Oregon Magistrate Judge: Environmental Claims Exclusion Includes Indian Tribes’ Claims

In an insurance case attracting the attention of many insurance companies, Century Indemnity Company v. Marine Group, LLP, et al., a U.S. Magistrate Judge with the U.S. District Court for the District of Oregon (Portland Division), in its opinion and order on Marine Group’s motion for clarification and reconsideration, held that an insurance policy provision which excludes coverage for environmental claims brought by governmental agencies extends to Superfund or CERCLA natural resource damage claims asserted by Indian tribes that are members of a Superfund Trustee Council. The Indian tribes are members of the Portland Harbor Natural Resource Trustee Council, and the Court held that the claims asserted by members of the Council, including the tribes, triggered the insurance exclusion.

The at-issue environmental claims exclusion provides:

“This policy does not apply to the liability of the Insured, or liability of another for which the Insured may be liable in whole or in part, resulting from any suit, action, proceeding or order brought or issued by or on behalf of any Federal, State or local governmental authority seeking (a) Remedial Action or the cost thereof, (b) damages for injury to, destruction of or loss of natural resources, including the costs of assessing such injury, destruction or loss, if such suit, action, proceeding or order arises from the release of a hazardous substance at any area, whether or not owned by the Insured. The company shall not have the obligation to defend any suit, action or proceeding seeking to impose such liability.”

Interpreting this exclusion, the court found that as members of the Council and based on the Council’s Memorandum of Agreement, the Tribes were asserting natural resource damage (NRD) claims on behalf of the collective members of the Council, which clearly included Federal, State or local governmental authorities.  Consequently, it found that NRD claims asserted by members of the Council, including the Tribes, were claims “brought or issued by or on behalf of any Federal, State or local governmental authority seeking … damages for injury to, destruction of or loss of natural resources,” and fell within the parameters of the exclusion.

Marine Group argued that the court committed clear error in reaching this conclusion by ignoring material terms of the exclusion, substituting its own terms for those actually used in the exclusion, disregarding federal law when characterizing the NRD claims, and failing to construe an ambiguity in the underlying complaint in favor of the Marine Group, the insured.  It further argued that the court failed to construe an ambiguity in the underlying complaint in their favor. Finally, Marine Group contended that the court disregarded existing law establishing that CERCLA authorizes only natural resource trustees, and not the Council, to bring NRD claims.  In response, the court confirmed that “the court analyzed the Tribe’s NRD claims solely within the context of the Council but did not view the claims as being brought by the Council.”

Marine Group also argued that the court erred when it found that the “Tribes were acting on behalf of other members of the Council, who were clearly governmental authorities within the parameters of the [e]xclusion.” In response, the court noted:

“While, as noted by the Marine Group, Tribes are independent sovereigns who act solely for the benefit of tribe members and not United States citizens in general, the Council’s Memorandum of Agreement specifically provides that all members of the Council are acting for the benefit of the members as a whole. Accordingly, any claim brought by a Tribe for NRD while a member of the Council is brought on behalf of all other members, who share equally in the damages recovered. In this context, the Tribes are asserting claims which will benefit United States citizens, not just tribe members.”

Ultimately, the court found that Marine Group failed to establish the court committed clear error or that the initial decision was manifestly unjust, finding that “[i]n the context of the facts currently before the court—Tribes are asserting natural resource damages claims not individually but as a member of the Council for the benefit of the members as whole, which members include Federal, State, or local governmental authorities—the court is convinced the [e]xclusion bars coverage of such claims despite the Marine Group’s continued arguments to the contrary.”