Allianz Global Risks US Ins. Co. v. ACE Prop. & Cas. Ins. Co.

• Decision Date: 25 March 2021
• Docket Number: CC 120404552 (SC S067017)
• Parties: ALLIANZ GLOBAL RISKS US INSURANCE COMPANY and Allianz Underwriters Insurance Company, Petitioners on Review, v. ACE PROPERTY & CASUALTY INSURANCE COMPANY, as Successor to Aetna Insurance Company; Certain Underwriters at Lloyd's London; Certain London Market Insurance Companies; General Insurance Company; and Westport Insurance Corporation, as Successor to Puritan Insurance Company, Respondents on Review, and Con-Way, Inc., as Successor to Consolidated Freightways, Inc., Respondent on Review, and Allstate Insurance Company, as Successor to Northbrook Excess and Surplus Insurance Company, fka Northbrook Insurance Company ; et al., Defendants. Allianz Global Risks US Insurance Company and Allianz Underwriters Insurance Company, Petitioners on Review, v. Ace Property & Casualty Insurance Company, as Successor to Aetna Insurance Company; General Insurance Company; and Westport Insurance Corporation, as Successor to Puritan Insurance Company, Respondents on Review, and American Home Assurance Company; Certain Underwriters at Lloyd's London; Certain London Market Insurance Companies; Continental Casualty Company; Lexington Insurance Company; Northern Assurance Company of America, Respondents on Review, and Con-Way, Inc., as Successor to Consolidated Freightways, Inc., Respondent on Review, and Allstate Insurance Company, as Successor to Northbrook Excess and Surplus Insurance Company, fka Northbrook Insurance Company ; et al., Defendants.
• Court: Oregon Supreme Court

367 Or. 711

483 P.3d 1124

ALLIANZ GLOBAL RISKS US INSURANCE COMPANY and Allianz Underwriters Insurance Company, Petitioners on Review,

v.ACE PROPERTY & CASUALTY INSURANCE COMPANY, as Successor to Aetna Insurance Company; Certain Underwriters at Lloyd's London; Certain London Market Insurance Companies; General Insurance Company; and Westport Insurance Corporation, as Successor to Puritan Insurance Company, Respondents on Review,andCon-Way, Inc., as Successor to Consolidated Freightways, Inc., Respondent on Review,

and

Allstate Insurance Company, as Successor to Northbrook Excess and Surplus Insurance Company, fka Northbrook Insurance Company ; et al., Defendants.

Allianz Global Risks US Insurance Company and Allianz Underwriters Insurance Company, Petitioners on Review,

v.Ace Property & Casualty Insurance Company, as Successor to Aetna Insurance Company; General Insurance Company; and Westport Insurance Corporation, as Successor to Puritan Insurance Company, Respondents on Review,andAmerican Home Assurance Company; Certain Underwriters at Lloyd's London; Certain London Market Insurance Companies; Continental Casualty Company; Lexington Insurance Company; Northern Assurance Company of America, Respondents on Review,

and

Con-Way, Inc., as Successor to Consolidated Freightways, Inc., Respondent on Review,

and

Allstate Insurance Company, as Successor to Northbrook Excess and Surplus Insurance Company, fka Northbrook Insurance Company ; et al., Defendants.

CC 120404552 (SC S067017)

Supreme Court of Oregon.

Argued and submitted September 16, 2020.

March 25, 2021

C. Robert Steringer, Harrang Long Gary Rudnick P.C., Portland, argued the cause and filed the briefs for petitioners on review. Also on the briefs were James E. Mountain, Jr., and Erica R. Tatoian, and, on the reply brief, Margaret H. Warner and Ryan S. Smethurst, McDermott Will & Emery LLP, Washington DC.

Robert Koch, Tonkon Torp, Portland, argued the cause and filed the brief for respondent on review Con-Way, Inc. Also on the brief were Frank J. Weiss and Anna K. Sortun.

Carl E. Forsberg, Forsberg & Umlauf, P.S., Seattle, Washington, argued the cause and filed the brief for respondents on review Certain Underwriters at Lloyd's London and Certain London Market Insurance Companies. Also on the brief were Matthew S. Adams and Charles Henty, Forsberg & Umlauf, P.S., Timothy R. Volpert, Tim Volpert, P.C., Portland, and Matthew B. Anderson and William B. Seo, Mendes & Mount, LLP, New York.

Thomas M. Christ, Sussman Shank LLP, Portland, filed the brief for respondent on review General Insurance Company.

Beverly Pearman, Assistant General Counsel, Portland, and Seth H. Row, Portland, filed the brief for amici curiae Port of Portland and United Policyholders.

Nadia H. Dahab, Stoll Stoll Berne Lokting & Shlachter, Portland, filed the brief in support of the petition for review and Lydia Anderson-Dana, Stoll Stoll Berne Lokting & Shlachter, filed the brief on the merits for amicus curiae Daimler Trucks North America LLC. Also on the brief on the merits was Steven C. Berman.

Michael E. Farnell, Parsons Farnell & Grein, LLP, Portland, filed the brief for amicus curiae Former Governor Ted Kulongoski.

Before Walters, Chief Justice, and Balmer, Nakamoto, Duncan, Nelson, and Garrett, Justices, and Rives Kistler, Senior Judge, Justice pro tempore.^**

BALMER, J.

This case arises out of an insurance company's civil action seeking equitable and statutory contribution from other insurers for claims and defense costs that it paid on behalf of its insured. We describe the factual background of the case and the claims in general terms before addressing the legal arguments in detail. For the reasons explained below, we reverse the decision of the Court of Appeals, affirm in part and reverse in part the trial court's limited judgments, and remand to the trial court for further proceedings.

I. BACKGROUND AND PROCEEDINGS BELOW

Daimler-Benz AG acquired Freightliner Corporation (Freightliner) from Consolidated Freightways (now Con-Way) in 1981. As part of the transaction, it liquidated Freightliner's assets and liabilities into a subsidiary, Daimler Trucks North America LLC (Daimler). Between 1952 and 1982, Freightliner and then Daimler had engaged in business activities, primarily the manufacture of trucks, that subsequently led to several environmental remediation proceedings, including claims related to the Portland Harbor Superfund cleanup, and to some 1,500 asbestos personal injury claims. Plaintiffs Allianz Global Risk US Insurance and Allianz Underwriters Insurance Company (Allianz) insured Freightliner in 1981 and Daimler from 1981 to 1986 through a general commercial liability insurance policy. Daimler also purchased from Allianz another policy to provide coverage for future claims that might be made against Freightliner based on its past operations that were "incurred but not yet reported." By the time it filed the operative complaint in this action in 2014, Allianz had spent more than $24 million defending and paying environmental and asbestos claims against Daimler and the now-dissolved Freightliner arising from Freightliner's business operations between 1952 and 1982.

In this litigation, Allianz seeks contribution for the payments it has made and will make in the future based on those environmental and asbestos claims from insurance companies that insured Freightliner—either directly or through its parent, Con-Way—from 1976 to 1982. Those include defendants ACE Property & Casualty Insurance Company (ACE), General Insurance Company (General), and Westport Insurance Corporation (Westport). Allianz also seeks contribution from Certain Underwriters at Lloyd's, London and Certain London Market Insurance Companies (London), which had issued excess insurance policies to Freightliner from 1977 to 1981.¹ Defendant insurance companies declined to defend Daimler or pay claims under the relevant policies or to pay any contribution to Allianz for the amounts that it has paid. Daimler assigned its claims against defendants under the insurance policies to Allianz.

Allianz alleges that it is entitled to common-law equitable contribution because of the "equitable doctrine which holds that one who pays money for the benefit of another is entitled to be reimbursed." Carolina Casualty v. Oregon Auto. , 242 Or. 407, 417, 408 P.2d 198 (1965). It also relies on ORS 465.475 to 465.484, the Oregon Environmental Cleanup Assistance Act (OECAA), which provides that an "insurer that has paid all or part of an environmental claim may seek contribution from any other insurer that is liable or potentially liable to the insured and that has not entered into a good-faith settlement agreement with the insured regarding the environmental claim." ORS 465.480(4)(a).

The insurance companies' threshold defense is that they are not responsible for any payments by Allianz because the liabilities that they insured for Freightliner and Con-Way were not transferred to Daimler as part of the acquisition and dissolution of Freightliner in 1981. For that reason, they argue, they have no obligation at all to Daimler directly or in its capacity as the assignee of Freightliner's liabilities, and Allianz therefore may not recover any contribution from them.

A second line of defense for General, Westport, and ACE is that, even if Daimler did assume the liabilities of Freightliner, including the environmental and asbestos liabilities at issue here, their policies require no payment by them to Daimler (and thus no contribution payment to Allianz) because of side agreements, sometimes referred to as "fronting agreements," between themselves and Freightliner's parent, Con-Way. Under the side agreements, Con-Way agreed to indemnify the insurers for all claims, defense costs, and other expenses arising out of occurrences subject to the policies. Con-Way intervened in support of the insurers because, under the side agreements, "Con-Way ultimately will be responsible for any damages assessed against" them.

A third defense raised by the insurers is based on "qualified pollution exclusion" provisions in the policies. Policies issued by London and General excluded coverage for pollution liability unless the pollution was "sudden, unintended and unexpected" (London) or was "sudden, unexpected [and] unintentional" (General), which the parties refer to as the "London" pollution exclusion.² Policies issued by Westport and ACE excluded pollution coverage unless the pollution was caused by a "discharge" that was "sudden and accidental" (the "Domestic" pollution exclusion).

At trial, the jury found that Daimler had assumed the contingent liabilities of Freightliner and, thus, that the insurers could be liable to Daimler for the claims at issue here. However, based on the side agreements and other evidence admitted at trial, the jury also found that, notwithstanding the insurance policies issued by Westport, ACE, and General, those insurers and Con-Way did not intend that the insurers would have a duty to defend or indemnify Freightliner. As to the pollution exclusion provisions, the jury agreed with Allianz that the Domestic exclusion provisions in the ACE and Westport policies did not exclude the environmental claims at issue here, but also found that the London exclusion provisions in the London and General policies did exclude coverage of those environmental claims.

Based on the jury verdict, the trial court entered the two limited judgments that are at issue here. In one, the trial court declared, because the jury had found that Con-Way and the fronting insurers—General, ACE, and Westport—did not intend that those insurers would have a duty to defend Freightliner as to the claims at issue, that Allianz was not entitled to contribution from those defendants for the amounts that it paid with respect to the claims. It therefore dismissed with prejudice all of Allianz's claims against ACE and claims against General and Westport that related to some of the...