Pope Res. LP v. Certain Underwriters at Lloyd's

Decision Date07 September 2021
Docket NumberNo. 80032-9-I,80032-9-I
Citation494 P.3d 1076
Parties POPE RESOURCES LP, a Delaware limited partnership, Respondent, v. CERTAIN UNDERWRITERS AT LLOYD'S, LONDON ; Certain London Market Companies; Continental Casualty Company; and the Continental Insurance Company (as successor in interest to the rights and obligations under certain policies issued by Harbor Insurance Company); American Reinsurance Company ; Associated International Insurance Company; Central National Insurance Company; Century Indemnity Company ; Employers Insurance Company of Wausau; Employers Reinsurance Company ; Granite State Insurance Company; Highlands Insurance Company ; Insurance Company of North America; Insurance Company of the State of Pennslyvania; International Insurance Company as Successor To International Surplus Lines Insurance Company; New Hampshire Insurance Company; and Northbrook Insurance Company, Appellants. Pope & Talbot, Inc.; General Insurance Company of America; Liberty Mutual Insurance Company; and John Does 1-20, Defendants.
CourtWashington Court of Appeals

Robin E. Wechkin, Sidley Austin LLP, Issaquah, WA, Constantine Trela, Robert Hochman, Sidley Austin LLP, Chicago, IL, Gabriel Baker, Benjamin Jerauld Roesch, Jensen Morse Baker PLLC, Philip Albert Talmadge, Gary Manca, Talmadge/Fitzpatrick, Carl Edward Forsberg, Matthew Stuart Adams, Charles Adrian Henty, Forsberg & Umlauf PS, Patrick Michael Paulich, Betts Patterson & Mines PS, Herbert Matthew Munson, Steven Soha, Geoffrey C Bedell, Soha & Lang PS, Sarah Eversole, Wilson Smith Cochran Dickerson, David Martin Schoeggl, Ryan P. McBride, Lane Powell, Catherine Ann Becker, Elizabeth Grace Smith, Law Office of Elizabeth G. Smith, Seattle, WA, Louise McCabe, Jordan Jeffery, Tara Goodwin, Christina Ding, Troutman Pepper Hamilton Sanders LLP, San Diego, CA, Robin Craig, Bruce Winkelman, Craig & Winkelman LLP, Berkeley, CA, David C. Linder, Larson King LLP, St. Paul, MN, for Petitioner.

Mark S. Nadler, Liberty Waters, The Nadler Law Group PLLC, Edmonds, WA, John Dolese, Law Offices of John S. Dolese, Poulsbo, WA, Jay S. Carlson, Carlson Legal, Seattle, WA, for Respondent.

Jacquelyn A. Beatty, Karr Tuttle Campbell, Seattle, WA, for Amicus Curiae on behalf of Complex Insurance Claims Litigation Association.

Marta Uballe Deleon, Office of the Attorney General, Olympia, WA, for Amicus Curiae on behalf of Washington State Insurance Commissioner.


Verellen, J. ¶1 Washington's broad and inclusive anti-annulment statute, RCW 48.18.320, voids any agreement between an insurer and insured attempting to retroactively cancel, rescind, void, buy back, or otherwise annul an insurance contract for liability coverage after a potentially covered injury or damage to a third party has occurred. When analyzing whether a particular settlement agreement and release implicates an "insurance contract," we must consider whether the substance of the agreement and release impacts a risk-shifting and risk-distributing device, not necessarily an entire policy.

¶2 Applying recognized conflict of law principles, we conclude Washington's paramount interest in environmental cleanup and pollution remediation requires we apply RCW 48.18.320 to each of the settlement and remediation agreements between ten different Insurers and Pope & Talbot, Inc., the previous owner and operator of the Port Gamble Bay and mill site located in Washington. We further conclude that RCW 48.18.320 renders all ten agreements unenforceable.

¶3 Therefore, we affirm.


¶4 The history underlying the current dispute is extensive. In 1853, Pope & Talbot, Inc. began operating a mill in Port Gamble, Washington. In 1964, Pope & Talbot, which had become a publicly traded Delaware corporation, moved its headquarters to Oregon.

¶5 Between 1959 and 1986, various insurance companies issued comprehensive general liability insurance policies to Pope & Talbot. Over the years, Pope & Talbot also obtained various excess and umbrella coverages.1

¶6 Here, we are concerned with the policies issued by TIG Insurance Company,2 Evanston Insurance Company,3 Westport Insurance Corporation,4 London Market Insurers,5 Munich Reinsurance America Inc.,6 Century Indemnity Company,7 Employers Insurance Company of Wausau,8 Allstate Insurance Company,9 Continental Insurance Company,10 and Granite State Insurance Company11 (Insurers).

¶7 In 1985, Pope & Talbot created Pope Resources, a limited partnership.12 Pope & Talbot transferred all of its Washington real property, including the Port Gamble Bay and mill site, to Pope Resources.13 In exchange, Pope Resources assumed upwards of $22 million of Pope & Talbot's debt. Pope Resources leased the mill site back to Pope & Talbot, which continued to operate the mill until 1995, when it was shut down due to significant environmental contamination. The Washington State Department of Ecology listed the Port Gamble mill as a hazardous waste site. The estimated cost to clean up Port Gamble, including the mill site, is $22 million.14

¶8 In June of 1995, Pope Resources and Pope & Talbot started communicating about their shared responsibility for the environmental contamination at Port Gamble.

¶9 In 1997, Pope Resources sent Pope & Talbot a formal demand letter. A few years later, Pope Resources and Pope & Talbot entered into a remediation agreement. In summary, Pope & Talbot assumed responsibility for the cleanup at Port Gamble and, once completed, Pope Resources would clean up the other sites contaminated by Pope & Talbot's operations.

¶10 Around the same time, Pope & Talbot filed suit against Insurers in King County Superior Court seeking insurance coverage for its Washington liabilities. Between 1998 and 2003, Pope & Talbot and Insurers entered into ten separate settlement and remediation agreements.

¶11 In November 2007, Pope & Talbot filed for Chapter 11 bankruptcy in Delaware and stopped all remediation work at Port Gamble. The bankruptcy was converted to a Chapter 7 proceeding.

¶12 On February 4, 2013, the bankruptcy court granted Pope Resources relief from the automatic stay to enable Pope Resources "to liquidate its claims against [Pope & Talbot] for contamination arising from [Pope & Talbot's] ownership or operation of the property."15

¶13 In 2015, Pope Resources filed suit in King County to obtain coverage for its environmental liabilities against its own insurers, seeking declaratory judgment for breach of contract, bad faith, and violations of the Consumer Protection Act. In 2016, Pope Resources amended its complaint to seek contribution from Pope & Talbot and Insurers for the costs of the environmental remediation.

¶14 The court entered a case management order phasing the litigation. Pope Resources and Insurers filed cross motions for summary judgment regarding conflicts of law and the enforceability of the settlement agreements.

¶15 On April 30, 2019, the court denied Insurers’ motion for summary judgment and granted Pope Resources’ motion for summary judgment. The trial court noted that no conflict of law analysis was necessary because Pope Resources was "not a signatory or [a] party to [the] settlement agreements."16 The court concluded, "Allowing the settlement agreements to be used as a shield ... against a third party, non-signatory, to retroactively cancel insurance coverage of a potentially covered event, would be to enforce a contract that is illegal as violative of Washington public policy."17 Accordingly, the court held that all ten settlement agreements were unenforceable.

¶16 Insurers filed motions for discretionary review in this court.18 Commissioner Mary Neel granted the motions for discretionary review as to the conflict of law issue and interpretation of Washington's anti-annulment statute.19

¶17 Subsequent phases of this litigation will determine whether Pope Resources has compensable damages and is entitled to a judgment against Pope & Talbot and Insurers.


¶18 At the outset, we emphasize the very narrow issues before this court. Commissioner Neel granted discretionary review of the conflict of law "threshold issue" and the "interpretation and application" of Washington's anti-annulment statute, RCW 48.18.320, as it pertains to the claims involving the Port Gamble Bay and mill site.20

¶19 We are not deciding other issues nor are we deciding any conflict of law as it may pertain to any other issues.21 We are focused on how the particular language of the ten settlement and remediation agreements between Pope & Talbot and Insurers impact the potential claims of Pope Resources, a prospective garnishor of the insurance contracts that was known to the Insurers as the current owner of the Port Gamble mill site when all 10 settlement agreements were entered into.

I. Conflict of Law

¶20 Insurers contend that the trial court failed to engage in the appropriate conflict of law analysis before determining whether RCW 48.18.320 applied to the ten settlement agreements.

¶21 We disagree with the trial court's conclusion that no conflict of law analysis was required because Pope Resources was not a signatory or a party to any of the settlement agreements. Whether the settlement agreements are valid impacts the prospective claims of Pope Resources. Because Pope Resources has a potential interest in the outcome of the dispute, a conflict of law analysis is required. To determine whether RCW 48.18.320 applies to the settlement agreements, we must first engage in a conflict of law analysis to decide which state's law applies. We review the question of conflict of law de novo.22

¶22 Actual conflict. The first step in the conflict of law analysis is to determine whether an actual conflict exists.23 An actual conflict exists if the outcome of an issue is different depending on which state's law applies.24 Here, there is an actual conflict.

¶23 Insurers contend an actual conflict exists because the enforceability of the settlement agreements depends on whether Washington law applies. Pope...

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