## Facts

- West Bay Exploration Company operated approximately 24 natural-gas wells in northern lower Michigan and removed water vapor from gas production.
- Concerned the separated water might contain carcinogens, West Bay discharged it into a drum rather than venting it.
- An August 1984 Michigan Department of Natural Resources (MDNR) report indicated carcinogenic substances associated with oil-field brines had contaminated water sources and that a tested aquifer was unsafe for human consumption.
- On October 31, 1985, MDNR sent West Bay a letter stating it suspected West Bay of improperly disposing of carcinogenic chemicals at several wells.
- On February 19, 1986, MDNR directed West Bay to cooperate with the agency and remediate carcinogen contamination within 40 days.
- During policy years 1982–1985, West Bay held general liability policies issued by International Surplus Lines Insurance Company, Great Southwest Fire Insurance Company, and Zurich American Insurance Company of Illinois.
- Each policy required written notice of an “occurrence” “as soon as practicable” and stated that no action could be brought against the insurer unless the insured complied with policy terms, including notice.
- West Bay incurred substantial remediation costs at seven wells for contamination occurring during the covered period and sought coverage; the insurers denied coverage based on untimely notice.
- West Bay filed a declaratory judgment action on October 27, 1987, about 20 months after the February 1986 MDNR directive.

## Issues

1. Under Michigan law, did West Bay’s failure to provide written notice of an occurrence “as soon as practicable,” as required by the liability policies, bar coverage for environmental remediation costs?
2. Was summary judgment proper where the notice timing was largely established by undisputed regulatory correspondence and dates?

## Decision

- The Sixth Circuit affirmed summary judgment for International, Great Southwest, and Zurich.
- The court held that the notice provisions were conditions precedent and West Bay failed, as a matter of law, to provide notice “as soon as practicable.”
- The court concluded that West Bay’s duty to notify was triggered no later than early 1986, when MDNR issued the remediation directive (and, at the latest, by the earlier noncompliance letter).
- Because West Bay’s delay was substantial and inadequately explained, no reasonable jury could find compliance with the notice condition; coverage was therefore barred.

## Legal Principles

- Under Michigan law, clear policy notice requirements may operate as conditions precedent to coverage and may be enforced according to their terms.
- “As soon as practicable” is assessed by an objective standard: when a reasonable insured would believe a covered occurrence had occurred and that a claim was probable.
- Regulatory communications identifying suspected violations and directing cleanup can trigger an insured’s notice obligation under liability policies.
- Where the relevant timing is undisputed and the insured’s delay is substantial and unjustified, failure to satisfy a notice condition precedent can defeat coverage as a matter of law at summary judgment.

## Conclusion

The court held that West Bay’s extended delay in notifying its insurers after receiving MDNR’s noncompliance letter and remediation directive violated the policies’ “as soon as practicable” notice condition, barring recovery of environmental cleanup costs under Michigan law.


West Bay Expl. Co. v. AIG Specialty Agencies of Tex., Inc., 915 F.2d 1030 (6th Cir. 1990)