Insurance Law

Counterclaim Asserted Against Insured in Underlying Environmental Cleanup Action Triggered Duty to Defend

In Haskins, [subscribers can access an enhanced version of this opinion: lexis.com | Lexis Advance], the Northern District of California held that the insurer’s duty to defend under a CGL policy was triggered by a counterclaim asserted against the insureds in an underlying action brought by the insureds.

The insureds owned commercial property in South San Francisco and brought an action against the owners of an adjoining property for failing to complete environmental cleanup before selling their property. The adjoining property owners answered and filed a counterclaim seeking declaratory relief under 42 U.S.C. section 9613(g)(2), [subscribers can access an enhanced version of this statute: lexis.com | Lexis Advance], and cost recovery under 42 U.S.C. section 9607(a), [subscribers can access an enhanced version of this statute: lexis.com | Lexis Advance]. The insured tendered the counterclaim to their CGL insurer, which declined coverage based on the position that the counterclaim was not a “suit,” as that undefined term was used in the policy because it was purely defensive in nature. The insured moved for summary judgment, and the court granted the motion.

The court explained that, “the critical question in resolving whether th[e] duty to defend was triggered by [the] counterclaim is whether that counterclaim ‘would unquestionably have been a suit for damages if asserted in a court of law . . . .’” The court found that the counterclaim alleged that the adjoining owners had already incurred costs for which the insureds were liable pursuant to statute and could have brought the counterclaim as an independent suit even in the absence of the insureds’ affirmative claim. Accordingly, the court concluded that the counterclaim triggered the insurer’s duty to defend.

Haskins v. Emplrs Ins. of Wausau, 2015 U.S. Dist. LEXIS 21480 (N.D. Cal. Feb. 23, 2015)

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