Certain Underwriters At Lloyd's London & Excess Ins. Co. v. Mass. Bonding & Ins. Co.

• Decision Date: 03 November 2010
• Docket Number: 030403995,A129974.
• Citation: 260 P.3d 830,245 Or.App. 101
• Parties: CERTAIN UNDERWRITERS AT LLOYD'S LONDON and Excess Insurance Company, Limited, Plaintiffs–Appellants, v. MASSACHUSETTS BONDING AND INSURANCE COMPANY, succeeded in interest by Hanover Insurance Company; Maine Bonding and Casualty Company, a Maine corporation, dba Maryland Casualty Company, dba Zurich Insurance Company; RLI Insurance Company, an Illinois corporation; The Home Indemnity Company, succeeded in interest by The Home Insurance Company, a New Hampshire corporation; Highlands Insurance Company, a Texas corporation, dba Cigna Property and Casualty Insurance Company, aka Cigna Insurance Company of North America, a Pennsylvania corporation, succeeded in interest by CCI Insurance Company, succeeded in interest by Century Indemnity Company, dba Cigna Specialty Insurance Company, aka Cigna; Century Indemnity Company, a Pennsylvania corporation, dba Cigna Property and Casualty Insurance Company, aka Cigna, individually and as successor in interest to CCI Insurance Company, the successor in interest to Insurance Company of North America, Defendants, and Beneficial Fire and Casualty Insurance Company, succeeded in interest by JC Penney Life Insurance Company, then succeeded in interest by Stonebridge Life Insurance Company, a Vermont corporation; Continental Insurance Company, a New Hampshire corporation, dba CNA Insurance Companies and as successor in interest to Glens Falls Insurance Company, a Delaware corporation, dba CNA Insurance Companies; National Union Fire Insurance Company of Pittsburgh, PA, a Pennsylvania corporation; and Industrial Indemnity Company, succeeded in interest by United States Fire Insurance Company, a New York corporation, Defendants–Respondents.
• Court: Oregon Court of Appeals

245 Or.App. 101

260 P.3d 830

CERTAIN UNDERWRITERS AT LLOYD'S LONDON and Excess Insurance Company, Limited, Plaintiffs–Appellants,

v. MASSACHUSETTS BONDING AND INSURANCE COMPANY, succeeded in interest by Hanover Insurance Company; Maine Bonding and Casualty Company, a Maine corporation, dba Maryland Casualty Company, dba Zurich Insurance Company; RLI Insurance Company, an Illinois corporation; The Home Indemnity Company, succeeded in interest by The Home Insurance Company, a New Hampshire corporation; Highlands Insurance Company, a Texas corporation, dba Cigna Property and Casualty Insurance Company, aka Cigna Insurance Company of North America, a Pennsylvania corporation, succeeded in interest by CCI Insurance Company, succeeded in interest by Century Indemnity Company, dba Cigna Specialty Insurance Company, aka Cigna; Century Indemnity Company, a Pennsylvania corporation, dba Cigna Property and Casualty Insurance Company, aka Cigna, individually and as successor in interest to CCI Insurance Company, the successor in interest to Insurance Company of North America, Defendants,andBeneficial Fire and Casualty Insurance Company, succeeded in interest by JC Penney Life Insurance Company, then succeeded in interest by Stonebridge Life Insurance Company, a Vermont corporation; Continental Insurance Company, a New Hampshire corporation, dba CNA Insurance Companies and as successor in interest to Glens Falls Insurance Company, a Delaware corporation, dba CNA Insurance Companies; National Union Fire Insurance Company of Pittsburgh, PA, a Pennsylvania corporation; and Industrial Indemnity Company, succeeded in interest by United States Fire Insurance Company, a New York corporation, Defendants–Respondents.

030403995

A129974.

Court of Appeals of Oregon.

Nov. 3, 2010.

Dec. 12, 2010.

Decided Aug. 17, 2011.

Appellants' Response to Petition for Reconsideration

Christopher T. Carson and Kilmer, Voorhees & Laurick, P.C., for petition.

John Folawn and Folawn Alterman & Richardson, LLP, for response.

Before WOLLHEIM, Presiding Judge, and BREWER, Chief Judge, and SERCOMBE, Judge.

SERCOMBE, J.

Defendant Beneficial Fire and Casualty Insurance Company (Beneficial) petitions for reconsideration of our decision in Certain Underwriters v. Mass. Bonding and Ins. Co., 235 Or.App. 99, 230 P.3d 103 (2010), requesting that we address an assignment of error that we initially declined to reach. For the reasons that follow, we allow the petition, reach and reject that assignment of error, and modify our original opinion accordingly.

Although the circumstances giving rise to this petition are somewhat complicated, the issue on reconsideration is actually quite narrow. Plaintiffs and defendants issued insurance policies to Zidell, their common insured.¹ Zidell, which operated a scrapping business on Moody Avenue along the Willamette River, later became the target of an environmental cleanup action and turned to its insurers for coverage. When the insurers denied coverage, Zidell commenced an action against them, including plaintiffs and defendants. Defendants later settled with Zidell, but plaintiffs did not. Ultimately, Zidell obtained a judgment against plaintiffs in the underlying coverage action, which plaintiffs then appealed.

Meanwhile, following the entry of judgment in the coverage action, plaintiffs filed a contribution action against defendants, the settling insurers. Plaintiffs alleged that, having paid a disproportionate share of a common obligation to Zidell, they were entitled to pro rata contributions from defendants. The trial court granted summary judgment in favor of defendants and dismissed plaintiffs' claims.

The appeals in the underlying coverage action and the inter-insurer 4 contribution action have since wended their way through the Oregon appellate courts. The first decision was issued in the underlying coverage action, ZRZ Realty v. Beneficial Fire and Casualty Ins., 222 Or.App. 453, 194 P.3d 167 (2008), modified on recons., 225 Or.App. 257, 201 P.3d 912 (2009). In that appeal, plaintiffs argued, among other things, that the trial court had incorrectly allocated the burden to plaintiffs to prove that Zidell's pollution was neither "unexpected nor unintended." We agreed with plaintiffs on that issue and ultimately reversed and remanded the case; we also vacated the statutory attorney fee award against plaintiffs. The Supreme Court allowed review. ZRZ Realty v. Beneficial Fire and Casualty Ins., 346 Or. 363, 213 P.3d 577 (2009).

While the coverage case was pending in the Supreme Court, we issued our decision in this case regarding contribution. Certain Underwriters, 235 Or.App. 99, 230 P.3d 103. We reversed in part and remanded a judgment dismissing plaintiffs' claims for inter-insurer contribution from defendants. In the process, we declined to reach one of plaintiffs' assignments of error, which concerned plaintiffs' right to contribution for attorney fees awarded to Zidell in the coverage action. We reasoned, "In ZRZ Realty, we vacated the underlying award of attorney fees that is the basis for this assignment of error. 222 Or.App. at 495 . Accordingly, we do not reach plaintiffs' fourth assignment." Id. at 116–17, 194 P.3d 167. The Supreme Court denied a petition for review of our decision. Certain Underwriters v. Mass. Bonding and Ins. Co., 349 Or. 173, 243 P.3d 468 (2010).

However, exactly one week before denying review in this case, the Supreme Court issued its decision in the coverage case. ZRZ Realty v. Beneficial Fire and Casualty Ins., 349 Or. 117, 241 P.3d 710 (2010), adh'd to as modified on recons., 349 Or. 657, 249 P.3d 111 (2011). One aspect of that decision is pertinent here: The court explained that our ruling reversing the trial court's allocation of the burden of proof which the Supreme Court affirmed—had no effect on the trial court's award of attorney fees; for that reason, the court held, we "erred in reversing and vacating the fee awards." 349 Or. at 150, 241 P.3d 710.

And that brings us to the issue that is the subject of Beneficial's petition for reconsideration. After the Supreme Court denied defendants' petition for review in this case, but before the appellate judgment issued, Beneficial filed a late petition for reconsideration in light of the Supreme Court's intervening decision in ZRZ Realty. See ORAP 6.25(2) ("A petition for reconsideration shall be filed within 14 days after the decision."). In its petition, Beneficial explained:

"Under the Supreme Court ruling [in the coverage case], Zidell clearly has an entitlement to attorney fees based on [plaintiffs'] breach of the duty to defend Zidell. The question of whether plaintiff[s] may allocate that attorney fee award among defendants in this case under principles of equitable contribution is a ‘live’ issue in this case again, not moot as it was prior to this Court's decision, and is the substance of plaintiffs' Assignment of Error No. 4.

"The issue has been fully briefed and orally argued in this Court. It is ripe for decision and would use little of the resources of this Court, which is already familiar with this case, while resolving a major issue, which could have a major impact on whether this case is tried or settled."

(Emphasis by Beneficial.)

Plaintiffs, for their part, have no objection to the petition for reconsideration. Under the unique circumstances of this case, we exercise our discretion, as a matter of judicial efficiency, to address plaintiffs' fourth assignment of error. We therefore waive the 14–day requirement in ORAP 6.25(2) and allow the late petition for reconsideration. ORAP 1.20(5) ("For good cause, the court on its own motion or on motion of any party may waive any rule."); ORAP 9.30(2) ("The Court of Appeals has authority to decide matters, including motions, in an appeal that was filed in that court in the following circumstances: (a) If the case is not pending in the Supreme Court, until the appellate judgment issues.").

We turn, then, to the merits of plaintiffs' fourth assignment of error. In their complaint for inter-insurer contribution, plaintiffs alleged that they are liable for attorney fees in the coverage action pursuant to ORS 742.061, and that defendants likewise would have been liable for those attorney fees had they not settled before the judgment was entered in Zidell's favor. Defendants, in response, moved for summary judgment on that issue, arguing, among other contentions, that statutory attorney fees were not a common obligation among the insurers and, for that reason, defendants were not liable for any share of those attorney fees. The trial court granted defendants' motions for partial summary judgment.²

On appeal, plaintiffs argue that principles of equity do not allow defendants to escape liability for attorney fees awarded to Zidell in the coverage action. According to plaintiffs, "[w]hile the award of attorney fees to Zidell was based upon ORS 742.061, [plaintiffs'] right to contribution is not. [Plaintiffs'] right to contribution is based upon an implied promise that a co-obligor to a common obligation must pay a fair share." In plaintiffs' view, defendants cannot escape that common obligation simply by settling out of the litigation before judgment.

Defendants, meanwhile, argue that plaintiffs' premise is flawed: an attorney fee award under ORS 742.061 is not the type of common liability among insurers that gives rise to equitable contribution, at least in this posture. We agree with defendants.

Unlike the duty to defend, which is a shared obligation that arises independent of completed litigation, liability for attorney fees under ORS 742.061 is a statutory obligation that arises only after the insured prevails at trial. ORS 742.061(1) provides, in part:

"Except as otherwise provided in subsections (2) and (3) of

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