Last week, I posted this article about the Ninth Circuit’s recent opinion affirming a $3.5 million attorney-fee award in favor of Schnitzer Steel against its insurer, Continental Casualty Co. Continental is unsatisfied with how it lost this battle, arguing in this petition for rehearing that the Ninth Circuit failed to adequately address Continental’s argument that Oregon’s fee-shifting statute in coverage cases doesn’t apply to losing insurers merely because the coverage lawsuit was filed in federal court.
It is Continental’s right to give this argument a shot. But what Oregon insureds should find troubling is Continental’s risibly misleading attempt to minimize what’s at stake here for insureds forced to spend many thousands (or even millions) of dollars forcing their insurers to pay what they promised. In support of its request that the Ninth Circuit reverse course, Continental argues that insurers really won’t be able to game the system by racing their insureds into the courthouse:
Finally, an insurer cannot defeat the insured’s choice of forum and right to fees by preemptively filing a declaratory relief action in federal court, because insureds—if correct on the merits of the declaration—remain free to seek any damages to which they may be entitled in a state court action.
This is precisely the peril that I worried about in my previous post, and I’m hopeful that the Ninth Circuit sees right through this soothing nonsense. An insured may be able to “seek any damages” caused by an insurer’s wrongful denial of a claim in a separate state-court lawsuit, but that misses the entire point of Oregon’s fee-shifting statute, which compensates insureds for their costs to fight a lawsuit in the first place. This “right to fees” in the initial coverage skirmish, apart from the merits and the “damages” owed to the insured, is exactly what Continental’s proposed rule would allow insurers to destroy under Continental’s self-serving interpretation of Oregon law intended to benefit insureds.
Oregon insureds, keep your fingers crossed.