Texas Supreme Court Will Decide Important CERCLA Insurance Matter

The Texas Supreme Court confirmed that it will decide an issue of Texas law that was certified to the Court by the U.S. Court of Appeals for the Fifth Circuit. The case is McGinnes Industrial Maintenance Corporation v. The Phoenix Insurance Company; The Travelers Indemnity Company. The issue is whether the receipt of Potentially Responsible Party (PRP) letters and unilateral administrative order, issued pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), from EPA Region 6 is a “suit” that triggers a duty by the insurers to defend, investigate and settle.

McGinnes is in the waste disposal business and, in the 1960s, McGinnes removed waste from a paper mill and released it into three ponds located adjacent to the San Jacinto River. McGinnes is a potentially responsible party at the San Jacinto Waste Pits Superfund site in Harris County, Texas. McGinnes is cooperating with EPA in developing a cleanup plan for the site, but McGinnes is also being sued in state court for past violations of the state environmental laws pertaining to waste cleanups. Its liability could well be assessed at millions of dollars in addition to the cleanup costs. The Fifth Circuit believes that this issue of state law requires clarification by the Texas Supreme Court. This is an important case; different courts in different states have issued rulings coming down on both sides of this issue. No date for oral argument has been scheduled.