Columbia Grain, Inc. v. Oregon Ins. Guar. Ass'n, BUHLER-MIA

• Decision Date: 25 April 1994
• Docket Number: 92-35581,BUHLER-MIA,Nos. 92-35572,INC,s. 92-35572
• Citation: 22 F.3d 928
• Parties: COLUMBIA GRAIN, INC., an Oregon corporation, Plaintiff, v. OREGON INSURANCE GUARANTY ASSOCIATION, an Oregon association, Fourth-party defendant-Appellant, and LOUISIANA INSURANCE GUARANTY ASSOCIATION, Intervenor-Appellee, v. WISMER AND BECKER CONTRACTING ENGINEERS, a foreign corporation, Third-party-defendant, and SHARP ELECTRIC INC., a foreign corporation, Third-party-defendant-fourth-party-plaintiff-Appellee, v., a foreign corporation, Third-party-defendant-plaintiff-Appellee. COLUMBIA GRAIN, INC., an Oregon corporation, Plaintiff, v. LOUISIANA INSURANCE GUARANTY ASSOCIATION, Intervenor-Appellant, v. WISMER AND BECKER CONTRACTING ENGINEERS, a foreign corporation, Third-party-defendant, and SHARP ELECTRIC INC., a foreign corporation, Third-party-defendant-Appellee, v., a foreign corporation, Defendant-third-party-plaintiff-Appellee, and Oregon Insurance Guaranty Association, an Oregon association, Fourth-party-defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 928

22 F.3d 928

COLUMBIA GRAIN, INC., an Oregon corporation, Plaintiff, v. OREGON INSURANCE GUARANTY ASSOCIATION, an Oregon

association, Fourth-party defendant-Appellant, and LOUISIANA INSURANCE GUARANTY ASSOCIATION, Intervenor-Appellee, v. WISMER AND BECKER CONTRACTING ENGINEERS, a foreign

corporation, Third-party-defendant, and SHARP ELECTRIC INC., a foreign corporation, Third-party-defendant-fourth-party-plaintiff-Appellee, v. BUHLER-MIAG, INC., a foreign corporation,

Third-party-defendant-plaintiff-Appellee.

COLUMBIA GRAIN, INC., an Oregon corporation, Plaintiff, v. LOUISIANA INSURANCE GUARANTY ASSOCIATION, Intervenor-Appellant, v. WISMER AND BECKER CONTRACTING ENGINEERS, a foreign

corporation, Third-party-defendant, and SHARP ELECTRIC INC., a foreign corporation, Third-party-defendant-Appellee, v. BUHLER-MIAG, INC., a foreign corporation,

Defendant-third-party-plaintiff-Appellee,

and

Oregon Insurance Guaranty Association, an Oregon

association, Fourth-party-defendant-Appellee.

Nos. 92-35572, 92-35581.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Jan. 4, 1994.

Decided April 25, 1994.

William D. Okrent, Acker, Okrent, Portland, OR, Carey J. Guglielmo, Mathews, Atkinson, Guglielmo, Marks & Day, Baton Rouge, LA, for Louisiana Ins. Guar. Ass'n.

Thomas W. Brown, Cosgrave, Vergeer & Kester, Portland, OR, for Oregon Ins. Guar. Ass'n.

M. Elizabeth Duncan, W.A. Jerry North, Schwabe, Williamson & Wyatt, Portland, OR, for Buhler-Miag.

Before: POOLE and TROTT, Circuit Judges, and KING, ^* District Judge.

Opinion by Judge TROTT.

Appeal from the United States District Court for the District of Oregon.

TROTT, Circuit Judge:

Oregon Insurance Guaranty Association and Louisiana Insurance Guaranty Association appeal the district court's summary judgment in favor of Buhler-Miag, Inc. The district court ruled that Buhler-Miag's third-party claims against Sharp Electric, Inc. were "covered claims" under both Oregon and Louisiana law, entitling Buhler-Miag to recover a portion of these claims from the Oregon and Louisiana Insurance Guaranty Associations. We have jurisdiction under 28 U.S.C. Sec. 1291, and we conclude that Buhler-Miag's claims are excluded from the definition of a "covered claim" because any money paid on these claims will go to Buhler-Miag's insurer.

I BACKGROUND

Columbia Grain, Inc. owned and operated a grain loading facility in Oregon. In 1976 and 1983, portions of the facility were damaged. Columbia Grain brought a product liability action against Buhler-Miag, the designer of part of the facility. Columbia Grain prevailed in its action, and Republic Insurance Company, Buhler-Miag's insurer, paid the resulting judgment of $796,214. Buhler-Miag and Republic Insurance executed a loan receipt agreement, in which Buhler-Miag pledged to Republic Insurance any claims or recovery it received from third parties or their insurers. Under the terms of the loan receipt, Buhler-Miag was to bring the claims in its own name, but at Republic Insurance's expense, and Buhler-Miag agreed not to settle any of its claims without Republic Insurance's consent.

Buhler-Miag then brought a third-party action against Sharp Electric, another company involved in constructing the facility, for contribution or indemnity. While this litigation was pending, Sharp Electric's insurance company became insolvent. As Sharp Electric is a Louisiana corporation, the Louisiana Insurance Guaranty Association ("LIGA") took on its defense against Buhler-Miag's action. Sharp Electric brought its own action against the Oregon Insurance Guaranty Association ("OIGA") to resolve issues arising from the insolvency of its insurer. Buhler-Miag and Sharp Electric eventually entered into a settlement agreement that included a stipulated judgment entered against Sharp Electric for $449,900. As part of the settlement, Sharp Electric assigned to Buhler-Miag all claims and rights which it might have against LIGA and OIGA.

Buhler-Miag then asserted its claims directly against LIGA and OIGA. LIGA and OIGA moved for summary judgment on the grounds that Buhler-Miag's claim is not a "covered claim" under Oregon and Louisiana law, and that they, therefore, are not liable. Buhler-Miag counterclaimed for summary judgment on the grounds that its claim is a "covered claim." The district court ruled that Buhler-Miag's claims are "covered claims" under both Oregon and Louisiana law and granted summary judgment for Buhler-Miag against both LIGA and OIGA.

II OREGON LAW

All parties to this case agree that there were no disputed issues of fact before the district court when it granted summary judgment. The only question before us is whether the district court properly interpreted Oregon and Louisiana law in granting summary judgment for Buhler-Miag. We review de novo grants of summary judgment, Jones v. Union Pacific R.R., 968 F.2d 937, 940 (9th Cir.1992), as well as a district court's interpretation of state law. Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 1220-21, 113 L.Ed.2d 190 (1991).

OIGA was created by the Oregon Legislature in 1971 "to avoid financial loss to claimants or policyholders because of the insolvency of an insurer." Or.Rev.Stat. Sec. 734.520 (1991). OIGA's expenses are financed by assessments against its members, which include all insurers writing policies in Oregon. Sec. 734.570(3). OIGA is "obligated to pay covered claims existing at the time of determination of insolvency of an insurer or arising within 30 days after the determination of insolvency." Sec. 734.570(1). In order for a claim to be considered "covered," the statute requires that "the claimant or insured is a resident of [Oregon] at the time of the occurrence giving rise to the unpaid claim, or the property for which claim arises is permanently located in [Oregon]." Sec. 734.510(4)(a)(B). However, "covered claims" do not include "[a]ny amount due any ... insurer ... as subrogated recoveries or otherwise." Sec. 734.510(4)(b)(B).

The parties do not challenge the district court's determination that Buhler-Miag's claim satisfies the first part of the "covered claim" definition; Transit Casualty (Sharp Electric's insurer) was insolvent and the property involved was permanently located in Oregon. What we must decide is whether the district court erred in determining that Buhler-Miag's claims are not claims for "[a]ny amount due any ... insurer ... as subrogated recoveries or otherwise." Id.

Subrogation is defined as the situation where insurance companies or others "step into the shoes of the party whom they compensate and sue any party whom the compensated party could have sued." Black's Law Dictionary, 1427 (6th ed. 1990). OIGA concedes that the arrangement between Buhler-Miag and Republic Insurance was not a subrogation agreement but a loan receipt. The difference between the two is that with a subrogation agreement, the insurer asserts the claim against the third party, whereas with a loan receipt, the insured makes the claim against the third party but may be contractually bound to give the money recovered to the insurer. See Northern Ins. Co. v. Conn Organ Corp., 596 P.2d 605, 610 (Or.Ct.App.1979). The district court found this distinction crucial and concluded that because under Oregon law loan receipts are not the equivalent of subrogation rights, loan receipts do not qualify as "subrogation recoveries or otherwise." OIGA again concedes that loan receipts are not the equivalent of subrogations rights but argues that they still qualify as "[a]ny amount due any ... insurer ... as subrogation recoveries or otherwise" because the money will ultimately go to Republic Insurance. OIGA places great emphasis on the words "or otherwise," arguing that any mechanism by which the insurer ultimately receives the recovery is sufficient to exclude the claim.

The Oregon Court of Appeals addressed this issue in Corvallis Aero Service, Inc. v. Villalobos, 724 P.2d 880 (Or.Ct.App.), review denied, 302 Or. 461, 730 P.2d 1251 (1986). Because this question involves the interpretation of state law, we are bound to follow the decisions of the Oregon Supreme Court. Meusy v. Montgomery Ward Life Ins. Co., 943 F.2d 1097, 1099 (9th Cir.1991). If, as is the case here, "no ruling exists from the highest court of the state, we must follow intermediate appellate decisions unless 'convinced by other persuasive data that the highest court of the state would decide otherwise.' " Ogden Martin Systems, Inc. v. San Bernardino County, 932 F.2d 1284, 1288-89 (9th Cir.1991) (quoting West v. American Tel. & Tel. Co., 311 U.S. 223, 237, 61 S.Ct. 179, 183-84, 85 L.Ed. 139 (1940)).

In Corvallis Aero, Francisco Villalobos suffered an on-the-job injury caused by Corvallis Aero Service ("Corvallis") employees' negligence. Villalobos received workers' compensation benefits from the State Accident Insurance Fund ("SAIF"), and he also brought a negligence action against Corvallis. Corvallis's liability insurer was insolvent, so OIGA assumed Corvallis's defense. Villalobos and Corvallis entered into a settlement agreement, under which Corvallis agreed to pay Villalobos for his injuries, contingent on a declaratory judgment by the Oregon courts that SAIF had no right to share in Villalobos's recovery.

Under Oregon law, a worker who is awarded worker's compensation may also be able to bring a tort action against the third party responsible for the injury. Corvallis Aero, 724 P.2d at 882. If the worker brings such a suit, the agency that pays the worker's compensation benefits--in Villalobos' cases, SAIF--has a lien on the worker's cause of action and is entitled to share in the proceeds. Id. The court in Corvallis Aero was called upon to decide whether SAIF's recovery from Corvallis and OIGA was barred by the provision excluding "[a]ny amount due any ... insurer ... as subrogated recoveries or otherwise."

Like Buhler-Miag's claim, the claim in Corvallis Aero was technically...