A Oregon District Court Considers Whether A Dissolved Corporation's Liability Policy Constitutes An Undistributed Asset

Posted on July 14, 2010 by Diane Polscer

The issue of whether a liability policy of a dissolved corporation is an undistributed corporate asset capable of being distributed has not been addressed by Oregon’s state appellate courts. In the recent Oregon District Court opinion, Ironwood Homes, Inc. v. Bowen, 2010 U.S. Dist. LEXIS 59933 (D. Or. June 14, 2010), Oregon District Court Judge Anna Brown examined a dissolved corporation’s motion to dismiss claims against it for failure to state a claim based on the plaintiffs’ failure to allege that the dissolved corporation holds any undistributed assets, and thus lacks the capacity to be sued.  The Ironwood court’s opinion is of interest because the court considered the fact that the dissolved corporation’s liability insurer was paying the attorney representing the dissolved corporation as a factor in its denial of the motion.

In Ironwood, the plaintiffs sought partial relief for environmental response costs under CERCLA.  The dissolved corporation, Linke Enterprises, Inc. (“Linke”), apparently represented by an attorney paid by its liability insurer, moved to dismiss the claims against Linke on the ground that the plaintiffs did not allege that Linke holds any undistributed assets and, accordingly, lacks the capacity to be sued.  Linke asserted that it is a “dead and buried” corporation under Oregon law with no undistributed assets and thus not able to be sued or held liable for environmental response costs.  Noting that Fed. R. Civ. P. 17(b) (2) provides that the capacity of a corporation to sue or to be sued is determined by the law under which it was organized, and also noting that the Ninth Circuit has held that FED. R. Civ. P. 17(b) (2) requires the court to apply state law when deciding whether the dissolved corporation may be sued for damages, the Ironwood court looked to apply Oregon law.

Oregon statutes provide that the dissolution of a corporation does not prevent the commencement of a proceeding against it in its corporate name, and also provide that a claim against a dissolved corporation may be enforced to the extent of its undistributed assets unless the corporation complies with specified notice provisions, which, while not addressed in the opinion, Linke likely did not fulfill.  The Ironwood court noted that the parties did not cite, and the court did not find, any Oregon authorities helpful in addressing the issue as to whether a liability policy is a corporate asset capable of being distributed when a corporation is dissolved, but also noted that courts of other jurisdictions have found that liability policies should be listed as assets of a bankruptcy estate.

 

In light of the lack of Oregon law on the central issue, the court found it reasonable to infer that Linke’s liability insurance policies are an asset of the company because an attorney paid by the insurer is representing Linke’s interests in this case.  That inference, together with the court’s finding that the plaintiffs were not required to allege that Linke has undistributed assets to satisfy a judgment, resulted in the court’s denial of Linke’s motion to dismiss.
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UPDATE: Oregon Bill for Expanded Remedies for Insureds

Posted on August 19, 2009 by Diane Polscer

As reported in March, a bill was introduced, H.B. 2791, in the Oregon Legislature that would allow "any person" suffering injury or loss as a result of a practice prohibited under Oregon’s unfair claim settlement practices statute to sue for triple damages plus attorney’s fees. This would have drastically changed Oregon law that there is no private right of action for a violation of the unfair claim settlement practices statute.

Although the bill was introduced, it did not get very far and was not passed before the end of the legislative session. In fact, a hearing scheduled for March 31 2009, regarding the bill was cancelled, and there was no further formal action on the bill. Oregon's legislature typically only meets every two years, unless there is a special session. The legislature is planning a special session in February 2010 that will focus on the State budget, but may address other issues. If the bill is not reintroduced in this session, the bill could next be introduced in January 2011.
 

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Where's the roof? Oregon's Court of Appeals Confirms that Undefined Policy Terms are not Necessarily Ambiguous

Posted on July 15, 2009 by Diane Polscer

 

Insurers should welcome the Oregon Court of Appeals’ recent decision in Dewsnup v. Farmers Ins. Co. of Oregon, A136394 (July 1, 2009), because it signals the Court’s reluctance to accept insureds’ arguments that ordinary words are ambiguous -- and must be construed in their favor -- if they are not defined by the policy. In the process of rejecting a water damage claim under a homeowners policy, the Dewsnup Court reiterated in favorable language Oregon law regarding the interpretation of insurance policies.

 

Using New Jersey as an example of a state that might interpret the insurance policy before it differently due to that state’s rules favoring “broad reading of coverage provisions,” the Dewsnup Court wrote that “the Oregon rules of interpretation, of course, are different, requiring construction against the insurer only in the case of unresolvable ambiguity.” While this statement is helpful because it clarifies that ambiguity, by itself, does not require interpretation against the insured, the Dewsnup case is even more helpful for the fact that the court did not even reach an ambiguity analysis. Instead, the Court held that the undefined policy term “roof” is unambiguous in the first place.

 

In relevant part, the policy at issue in Dewsnup excluded from coverage water damage to the interior of a dwelling or personal property unless the water damage occurred as a result of damage to the “roof” caused by a windstorm or a falling object. As part of a roof repair, the insureds had removed the roof’s wood shakes and physically attached to the roof several sheets of plastic as a temporary cover. After a storm ripped off one sheet of plastic, the insured went on the roof to replace it. However, the insured “lost his footing and fell off the roof, ripping off all the sheets of plastic as he fell.” As a result, the rain from the storm entered the home through the joints in the plywood sheathing “causing considerable damage to the interior of the house and to plaintiffs’ personal property.”

 

The insureds argued that their loss should be covered because the plastic sheets, which were a part of the roof, were damaged by a windstorm and/or a falling object (the insured). The Court consulted a dictionary and rejected this argument, concluding “that the term ‘roof’ has an unambiguous meaning, and that it does not include the tarps that plaintiffs placed over the house while the shakes were being replaced.” Most refreshing was the Court’s resort to old-fashioned common-sense, writing: “If someone attempted to sell a house that was covered by such a plastic sheet, we doubt that any reasonable buyer would believe that he or she was buying a house that had a ‘roof.’ Most likely, the buyer would say, ‘Where’s the roof?’” The Court’s use of common-sense reasoning should lend some support to insurers using the same tactic in face of insureds’ arguments that undefined policy terms are unambiguous.

 
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Oregon Court of Appeals Addresses CGL Policy's Definition of 'Temporary Worker'

Posted on June 1, 2009 by Diane Polscer

In Rhiner v. Red Shield Insurance Co., issued May 27, 2009, the Oregon Court of Appeals addressed the issue of whether an individual whom an insured hired directly, and who filed a workers’ compensation claim against the insured for on-the-job injuries is an “employee” or a “temporary worker” within the meaning of the policy. The appeals court reversed the trial court’s grant of summary judgment in favor of the insured, and remanded for entry of judgment for insurer holding that because the insured hired the individual directly, and not with the aid of a third party, the individual was not a “temporary worker” within the meaning of the policy, and the policy did not provide coverage of his claims against the insured.

The policy defines “employee” to include a “leased worker,” but not to include a “temporary worker.” “Temporary worker” is defined as “a person who is furnished to you to substitute for a permanent ‘employee’ on leave or to meet seasonal or short-term workload conditions.”

The insured contended that the policy definition of “temporary worker” is ambiguous as it could be read to apply to any person who was hired to meet seasonal or short-term workload conditions, regardless of who furnished the worker. The insured also contended that the policy is unclear as to whether the worker may “furnish” himself. In addition, the insured contended that the record supported that the individual was hired to meet short-term workload needs.

Employing Oregon’s rules to interpret the terms of an insurance contract, the Oregon Court of Appeals found that the policy’s definition of “temporary worker” plainly and unambiguously provided that a temporary worker is “a person who is furnished to you” either to substitute for a permanent employee or to meet seasonal or short-term workload conditions. The court then turned to the question of the meaning of “a person who is furnished to you,” and whether it encompasses an individual who plaintiff hired directly and whether a person can “furnish” himself or herself to an employer. As the policy does not define “furnished,” the court looked to the plain meaning of the term. Utilizing Webster’s Third New Int’l Dictionary, the court found that, in the context of human labor, the definition of “furnish” could conceivably mean that a person could provide or supply himself or herself to an employer. The court found, however, that ambiguity is not determined by what a single word in a policy means in the abstract, but what that term most likely was intended to mean when viewed in the context in which the term is used in the policy as a whole.

The court held that the insured’s proposed reading of the term “furnished” becomes untenable in the context of the whole policy because it renders the entire phrase “a person furnished to you” superfluous. Oregon courts do not lightly assume that contract language is superfluous in determining whether a phrase is ambiguous. For that reason, the court concluded that the phrase “a person who is furnished to you” as used in the definition of temporary worker means a person who is referred from, or provided by, a third party. Because the insured hired the individual directly and not with the aid of a third party, he was not a “temporary worker” within the meaning of the policy, and coverage of his claims against the insured is excluded.

In so holding, the Court of Appeals affirmed Oregon’s rules to interpret the terms of an insurance contract, and confirmed that when determining whether a term is ambiguous the issue is not what a single word in a policy means in the abstract, but what that term most likely was intended to mean when viewed in the context in which the term is used in the policy as a whole.
 
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Oregon Federal Court Rejects Outrageous Conduct Claim by Insured

Posted on January 22, 2009 by Diane Polscer

In Mancuso v. American Family Muutal Insurance Company, (D. Or. January 16, 2009), 2009 U.S. Dist. LEXIS 3361, the court found that an insured had not presented facts sufficient to show outrageous conduct on the part of the insurer in denying an insurance claim for goods destroyed by a fire. In May 2005, a fire destroyed Mr. Mancuso’s shared 10’ x 20’ storage unit.  When initially asked about the value of the contents, Mr. Mancuso replied it was somewhere between $25,000 and $50,000.  Six months after the fire Mancuso had not actually filed a claim so the insurer closed its file.  Approximately one year after the fire, Mancuso submitted a claim form that was 500 pages long and claimed a loss of more than $750,000. The claim was referred to the insurer’s fraud unit for investigation. Investigators interviewed Mr. Mancuso and his ex-wife.  The insurer denied the claim in total based on its conclusion that every item on the claim form was false.  The insurer also offered to settle the claim, but Mancuso did not respond to an offer. Mancuso brought claims for breach of contract, attorney fees, Outrageous Conduct, Intentional Infliction of Emotional Distress (“IIED”), and defamation. The decision involves the insurer’s partial summary judgment motion against the claims for Outrageous Conduct, IIED and defamation.

Under Oregon law, IIED and Outrageous Conduct are not separate torts. To prevail on a claim for IIED, a party must show that the defendant intended to cause emotional distress, the defendant engaged in outrageous conduct, and the action did result in severe emotional distress. The Court focused on the second element, noting that the claim required conduct “outrageous in the extreme.” In reviewing the facts, the Court noted that there was no outrageous conduct, only “an ordinary investigation of an extraordinary insurance claim.” The Court noted that even if the allegations could be considered deceit by the insurer, this was not outrageous conduct because the investigator did not misrepresent his role, threaten criminal action, or induce Mancuso to take any action to his detriment. The Court also rejected the defamation claim because the investigator did not actually accuse Mancuso of fraud when the investigator spoke to Mancuso’s ex-wife.
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Limitation to Specified Tanks Upheld

Posted on December 18, 2008 by Diane Polscer

In Cain Petroleum Inc. v. Zurich American Insurance Company, Court of Appeals of Oregon, A134133 (December 3, 2008), the Oregon Court of Appeals upheld a distinction in a “Storage Tank System Third Party Liability and Cleanup Policy” between scheduled and unscheduled underground storage tanks (“USTs”). The policy provided coverage for environmental cleanup costs and third party liability caused by releases from a “scheduled storage tank system” at a “scheduled location” after a “retroactive date.” It was undisputed that the location at issue was a scheduled location and that the location included three scheduled tanks installed in 1994. It was also undisputed that the retroactive date on the policy was 1991. Finally, it was undisputed that the contamination at the site did not come from any of the three scheduled USTs.

 

Plaintiff’s primary argument was that the policy was “irremediably ambiguous” because the retroactive date was meaningless to the property at issue, one of 17 properties, because the tanks at that location were installed after the retroactive date. Plaintiff argued this created an ambiguity because there was a potential for coverage based on a leak from before the tanks were installed. Plaintiff argued that because of this ambiguity the policy should be interpreted to cover tanks and prior tanks at a scheduled location so long as the release happened after the retroactive date.

 

The Oregon Court of Appeals rejected this argument. Following Oregon’s interpretative rules, the Court found that the policy was not ambiguous. The Court found that Plaintiff’s proposed interpretation was not plausible because it is directly contradictory to policy language that the policy was location and storage tank specific. Since Plaintiff’s proposed interpretation contradicted specific policy language, it was by definition not reasonable.

 

The Court also rejected an argument that the insurer was barred from taking its position by the doctrine of judicial estoppel. Plaintiff argued that because the insurer had taken a contrary position in a case in Alaska, that it should be estopped from asserting that the policy does not apply to older tanks at a scheduled location. The Court found that since the insurer did not prevail in the Alaska case, that judicial estoppel does not apply.
 
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PIP Insurer Required to Defend Process for Denying Claims

Posted on May 22, 2008 by Diane Polscer
Oregon courts have consistently held that an insurance company may only be liable for tortuous bad faith in situations where it is defending its insured.  In Ivanov v. Farmers Insurance Company of Oregon, the Oregon Supreme Court addressed an insurer’s obligations under personal injury protection (PIP) coverage.  The decision itself addresses an insurer’s obligation to pay medical payments under Oregon’s PIP coverage statutes.  Ivanov sought certification of a class and summary judgment regarding denial of PIP benefits “solely on the basis of generalized criteria not specific to claimants’ injuries” and that PIP benefits may not be denied “unless [the] determination is based on a contemporaneous physical examination of the insured by a physician selected by Farmers.”  The trial court granted summary judgment in favor of Farmers on Farmers’ corresponding motion for summary judgment on the ground that the PIP statute does not require an IME prior to denial of the claim and that the insured bears the burden of proving that medical expenses were reasonable and necessary.  The Court of Appeals affirmed the trial court decision, but held that plaintiff had failed to produce evidence from which a trier of fact could infer that the claimed expenses were necessary.
The plaintiffs’ claims are that the system Farmers uses to deny claims for medical expenses constitutes breach of contract, fraud, breach of the implied duty of good faith, and tortious breach of the duty of good faith. The Oregon Supreme Court notes that in the argument before both of the lower courts and the Oregon Supreme Court, there was no discussion as to the elements of the theories of recovery. The claims are based on Farmers’ use of a computer system to analyze claims that resulted in automatic deductions, rather than a case-by-case review of the particular claims. The court reviewed the PIP statutes and found that ORS 742.524(1)(a) provides a presumption in favor of the necessity of medical expenses incurred by a health care provider. Once a claim is denied, the presumption is removed as well. The court noted, however, that the plaintiffs are not challenging the validity of the denials, but the investigation of the claims prior to the denial. The court held that at the time an insurer decides whether to accept or deny a PIP claim, the medical expenses incurred to that date are presumed to be reasonable and necessary. The court also held that since the summary judgment record did not demonstrate that the process Farmers uses is valid as a matter of law, Farmers was not entitled to summary judgment.

The court discussed an insurer’s duties of good faith to its insured before reaching its decision. In reaching its conclusion, the Oregon Supreme Court found that “because Farmers’ review methodology was an impermissible one, Farmers needed to establish that the procedures it employed to deny plaintiffs’ claims satisfied its statutory and common law duties and did not violate the prohibitions set out in ORS 746.230(1)(d).” ORS 746.230(1)(d) prohibits an insurer from denying a claim without a reasonable investigation. Since Farmers did not present evidence that its claim review process was valid, the plaintiffs did not have to produce evidence that their medical expenses were medically necessary.
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More on the Oregon Supreme Court's Opinion in Goddard

Posted on March 10, 2008 by Diane Polscer
As reported earlier by Mike Aylward below, the Oregon Supreme Court ruled on Thursday that the maximum constitutionally acceptable punitive damages award is four times the amount of compensatory damages. The case, Goddard v. Farmers Insurance Co. of Oregon, concerns Farmers’ claims handling with respect to a car accident that occurred in 1987and the resultant wrongful death action filed against Farmers’ insured. Farmers undertook the insured’s defense but failed to settle Goddard’s wrongful death action within policy limits, after which a jury returned a verdict that resulted in a judgment against the insured for $863,274. The insured, who asserted that Farmers’ failure to settle was an act of bad faith, assigned his bad faith claim to Goddard who prosecuted the action and obtained an $863,274 compensatory damages award at trial along with an award of $20,718,576 in punitive damages. The Court of Appeals reduced the punitive damages award finding that the punitive damages award was grossly excessive and therefore unconstitutional under the Due Process Clause. As Mike outlines below, the Oregon Supreme Court affirmed the Court of Appeals finding that a ratio of 4:1 was constitutionally acceptable.





In making its decision, the court reviewed the “guideposts” recited by the US Supreme Court in BMW of North America, Inc. v. Gore, 517 US 559, 568 (1996) and State Farm Mut. Ins. Co. v. Campbell, 538 US 408 (2003), in analyzing punitive damages awards for excessiveness. Of particular note is the court’s determination that the 4:1 ratio was appropriate in this case as opposed to the recent $79.5 million punitive damages award it upheld several weeks ago which is summarized in our prior post concerning the Williams v. Phillip Morris case. The court specifically stated that an award that exceeds the single-digit ratio may be acceptable in a “few narrow circumstances” including when “extraordinarily reprehensible” conduct is involved such as the conduct in Williams. The court referenced the fact that only economic harm was present in this case and Farmers’ conduct was not comparable to the conduct of Phillip Morris’ “50-year campaign to delude a large part of the population of Oregon about the potentially devastating physical effects of smoking its products.” The court ultimately determined that the 4:1 ratio was constitutionally permissible and directed remand for a new trial unless the plaintiff agreed to remittitur of punitive damages to four times the compensatory damages award. This is not likely to be the court’s last take on what is a constitutionally permissible punitive damages award.
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Oregon Supreme Court Revisits Constitutionality of Punitive Damage Bad Faith Award

Posted on March 7, 2008 by Mike Aylward

Only weeks after its opinion in Williams v. Philip Morris upholding a punitive damage award that was nearly 100 times the amount of punitive damages (and largely ignoring the U.S. Supreme Court's directions through its application of state law to jury instructions),  the Oregon Supreme Court issued a new opinion discussing the constitutionallity of punitive damages yesterday in the context of a bad faith claim against an insurer.

 

In Goddard v. Farmers Ins. Co. of Oregon, an Oregon jury had awarded $20.7 million in punitive damages against Farmers after its failure to pay its $100,000 auto limit resulted in a $863,274 verdict against the insured.  The Oregon Supreme Court affirmed te jury's finding of bad faith, noting that:

In summary, we conclude that defendant's actions were directed at a financially vulnerable victim, were not confined to this victim alone, and involved intentional malice and deceit. On the other hand, defendant's actions caused economic harm only and did not evince a reckless disregard for the health or safety of others, although defendant is entitled to little credit for either factor -- cases of economic harm like the present one seldom provide malefactors with an opportunity to meet either of those criteria. Taken together, our analysis of the five reprehensibility factors set out in Gore, considered in light of the economic nature of defendant's wrongdoing, leads us to conclude that defendant's actions were very reprehensible.

Despite Farmers' argument that Campbell required a 1:1 ratio of punitive to compensatory damages, the Oregon Supreme Court concluded that a ratio of 4:1 was more appropriate.  Since the ratio here was closer to 16:1, the court held that a new trial limited to punitive damage was necessary unless the insured agreed to accept a reduced award based on a 4:1 ratio.

In calculating the ratio, the Supreme Court held that it was appropriate to consider pre-judgment interest awarded to the plaintiff in applying such ratios but that the amount of the damages was also properly reduced by the jury's finding of 20% comparative fault.
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Oregon Supreme Court Weighs in on Depositions of Expert Witnesses

Posted on February 7, 2008 by Diane Polscer
Unlike many other jurisdictions, Oregon state law does not allow for pre-trial depositions of expert witnesses. Indeed, not even the identity of an expert witness in an Oregon state procedure is discoverable. This is a quirk of Oregon practice and procedure that shows no sign of changing in the near future despite numerous attempts over the years by the Oregon State Legislature. This week however, the Oregon Supreme Court found that a prospective expert witness in a civil action can also be a fact witness and thus “may be deposed concerning facts that pertain to the witness's direct involvement in or observation of the relevant events that are personally known to the witness and that were not gathered primarily for the purpose of rendering an expert opinion” despite a party’s general insistence that the witness will only have “expert knowledge” of a matter.



Oregon Rule of Civil Procedure 36B provides, in part, that the scope of discovery is that:



[P]arties may inquire regarding any matter, not privileged, which is relevant to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things, and the identity and location of persons having knowledge of any discoverable matter. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to discovery of admissible evidence.



The court stated that, on its face, this rule “would appear to extend a right to depose or otherwise to obtain discovery from all potential witnesses (whose testimony is not privileged) . . . including expert witnesses.” However, the court noted that it had previously held that “the scope of the rule was not intended to extend to expert witnesses.” However, the court stated that nothing in the wording of the rule “suggests that a witness who has been personally or directly involved in events relevant to a case may not be deposed as to facts of which the witness has personal knowledge, simply because that person will be, as to other matters, an expert witness at trial.” The court stated that counsel for the plaintiff would have every opportunity at the expert’s deposition to object to any questions that sought expert opinions to thus stay within the spirit of the rules and the court’s holding.

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Williams v. Philip Morris - the Latest from Oregon on the $79.5 million Punitive Damages Award

Posted on February 5, 2008 by Diane Polscer
On remand from the U.S. Supreme Court, the Oregon Supreme Court has reinstated the $79.5 million punitive award in Williams concluding that the trial court did not err in refusing to give a proposed jury instruction concerning whether the jury could use punitive damage to punish Philip Morris for the impact of its misconduct on other persons, for independent state law grounds unrelated to the issues addressed by the US Supreme Court in its 2007 decision. Williams involved a claim by the widow of a longtime smoker that died of lung cancer against Philip Morris for fraud and negligence. At trial, Williams presented evidence that Philip Morris and other tobacco companies knew of the health dangers of smoking since the 1950s but nevertheless carried out an extensive campaign to convince the public that doubts remained about whether smoking actually was harmful to health. Near the end of trial, Philip Morris offered a proposed jury instruction that would have told the jury that it could not use punitive damages to punish Philip Morris for the alleged impact of its misconduct on other persons that could bring lawsuits of their own where a jury may award punitive damages. The trial court refused to give the instruction. The jury ultimately returned a verdict awarding Williams, among other things, $79.5 million in punitive damages.



Philip Morris appealed and, after a lengthy appeal process, the Oregon Supreme Court concluded the punitive award comported with federal due process and that the proposed jury instruction incorrectly stated the requirements of federal due process and therefore the trial court did not err in refusing to give the instruction. On certiorari, the US Supreme Court concluded that due process prohibits a jury from using a punitive damage verdict to punish a defendant directly for harm to nonparties. Determining that the Oregon Supreme Court had applied the wrong constitutional standard to the proposed jury instruction proffered by Philip Morris, the Court vacated the Oregon Supreme Court’s earlier decision and remanded.



On remand, the Oregon Supreme Court determined that the trial court correctly refused to give the instruction because it contained several other errors completely unrelated to the issues addressed by the US Supreme Court. The Oregon Supreme Court found that the instruction misstated Oregon law in that it incorrectly told the jury that the factors to be used in awarding punitive damages were discretionary when they are mandatory according to state statute and that the instruction mischaracterized this statutory language by referring to a defendant’s “motivation to make illicit profits” as compared to the “profitability of the defendant’s misconduct” as set forth in the statute. The Oregon Supreme Court therefore reaffirmed its prior decision. Shortly after the release of this decision last week, Philip Morris vowed to appeal to the US Supreme Court. A substantive due process issue that the US Supreme Court found unnecessary to address in its decision last year will likely be the subject of the Philip Morris petition.
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Policyholder Struck By Bicyclist after Parking Car Not Entitled to PIP Benefits

Posted on January 29, 2008 by Diane Polscer
Reversing a trial court’s grant of summary judgment for the plaintiff policyholder, the Oregon Court of Appeals found that a plaintiff’s injuries from being struck by a bicyclist as she crossed the street did not trigger PIP coverage under her auto insurance policy. In this case, the plaintiff had parked her car across the street from her residence and took several work related items from her back seat (although leaving her purse) and locked the car. She then crossed the street, descended a set of stairs to her home and opened the front door. Putting down the load she had taken from the car, she put a leash on her dog and walked with her dog across the street back to her car. She then unlocked the car doors and moved some of her personal times from the front seat to the hatchback of her car. She then closed and locked her car again and began to cross the street back to her house. When she was approximately three-quarters of the way across the road, she was struck by a cyclist riding down the hill and was injured.

After the accident, the plaintiff sought to recover her medical expenses and lost income and filed a claim for PIP benefits under her automobile policy with State Farm. State Farm denied the claim on the basis that the accident was not the result of her “use” or “occupancy” of her car and, thus, fell outside the coverage prescribed under the terms of her policy and the Oregon PIP statute. On summary judgment motions of both parties, the trial court found that the facts “show that the injury resulted form the use of the vehicle [and was] a consequence resulting from plaintiff’s use of the vehicle to transport and store items.” The trial court found that it was immaterial that she did not intend to return to her car again after locking it and that she might have taken the dog for a walk after crossing the street had she not been injured and thus, her injuries resulted from her “use” of the car.



The Court of Appeals reversed finding that a causal nexus between the use of the plaintiff’s car and the injury by the cyclist was lacking. The court found that there must be a “consequential nexus between the use and injurious event” for recovery to occur. Accordingly, in this case, there was no nexus as the injured cyclist “was going to be there regardless of plaintiff’s use of the car –and, other than in a pure “but for” sense, nothing about plaintiff’s use of the car enhanced the likelihood that she would suffer an injury because of being struck by a cyclist.”
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Oregon Court of Appeals Hears Oral Argument on Burden of Proof for "Expected or Intended" Coverage Term

Posted on January 23, 2008 by Diane Polscer
The Oregon Court of Appeals heard oral argument in ZRZ Realty Co. et al v. Beneficial Fire and Casualty Insurance, CA No. A121145, on January 10, 2008 concerning several issues including whether it is the insurer or the insured that has the burden of proving whether damage is unintended or unexpected under a policy of insurance.
This insurance coverage case involved environmental contamination of the policyholder’s land and the nearby Willamette River in Oregon where the policyholder operated a vessel scrapping business for many years. The trial court originally found that the all of the subject policies provided coverage for losses arising by “accident” which the court held to mean an “unexpected and unintended event.” In determining whether the insured’s potential liability on an environmental contamination claim was the consequence of an unexpected and unintended event, the trial court placed on the insurer, Lloyd’s, the burden of proving that the event was “expected or intended” rather than requiring the insured, Zidell, to prove that the damage was “unexpected and unintended.”



At oral argument, Lloyd’s argued that “expected or intended” was a part of the coverage grant, therefore, the burden of proof of “unexpected and intended” should be with Zidell. Lloyd’s argued that the burden of proof was on Zidell because this term was part of the coverage grant. Further, the trial court recognized that the unexpected and unintended issue is a condition, rather than exclusion. If the panel accepts Zidell’s interpretation, the insurer argued that any grant of coverage that was less than unconditional and promised to pay any claim, under any condition, for any amount, would engulf the entire policy. Lloyd’s also argued that the burden of proof of unexpected and unintended damage should be on the party who files the declaratory judgment action.



Zidell’s counsel argued that the issue of “unexpected and unintended,” was an exclusion and therefore the burden of proof rested with the insurer. Zidell’s counsel argued that the party seeking the benefit of specific policy language had the burden of proof and because Lloyd’s was attempting to benefit from establishing that Zidell expected or intended that its discharge of waste would cause third party property damage, it therefore should carry the burden of proving the term. Zidell’s counsel further argued that “unexpected or unintended” was an exception to an affirmative grant of coverage and thus an exclusion that Lloyd’s was required to prove.



A decision from the court is anticipated later this year.

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Oregon AG Settles Bid-Rigging Charges with ACE

Posted on October 29, 2007 by Diane Polscer

Oregon Attorney General Hardy Myers filed a stipulated general judgment in Marion County Circuit Court on October 25, 2007 with ACE Group Holdings, Inc. and its subsidiaries in which ACE agreed to pay $4.5 million to a group of eight state AGs in settlement of antitrust claims.  The case alleged improper, fictitious quoting and steering of insurance businesses in the commercial insurance market, orchestrated by Marsh & McLennan of New York. According to the press release issued by the Oregon AG, the scheme devised by broker Marsh & McLennan gave commercial policyholders the illusion of a legitimate competitive bidding process on policies while Marsh had secretly pre-designated certain insurers to win bids, but the results for the policyholders were actually inflated rates, not competitive bids.   Prior to the settlement, ACE paid out compensation for overcharges to a nationwide group of policyholders and adopted significant business reforms that govern its bidding and underwriting practices. 

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