INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Sorry, you owe a contribution
This matter was purely among insurers. Specifically, an insurance company, designated as a target insurer, sought contributions from others for a loss and defense costs it had solely paid. The triggering event had to do with providing coverage to a steel manufacturer involved with possibly contaminating a Superfund site located in Oregon.
Note: “Superfund” refers to a federal government program under the authority of the Environmental Protection Agency (EPA), set up to identify toxic and hazardous waste dump sites. Once the sites are identified, an attempt is made to identify the responsible parties, arrange the cleanup of the sites, and assess the responsible parties with the costs incurred.
The target insurer, along with two others, was among those that had issued commercial general liability (CGL) policies to the steel maker. Over a span of nearly two decades, the business was provided with a legal defense by those insurers.
The defense situation changed when the Oregon law firm that had been representing the steel maker had to withdraw due to a conflict of interest. The insured could find no other firm in the state that was qualified to take over, so it hired a firm from Los Angeles. The new firm charged substantially higher rates.
The insurers first reached agreement that it would continue to pay expenses equal to what the Oregon firm charged. Later, the insured challenged and won a court decision that the insurers, subject to exhaustion of their policy limits, must pay full defense costs.
While all costs had been paid by the target insurance company, the three carriers had an agreement to eventually share those costs on a 70%-20%-10% basis. When the target insurer called upon contributions, a problem arose.
Shortly after its request, the insurer that had pledged to handle 20% of total costs reached a settlement with their shared insured. Part of the settlement that the insurer made was to be released from any obligation for payments made to the insured by the target insurer for both existing and future loss costs and legal costs.
Finalization of the separate agreement was contingent on the target insurer terminating its contribution call. Instead, the target insurer responded by filing suit to enforce its request.
The insurer that made the side settlement filed a countersuit asking that its agreement be honored since it was made in good faith with the shared insured. While a trial court ruled in favor of the target insurer, an appellate court ruled that the separate settlement voided a need for a contribution. The target insurer appealed.
The higher court’s review was largely held within its interpretation of state statutes created to handle Superfund situations. It was also guided by review of previous cases that it found relevant to the matter.
The high court found fault with the appellate court’s reasoning. It was determined that the contributing insurer’s settlement agreement did not bar the target insurer from seeking contributions for the amount it paid.
The court’s rationale revolved around two major points. First, the target insurer payments involved a legitimate environmental claim. A valid environmental claim payment included defense expenses. Second, the contributing insurer already held responsibility (along with the two other insurers) to respond to Superfund losses.
In light of its findings, the trial court decision was affirmed, the appellate court decision was reversed, and the matter was remanded.
Continental Casualty Co. v. Argonaut Insurance Company, et al—Supreme Court of Oregon—No. SC S071094—January 28, 2025. n
