Cooper Industries v. Wasau is an insurance coverage dispute that arose out of a massive Passaic River cleanup effort by the EPA and State of New Jersey and their efforts to collect payment from potentially responsible parties (PRP).

Cooper received a PRP letter from the EPA stating that Cooper may be responsible for costs of the cleanup project due to alleged conditions created by manufacturing facilities owned by Cooper companies. Cooper alerted OneBeacon of this notice, but the insurer refused to cover the company’s defense costs in the EPA proceedings, asserting that the policy language provided that “OneBeacon “shall have the right and duty to defend any suit…” and that this letter was not a suit.

The Court looked to other jurisdictions that held that a PRP letter was, in essence, a pleading, and that these letters compelled information that would similarly be produced in discovery.  The Court also pointed out that the PRP letter stated that the EPA could initiate a lawsuit if Cooper declined to assist with the project. The Court found that the letter used the threat of legal proceedings to compel payment or conduct by a policyholder, which brought the letter within the definition of “suit” under the policies and ultimately found that OneBeacon must defend Cooper Industries in connection with the cleanup project.

Thanks to Chelsea Rendelman for her contribution to this post and please write to Mike Bono for more information.