First, the

104(e) Request alleged that there had been property damage, in the form of contamination at the

Portland Harbor Superfund Site ("Site").^ Anderson Dec, Ex. A . The 104(e) Request also

^ The 104(e) Request, although it did not contain extensive detail about the property damage at the Site, incorporated by reference the materials at the EPA's Portland Harbor Superfund Site website: http://yosemite.epa.gov/R10/cleanup.nsf7dl9cd587dffleee8825685f007d56b7/75e7f27bdl08f3eb88256f4a007ba01 8!OpenDocument. The Court may take judicial notice ofthe fact that within that website are documents dated prior to January, 2008 that refer to various types of contamination, including contamination in river sediment for which Page 13 - M E M O R A N D U M IN SUPPORT OF PLAINTIFF'S MOTION FOR PARTIAL

S U M M A R Y JUDGMENT


alleged that response costs had already been incurred, and were continuing to be incurred, in the

form of a Remedial Investigation and Feasibility Study ("RI/FS"), in cormection with that

property damage, and that additional response costs were going to be incurred in the future. Id.

Second, the 104(e) Request alleged that Anderson was among the group of persons

potentially liable for that contamination. The 104(e) Request stated that the EPA was sending

information requests to, among others, "landowners" and "tenants" at the Site. Id. It is

undisputed that Anderson is a landowner and tenant at the Site.

Any ambiguity in the 104(e) Request, of course, must be resolved in favor of coverage.

Ledford, 319 Or. at 399-400. Oregon courts have held that where a complaint is ambiguous as to

a coverage-related fact, a duty to defend exists whenever the factual allegations in the complaint

would permit the presentation of evidence at trial that would establish the missing coverage fact.

GEProp. & Cas. Ins. Co. v. Portland Community College, No. C V 04-727-HU, 2005 WL

2044315, *6 (D. Or., August 25, 2005) ("G£ v. PCC") (allegations in DEQ voluntary agreement

would have permitted DEQ to put on evidence of groundwater contamination). The 104(e)

Request clearly was broad enough to permh EPA to "introduce evidence" that Anderson was a

landowner of facilities within the Site subject to potential liability under state and federal

environmental laws and regulations.

C E R C L A is essentially a strict liability statute for landowners and tenants. Under the law

implicated by the 104(e) Request (CERCLA and the Superfund statute), any landowner or

Anderson, as a riparian landowner, is potentially liable. See Northwest Environmental Advocates v. U.S. E.P.A., 537 F.3d 1006, 1026 -1027 (9* Cir. 2008) (taking judicial notice of statements in E P A administrative documents); Grabhorn, Inc. v. Metropolitan Service Dist. 624 F.Supp.2d 1280, 1284 (D. Or. 2009) ("The court may take judicial notice of matters of public record which are not subject to reasonable dispute over authenticity," without taking notice of the truth of facts asserted in those documents where it would be inappropriate to do so.); see also Schnitzer, 197 Or. App. at 157 (reading DEQ letter together with attached documentation to assess duty to defend). One such document is the March, 2007 "Comprehensive Round 2 Site Characterization Summary and Data Gaps Analysis Report" which at page 3-7 of the Main Text discusses river sediment (main text available at: http://yosemite.epa.gov/R10/CLEANUP.NSF/6d62f9al6e249d7888256db4005fa293/0fal09d2ec455988882572950 079ff2f$FILE/2007-02-21_CompR2Rep__MainText.pdf).



facility operator within a contaminated site where hazardous substances have ever been released

is prima facie liable for an allocated share of the response costs:

To establish a claim for cost recovery under C E R C L A , a claimant must show that the defendant is a responsible party, a release or threatened release of hazardous material occurred at a facility, and the release or threatened release has caused the claimant to incur response costs that were necessary under C E R C L A . Carson Harbor Vill., Ltd. v. Unocal Corp., 270 F.3d 863, 870 (9th Ch. 2001). These are the prima facie elements for a claim under both 42 U.S .C. §§ 9607(a) (cost recovery) and 9613(f)(1) (contribution). Liability for the costs of response and remediation may be imposed upon current owners or operators of a facility, as well as upon previous owners or operators who owned or operated a facility at the time of disposal of any hazardous substance at the facility. 42 U.S.C. § 9607(a)(l-2).

XDP, Inc. V. Watumull Properties Corp., 2004 WL 1103023, *3 (D.Or. May 14, 2004).^ The

CERCLA statute was ched in the 104(e) Request, and the 104(e) Request referred to the Portland

Harbor Superfund Site; it was no secret that potential liability under these statutes was implicated

by the EPA's demand. As a landowner and tenant within a Superfund site - that is, a site that

had already been identified as having property damage - Anderson was most assuredly

potentially liable under C E R C L A based on the 104(e) Request's allegations.^

Further, the consequences of failing to comply with the 104(e) Request included the high

likelihood that Anderson would face greater financial liability for response costs - liability

arising out of covered property damage - than if it complied with the demand. An entity that

fails to cooperate with a 104(e) demand will be precluded from negotiating with the EPA

regarding allocation for response costs. See United States v. Cannons Engineering Corp. et al.,

899 F.2d 79, 93 (1'' Cir. 1990), As noted by Judge King in Ash Grove and the Ninth Circuh in

A "facility" includes a building, structure, or "any site or area where a hazardous substance has been deposited, stored, disposed of or placed, or otherwise come to be located." 42 U.S.C. § 9601(9). ' T O the extent that St. Paul would contend that the 104(e) Request did not trigger the duty to defend because it did not order Ash Grove to perfonn any "remedial action," that argument has been rejected by other courts. See GE v. PCC, 2005 W L 2044315, at *6 (order to conduct investigation triggered duty to defend).



Pintlar, getting involved in the administrative process early is essential to controlling liability for

property damage.

Based on the undisputed facts, the 104(e) Request was a "suh" that triggered the defense

obligation.

4. Because the 104(e) Request Was a "Suh," St. Paul Had a Duty to Defend, Which It Breached.

Under the terms of the Policies St. Paul had an obligation to defend "suhs" against

Anderson. Because, under the OECAA, the 104(e) Request was a "suit," St. Paul's refusal to

defend the 104(e) Request was a breach of the Policies.

5. St. Paul's Duty to Defend the 104(e) Request Is Continuing.

Anderson has submitted its initial response to the 104(e) Request. Sharp Dec, ^ 7.

However, the 104(e) Request states that the obligation to respond is continuing and that

Anderson has an obligation to supplement the response with "any additional information or

documents that become available or known to [Anderson] after [Anderson] submit[s hs]

response." Anderson Dec, Ex. A. Therefore, St. Paul's obhgation to defend the 104(e) Request

is ongoing.

For the foregoing reasons, Anderson respectfully requests that this Court grant partial

summary judgment on Anderson's First Claim for Relief as to breach of Pohcy Numbers

587JD7640 and 587JE180 by St. Paul's refusal to defend the 104(e) Request.

B. St. Paul Breached the Policies By Refusing to Defend the GNL.

St. Paul also breached the Policies by refusing to defend the G N L that Anderson received

from the EPA. Therefore, even if the 104(e) Request did not trigger a defense obligation, St.

Paul is still liable for breach. Moreover, the duty to defend the G N L is ongoing and carries with

it current, and urgent, obligations to assist Anderson in resisting the imposition of liability in

cormection with the Site.



1. The GNL Is a "Smt" Under the O E C A A & Controlhng Ninth Chcuit Case Law.

As discussed above, the O E C A A mandates that for any insurance policy that does not

hself define the term "suit" (as the St. Paul policies do not), that term shall be interpreted to

include any "action" "against" an insured in which EPA (or the Oregon Department of

Environmental Quality, DEQ) "in writing directs, requests or agrees that an insured take action

with respect to contamination within the State of Oregon..." ORS 465.480(2)(b).

Just as with a 104(e) request, a GNL clearly falls within the scope of the OECAA's rules

of construction. The Anderson GNL states: 1) that EPA has determined that contamination has

occurred; 2) that funds have been or will be spent (by EPA and others) on investigation; 3) that

Anderson "may be responsible under C E R C L A " for cleanup costs and that Anderson "may be a

PRP [Potentially Responsible Party] with respect to this Site." Anderson Dec, Ex. B. The GNL

specifically refers to Anderson's property ~ ching, among other properties, 4621 N W St. Helens

Road and "adjacent Tax Lots 200 and 300" - and states that "EPA has reason to believe that

hazardous substances have been or are being released from those facilhies." Id.

The GNL also directs that Anderson "take action." The GNL directs Anderson to "give

these matters your immediate attention" and to contact someone affiliated with the "Convening

Group," coupled with the statement that the "mediated allocation process" undertaken by the

Convening Group, which in description is a form of ahernative dispute resolution ("ADR") "will

avoid litigation and significant transaction costs to you and your company." Anderson Dec, Ex.

B.

In Pintlar, the Ninth Circuh discussed the impact of a GNL (which h described using the

commonly-used sobriquet "PRP notice") on an entity like Anderson. The court noted that "a

PRP notice carries with it immediate and severe implications... in a C E R C L A case, the PRP's

substantive rights and ultimate liability are affected from the start of the administrative process...



In order to influence the nature and costs of the environmental studies and cleanup measures, the

PRP must get involved firom the outset." Pintlar, 948 F.2d at 1516-1517. After noting

CERCLA's severe penalties for non-cooperation and "incentives" for a PRP to cooperate, the

court held that "[a]s a resuh, an 'ordinary person' would believe that the receipt of a PRP notice

is the effective commencement of a 'suh' necessitating a legal defense." Pintlar, 948 F.2d at

1517.̂ "

In this context it is clear that the EPA's language in the Anderson G N L about the A D R

process is a "direction" to Anderson to get involved in that A D R process. Therefore, under the

OECAA (and Ninth Circuh case law), the GNL is clearly a "suit."

2. The GNL Triggered the Defense Obligation.

The GNL also satisfied the language in the Policies stating that St. Paul must defend any

"suit" "against the insured seeking damages on account of... property damage [to which this

insurance applies.]" Row Dec, Exs. A & B . The GNL stated that a "release" "of hazardous

substances, pollutants, or contaminants" "has occurred" at the Site, and specifically at

Anderson's property at 4621 N W St. Helens Road and adjacent Tax Lots 200 and 300.

Anderson Dec, Ex. B. The G N L states that EPA "has spent or is considering spending public

funds to investigate and control releases" at the Site, and that EPA "has determined that"

Anderson "may be responsible under C E R C L A for cleanup of the Site." Anderson Dec, Ex. B.

The GNL, similar to the 104(e) Request, clearly alleged that there has been property

damage and that Anderson may be liable for damages resulting from that property damage. For

The court rejected the carriers' contention that nothing in insurance coverage law requires an interpretation of insurance policies to promote settlement rather than litigation: "Coverage should not depend on whether EPA may choose to proceed with its administrative remedies or go directly to litigation. A fundamental goal of C E R C L A is to encourage and facilitate voluntary settlements." Pintlar, 948 F.2d at 1517. Moreover, the O E C A A contains an express statement that its purpose is to encourage potentially liable parties to cooperate with the government's cleanup efforts. ORS 465.478.



all ofthe same reasons set out above in cormection with the 104(e) Request, the GNL triggered

St. Paul's defense obligation.

3. Because the GNL Was a "Suit," St. Paul Had an Obligation to Defend, Which h Breached.

Under the terms of the Policies St. Paul had an obligation to defend "suhs" against

Anderson. Because, under the OECAA, the GNL was a "suh," St. Paul's refusal to defend the

GNL was a breach of the Policies.

Therefore, Anderson respectfully requests that the Court grant Anderson's Motion for

Partial Summary Judgment on St. Paul's liability for breach of contract as to Policies 587JD7640

and 587JE180 as to the GNL.

C. Anderson Is Entitled to Declaratory Judgment that St. Paul Has an Obligation to Defend Anderson.

1. Legal Standard for Declaratory Judgment

A declaratory judgment is appropriate where there is a "case of actual controversy" in

which the court may "declare the rights [or] other legal relations of any interested party." 28

U.S.C. § 2201(a).

2. The Defense Obligation for the GNL Includes the Ongoing A D R Process.

As discussed above, St. Paul has, repeatedly, stated that it owes no obligation to defend

Anderson against either the 104(e) Request or the GNL. In particular, St. Paul has stated in

writing that hs denial is based on the two following two propositions: 1) the 104(e) Request and

the GNL do not constitute an "actual demand" "to take any action to perform clean-up

activities;" and 2) that the EPA "correspondence" "does not arise to the level of a suh as there

does not appear to be any demand that Anderson take any action to perform clean up activities."

Sharp Dec, Ex. O. If the Court holds that St. Paul breached the Policies by refusing to defend

Anderson against the 104(e) Request and/or the GNL, those contentions (which seek to narrowly



interpret the term "suit," contrary to the OECAA) will have been put to rest. However, an actual

case or controversy will remain i f St. Paul takes the position, as its sister company United States

Fidelity and Guaranty Company ("USF&G") has in the Ash Grove htigation, that the "defense"

of an entity in connection with the Site does not include the A D R process identified in the

G N L . "

St. Paul is expected to take the position that "defense" of the G N L does not include

participation in the A D R process. Therefore, Anderson seeks summary judgment on hs Second

Claim for Relief and specifically a declaration that the duty to defend includes participation in

the ADR process described in the GNL. As described above, the A D R process was specifically

identified by the EPA in the GNL as the mechanism by which an entity like Anderson may

reduce hs liability. For all of the reasons described above, including the analysis provided by the

Ninth Circuit in Pintlar, Anderson must get involved now in the administrative process.

Anderson respectfully requests summary judgment in hs favor on its Second Claim for Relief

IV. CONCLUSION

For the foregoing reasons, Anderson respectfully requests that the Court grant its Motion

for Partial Summary Judgment.

DATED this 12* day of May, 2011.

PARSONS F A R N E L L & GREIN, LLP

By: /s/Seth H. Row SethH. Row, OSB #021845 Telephone: (503)222-1812 Attomeys for Plaintiff Anderson Brothers, Inc.

" See the pleadings in the Ash Grove matter submitted by co-defendants Liberty Mutual Insurance Company and USF&G making the assertion that the A D R process (including the "Convening Group") is not within the scope of the duty to defend, attached to the Row Declaration as Exhibits C and D.



Economy & Finance

Anderson Bros. MSJ 104(e) Request Granted