The United States 11^th Circuit Court of Appeals, applying Alabama law, affirmed the district court’s ruling for the insurer against coverage and against bad faith damages. The insurer issued commercial general liability coverage to the policyholder between 1967 and 1984. In 2008-2009, the policyholder received a CERCLA information request, a formal notice of potential liability, and a draft administrative order of consent from the U.S. EPA. Carcinogenic contamination at the former gas plant occurred between 1886 and the policyholder’s sale of the property in 1949. The policyholder tendered the claim to the insurer, who denied coverage, asserting there was no “formal claim,” “suit,” or “occurrence.”

The district court held that Alabama law applies an “injury-in-fact” trigger requirement for indemnity coverage, requiring that an actual injury must occur during the time the policy is in effect. The district court found that the injury to the land occurred prior to 1949, while the injury to the policyholder occurred no earlier than 2008.  Thus, the district court ruled that the 1967-1984 policies’ indemnity obligations were not triggered. The 11^th Circuit agreed with the district court that “the occurrences that might trigger coverage in this case happened too early – before 1949 – for the proved pertinent policy periods.”

With regard to the bad faith claim, the Alabama Supreme Court issued a ruling in December 2012, in response to a certified question from the district court in this case, holding that PRP letters trigger a carrier’s duty to defend under Alabama law. With that clarification, the district court held that prior to the Alabama Supreme Court’s ruling, the question of whether a PRP letter constituted a “suit,” was unsettled and therefore, the insurer’s refusal to assume the duty to defend did not satisfy the elements of a bad faith claim. The 11^th Circuit agreed, stating, “[W]e agree that the question of whether a PRP letter from the EPA triggered a defense obligation was debatable before the Supreme Court of Alabama decided the question in this case.” Alabama Gas Corp. v. Travelers Cas. & Sur. Co., No. 13-14345 (11th Cir. June 11, 2014).