Certain Underwriters At Lloyd's London And Excess Ins. Co. v. Mass. Bonding And Ins. Co. Succeeded In Interest By Hanover Ins. Co.

• Decision Date: 28 April 2010
• Docket Number: A129974.,030403995
• Citation: Certain Underwriters at Lloyd's London & Excess Ins. Co. v. Massachusetts Bonding & Ins. Co., 235 Or.App. 99, 230 P.3d 103 (Or. App. 2010)
• Court: Oregon Court of Appeals
• 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,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.

235 Or.App. 99

230 P.3d 103

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.

Argued and Submitted June 03, 2009.

Decided April 28, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John Folawn, Portland, argued the cause for appellants.With him on the briefs was Kirklin Folawn LLP.

Thomas A. Gordon, Portland, argued the cause for respondents.With him on the joint briefs were Russell W. Pike, Diane L. Polscer, and Gordon & Polscer L.L.C.; Jeffrey M. Kilmer and Kilmer, Voorhees & Laurick, P.C.; Richard A. Lee and Bodyfelt Mount Stroup & Chamberlain, LLP; Peter J. Mintzer, Thomas M. Jones, Seattle, Michael D. Handler, Seattle, and Cozen O'Connor; and Thomas W. Brown and Cosgrave Vergeer Kester LLP.

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

SERCOMBE, J.

Plaintiffs and defendants issued various insurance policies to a common insured, Zidell,¹ which operated a scrapping business along the Willamette River.Zidell later became the target of an environmental cleanup action and eventually filed claims against its insurers, including plaintiffs and defendants, seeking a declaration of coverage related to the cleanup action, as well as reimbursement for defense and indemnity costs already incurred.Defendants settled with Zidell and were dismissed from the case.Plaintiffs, meanwhile, proceeded to trial, and the court entered a judgment in Zidell's favor.

Following the entry of that adverse judgment, plaintiffs filed this contribution action against defendants, the settling insurers.Plaintiffs alleged that the duty to defend Zidell from an environmental cleanup action was an obligation owed by plaintiffs and defendants jointly.Having paid a disproportionate share of that common obligation, plaintiffs alleged, they were entitled to pro rata contributions from defendants.Defendants moved for summary judgment on a number of grounds, including (1) that the allocation of defense costs had already been litigated in the underlying coverage action, and (2) that defendants' settlements with Zidell extinguished any common liability for purposes of a contribution claim.The trial court granted defendants' motions, and plaintiffs appeal.We reverse in part and remand.

I.BACKGROUND

The relevant facts are procedural and largely undisputed.From the 1950s through the early 1980s, plaintiffs and defendants insured Zidell under various insurance policies.In 1994, Zidell became the subject of a Department of Environmental Quality(DEQ) cleanup action based on environmental contamination on its property at Moody Avenue.After receiving a demand letter from DEQ in May 1994, Zidell sought coverage under its various insurance policies on the theory that the pollution occurred and persisted during the relevant policy periods.In August 1997, after its insurers denied coverage, Zidell commenced an action against plaintiffs and defendants, as well as other insurers, alleging that the insurers had “refused or otherwise failed to provide Zidell with a defense of the DEQ action, to pay defense, investigation and loss mitigation costs and/or to pay Zidell for all liabilities and damages Zidell ha[d] been legally obligated to incur * * *.”For purposes of this opinion, we refer to that underlying coverage action as the “ Moody Avenue ” action.

During the course of the Moody Avenue action, several insurers settled out.Defendants Beneficial Fire, National Union, and Industrial Indemnity Company(U.S. Fire) were among those who settled first, which left defendantsGlens Falls and Continental Insurance Company(collectively CNA), defendantCentury Indemnity Company(CIGNA), and plaintiffs as the only remaining insurers in the coverage case.

In October 1999, the Moody Avenuecourt ruled on a series of summary judgment motions filed by Zidell and the remaining insurers.The court ruled that “the duty to defend is a joint and several obligation, which will be allocated among the Defendant Insurers.Allocation should not be any hindrance to the duty to defend.”The court further ordered that “the Defendant Insurers”-at that time, CNA, CIGNA, and plaintiffs-were to “make payment of past defense costs submitted by [Zidell] to date” and that, “with respect to ongoing defense costs,”the parties were to put in place a “reasonable system for submission, review and payment of these costs.”

The remaining insurers paid Zidell's accrued defense costs-approximately $771,000-as ordered.Of that amount, plaintiffs paid approximately $578,000, and CNA and CIGNA paid the rest.The payments were made by plaintiffs with the understanding that they were “subject to a full reservation of each insurer's rights.”

After the start of trial in the Moody Avenue action, CNA settled out.The settlement then left plaintiffs and CIGNA as the only insurers subject to the court's order to pay Zidell's remaining defense costs.Together, plaintiffs and CIGNA paid another $619,982 in defense costs, with plaintiffs again paying the lion's share-approximately $566,000.Then, after trial but while the court was still preparing its findings of fact and conclusions of law, CIGNA settled with Zidell.Plaintiffs were the last insurers standing.

In April 2003, the trial court entered judgment against plaintiffs.With respect to the issue of defense costs, the judgment provided, in part, that plaintiffs were “jointly and severally obligated to pay Zidell's costs of defense, that is, attorney fees, costs and disbursements, and investigative costs, incurred in connection with claims asserted” in the DEQ action.The judgment also contained the following paragraph:

“19.[Plaintiffs], together with dismissed defendants CNA and CIGNA (who shared the joint and several obligation to pay Zidell's defense costs prior to their dismissal from this case), have satisfied their obligation for defense costs of $1,390,658.65 incurred by Zidell through August 31, 2001, with respect to the DEQ Action and the prejudgment interest of $37,768.35 thereon.[Plaintiffs] are now responsible only for defense costs submitted by Zidell subsequent to August 31, 2001.”

As far as plaintiffs' indemnity obligations ( i.e., the costs of remediation as a result of the DEQ claims rather than defending against them or investigating them), the Moody Avenue judgment incorporated the trial court's earlier findings of fact and conclusions of law, which allocated indemnity costs to particular policies.The trial court also awarded Zidell its attorney fees as the prevailing party in the coverage action, pursuant to ORS 742.061-an additional $1,379,119.

Immediately after the April 2003 judgment was entered, plaintiffs filed this contribution action.In their complaint, plaintiffs alleged:

“On and after July 26, 1994, [when Zidell notified plaintiffs and defendants of the DEQ action,] Zidell incurred reasonable and necessary defense costs in defending the DEQ claim.None of Zidell's defense costs were paid until on or about August 1999, when plaintiffs paid $578,007.35, the CIGNA defendants paid $77,067.64 and the CNA defendants paid $115,601.47.Since that time, plaintiffs have paid $1,157,317.10 for additional defense costs incurred by Zidell in defending the DEQ claim.Except for payments made by the CIGNA and CNA defendants as stated herein, no other payments of Zidell's defense costs have been made by any defendant.”

Plaintiffs similarly alleged that they had been held liable for attorney fees pursuant to ORS 742.061, as well as prejudgment interest on the unpaid defense costs, for which defendants would have been liable had they not settled with Zidell before the Moody Avenue judgment was entered.The complaint summarized the contribution theory in this way:

“Plaintiffs have paid or incurred liabilities to Zidell for defense costs, prejudgment interest and statutory attorney fees and costs, which liabilities are disproportionate to the insurance coverage provided by them when compared to the insurance coverage provided by defendants.Plaintiffs will continue to pay Zidell defense costs until the DEQ claim is resolved.Plaintiffs are entitled to contribution from defendants and each of them for a proportionate share of Zidell's defense costs, prejudgment interest and statutory attorney fees and costs as follows:

“a.To

...