ODOT v. Pacific Indemnity Co.

The “four corners” rule imposes a duty to defend when the complaint alleges facts, if proved true, which would impose liability covered by the policy. See West Hills Development Co. v. Chartis Claims, 360 Or 650, 653 (2016).

Oregon Department of Transportation (ODOT) received a notice from the Environmental Protection Agency (EPA) identifying them as a potentially responsible party, and therefore liable, for contamination at a Superfund site. See 42 U.S.C. §104(e); see generally id. §§ 9601 – 9628. When Arrowood Indemnity Company (Arrowood) declined to defend or cover any litigation under its insurance policy issued to ODOT, ODOT sought a declaration that Arrowood had a duty to defend. Arrowood assigned error to the trial court’s grant of summary judgment to ODOT, claiming the court erred finding a duty to defend because the EPA notice was not a complaint or “suit” subject to the policy. The “four corners” rule imposes a duty to defend when the complaint alleges facts, if proved true, which would impose liability covered by the policy. See West Hills Development Co. v. Chartis Claims, 360 Or 650, 653 (2016). Despite the EPA notices not coming in the form of a complaint, the duty to defend applies when a claimant can recover from the insured “upon any basis for which the insurer affords coverage.” Nielsen v. St. Paul Companies, 283 Or 277, 280 (1978). The question to determine if there is a duty to defend inquires only if, disregarding ambiguity, the EPA notice could be reasonably interpreted to prove coverage at trial. See West Hills, 360 Or at 666. The Court concluded the EPA notice could trigger coverage because it alleged damages as a result of property damage to which the policy would apply. Arrowood therefore had a duty to defend. Affirmed.