Washington Court Rules Insurer’s Duty to Defend Environmental Liability is Triggered by Agency’s Explicit or Implicit Threat of Immediate and Severe Consequences


A party faced with strict liability under the Washington Model Toxics Control Act (MTCA) for the costs of cleaning up environmental contamination often has insurance that might apply, but a lingering question has been at what point is the party’s insurer obligated to defend? The Washington Court of Appeals has now ruled that a letter from the Department of Ecology (Ecology) that merely acknowledges receipt of a voluntary report of contamination and intent to remediate is insufficient to trigger the insurer’s duty to defend. As foreshadowed 20 years ago by the Washington State Supreme Court in Weyerhaeuser Co. v. Aetna Cas. & Sur. Co., the Court of Appeals has now ruled that the duty to defend is triggered only when there is an explicit or implicit threat of immediate and severe consequences because of the contamination. The court, however, did not explain what language would constitute an “explicit or implicit” threat.

In Gull Industries, Inc. v. State Farm Fire and Casualty Company, the plaintiff owned a gas station in Sedro Wooley and had liability insurance that provided for a duty to defend the insured in the event of a “suit” against the insured. The policies, which were issued in the 1970s and 1980s, did not define what constituted a “suit.” In 2005 Gull notified Ecology that there had been a release of petroleum at the gas station and Ecology acknowledged receipt of that notice. Subsequently, Gull tendered claims for defense and coverage to the insurers for the costs of cleanup, but the insurers rejected the tender. Gull then sued the insurers seeking coverage for the Sedro Wooley site and 200 other sites that Gull formerly owned in Washington.

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