Federal court applies Oregon statute to approve “good faith” settlement in environmental insurance litigation2020-04-23T00:34:38+00:00
10.22.2015 // THE POLICYHOLDER REPORT
Federal court applies Oregon statute to approve “good faith” settlement in environmental insurance litigation

Coverage litigation stemming from continuous or progressive property damage or bodily injury claims typically involves multiple insurers that issued liability policies over a number of years. One or more of those insurers may want to settle early, and the policyholder may very well want to take that insurer’s money. Settlement may be complicated, however, by the potential equitable contribution rights of the other, non-settling insurers. The settling insurer wants to close its file without the risk of being dragged back into the litigation through a contribution claim. But the sophisticated policyholder is rightfully reluctant to agree to defend and indemnify the settling insurer, taking on the risk that a court could later conclude that the settlement was too low.

In the context of coverage litigation arising from underlying environmental claims, the Oregon legislature addressed this problem in the 2013 amendments to the Oregon Environmental Cleanup Assistance Act (“OECAA”). One provision of this Act, ORS 465.480(4), expressly provides insurers with a right of contribution, but only against insurers that have “not entered into a good-faith settlement agreement with the insured regarding the environmental claim.” OECAA provides for a rebuttable presumption that settlements between a policyholder and insurer are “good-faith settlements.” But the statute goes further: it allows the settling parties to seek a good-faith determination from any court of competent Federal court applies Oregon statute to approve “good faith” settlement in environmental insurance litigationjurisdiction, after providing 30 days’ notice to other insurers. ORS 465.480(4)(b). If the court approves the settlement, the contribution rights of any non-settling insurer that receives notice are extinguished.

The statutory good-faith settlement process put in place by the OECAA amendments is now being put into practice, allowing settlements to go forward. For example, on September 2, 2015, Magistrate Judge Acosta of the U.S. District Court for the District of Oregon entered Findings and Recommendations (which were later adopted by Judge Mosman) in Evraz Inc. v. Riddell Williams P.S. There, Evraz and Hartford Fire Insurance Co. filed an unopposed Motion to Approve Settlement. The court granted the motion, concluding that Hartford had agreed to pay “a significant sum” in settlement and that appropriate notice had been provided. Potential contribution rights against Hartford were extinguished, and the parties were able to conclude their settlement.

The system, in other words, is working, at least in the context of environmental claims. Policyholders and insurers involved in coverage litigation arising from other long-tail claims, such as construction defect or asbestos claims, still lack the statutory means to establish a good-faith settlement and cut off contribution rights. From a public policy perspective, it seems odd at best to treat policyholders and insurers differently depending on the nature of the underlying litigation. The Oregon legislature should at least consider encouraging settlements and the efficient resolution of insurance disputes by extending OECAA’s good-faith settlement presumptions and procedures to all types of coverage litigation.

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Ball Janik LLP was founded in 1982 with six lawyers and a four-person support staff in Portland, Oregon. Since our firm’s inception, we have expanded our capabilities, our professionals, and geographic footprint. What started as a firm focused in real property and land use (known then as Ball Janik & Novack), has grown to include the insights of a team of 30-plus attorneys, with a combined six centuries of experience, and capabilities including Real Estate and Land Use, Construction Defect, Commercial Litigation, Insurance Recovery, Construction and Design, Employment, Finance and Corporate, Public Agencies and Schools, and Community Associations. With offices in Florida and Oregon, our regional growth has earned us a national reputation for upholding the rights of our clients.

Ball Janik LLP has been recognized by Chambers USA, U.S. News & World Report and Best Lawyers®, The Best Lawyers in America©, and Corporate International. Ball Janik LLP’s success and integrity have repeatedly made it one of “Oregon’s Most Admired Professional Firms,” according to the Portland Business Journal’s survey results of CEOs throughout the region.

Heather J. Oden
Oregon , Portland
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