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Gull Indus., Inc. v. State Farm Fire & Cas. Co.

Court of Appeals of Washington, Division 1

June 2, 2014

Gull Industries, Inc., Appellant,
v.
State Farm Fire and Casualty Company et al., Respondents

Oral Argument January 21, 2014.

Page 783

Appeal from King County Superior Court. Docket No: 11-2-44427-9. Date filed: 09/28/2012. Judge signing: Honorable Michael J Trickey.

Franklin D. Cordell, Jeffrey I. Tilden, and Susannah C. Carr (of Gordon Tilden Thomas & Cordell LLP ); Bradley M. Marten, Jessica K. Ferrell, and Russell C. Prugh (of Marten Law PLLC ); and Steven G. Jones (of Holland & Hart LLP ), for appellant.

Michael S. Rogers (of Reed McClure ); Carl E. Forsberg, Richard R. Roland, and Patrick S. Brady (of Forsberg & Umlauf PS ) ( Timothy J. Fagan, Clay H. Phillips, Bethanie L. Berube, Katie I. Falkenberg, Michael L. Resis, and Erika Stamper of SmithAmundsen LLC, of counsel), for respondents.

Robert W. Ferguson, Attorney General, and Valerie Rickman and Andrew Fitz, Assistants, on behalf of the Department of Ecology, amicus curiae.

AUTHOR: James Verellen, ACJ. WE CONCUR: Stephen J. Dwyer, J., Ann Schindler, J.

OPINION

Page 784

Verellen, A.C.J.

[181 Wn.App. 465] ¶ 1 The Model Toxics Control Act (MTCA), chapter 70.105D RCW, imposes strict liability upon the owner or operator of contaminated property. Such strict liability may trigger the duty to indemnify under [181 Wn.App. 466] commercial liability policies even if no agency has taken or overtly threatened formal legal action.[1] We are asked to decide what triggers a duty to defend " any suit" when the owner of contaminated property faces strict liability under the MTCA. We conclude that the term " suit" is ambiguous in this context and does not require that a summons and complaint be filed or served or that an administrative action be commenced. Rather, under a functional equivalent standard, the duty to defend is triggered if a government agency communicates an explicit or implicit threat of immediate and severe consequences by reason of the contamination.

¶ 2 The Department of Ecology (DOE) letter to Gull Industries Inc. acknowledged receipt of Gull's voluntary report of contamination and intent to remediate. The letter did not communicate any explicit or implicit threat of immediate and severe consequences. Therefore, we affirm the partial summary judgment that State Farm Fire and Casualty Company and Transamerica Insurance Group (TIG) have no duty to defend.

¶ 3 We reject TIG's challenge to the trial court's CR 54(b) designation.

FACTS

¶ 4 Gull owned a gas station in Sedro-Woolley. To insure itself against liability arising from the operation of this station, Gull obtained liability coverage with TIG for both bodily injury and property damage from 1981 until 1986.

¶ 5 Gull leased the Sedro-Woolley station to Hayes Johnson and Mary Johnson from 1972 to 1982. Under the terms of the lease, the Johnsons were required to obtain liability insurance to cover the service station's operations. The Johnsons obtained coverage from State Farm from July 28, [181 Wn.App. 467] 1977 through July 28, 1978 under policy number 98-59-34-77. The Johnsons then obtained another policy through State Farm under policy number 98-60-04-39, which covered the period from July 28, 1978 through July 28, 1981. But this second policy was immediately cancelled,

Page 785

and the cancellation request was processed on August 4, 1978. Gull and State Farm dispute whether the Johnsons renewed that policy with State Farm.[2]

¶ 6 Here, the reconstructed insurance policies at issue include the duty to defend against a " suit." [3] First, the parties agree that the State Farm policies stated:

This Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury or property damage, arising out of service station operations; and this Company shall have the right and the duty to defend any suit against the Insured seeking damages payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; but this Company may make such investigation and settlement of any claim or suit as it deems expedient.[4]

Similarly, the TIG policies stated:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence. 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 if any of the allegations of the suit are groundless [181 Wn.App. 468], false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient.[5]

None of the policies defined the term " suit." [6]

¶ 7 In 1984, Gull investigated underground storage tanks at a number of Gull's service stations. The investigation at the Sedro-Woolley station identified hydrocarbons in the soil adjacent to the underground storage tanks and revealed a continuous release of hydrocarbons during the period the Johnsons leased the station. As a result, Gull undertook voluntary remediation, including investigation and cleanup of the soil and groundwater.

¶ 8 In 2005, Gull notified DOE that there had been a release of petroleum product at the Sedro-Woolley station. DOE sent Gull a letter acknowledging Gull's notice of the suspected contamination.

¶ 9 In 2009, Gull tendered its claims for defense and indemnification for the costs of the cleanup at the Sedro-Woolley station to TIG. TIG did not accept Gull's tender. In March 2010, Gull tendered its claims as an additional insured under the Johnsons' ...


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