Often a number of insurers are involved in claims that concern damage that takes place over several years such as environmental damage claims. Oregon law allows claims for contribution by non-settling insurers against settling insurers under certain circumstances, Certain Underwriters v. Mass. Bonding and Ins. Co., 235 Or. App. 99, 230 P.3d 103 (2010), and equitable contribution claims between insurers are becoming more common. Yet there is little guidance for how to allocate defense costs or indemnity among insurers on the risk.
For coverage litigation concerning environmental claims, the 2013 amendments to the Oregon Environmental Cleanup Assistance Act (“OECAA”) provide that an insurer that has paid all or part of an environmental claim may seek contribution from any other insurer that is liable or potentially liable to the insured and that has not entered into a good-faith settlement agreement with the insured regarding the environmental claim. ORS 465.480(4)(a).
Oregon’s Supreme and appellate courts have not addressed the method to allocate defense costs or indemnity among insurers on the risk when the claims are subject to the OECAA. And while a few Oregon district courts have addressed the allocation question under the OECAA, the rulings on the method of allocation have varied. Some Oregon district courts have ruled that the OECAA requires consideration of time on the risk only, whereas another ruled that the OECAA requires that both time on the risk and policy limits be considered. Addressing this last ruling, the Ninth Circuit opined that the district court did not abuse its discretion in considering time on the risk and the applicable policy limits when allocating defense costs under the OECAA. Nw. Pipe Co. v. RLI Ins. Co., 649 F. App’x 643 (9th Cir. 2016). It is of note, however, that the Ninth Circuit’s reliance on whether the district court abused its discretion, rather than on whether its interpretation of the OECAA was correct, may viewed to permit the latitude to apply a different statutory interpretation.
Until an Oregon higher court is presented with, and decides, the issue of how to allocate defense costs or indemnity among insurers on the risk under the OECAA, there will continue to be limited guidance to insurers who are parties to such contribution claims.