Cont'l Cas. Co. v. Argonaut Ins. Co.

544 P.3d 1036

331 Or.App. 26

CONTINENTAL CASUALTY COMPANY and Transportation Insurance Company, Plaintiffs-Counterclaim Defendants, Respondents,

v.ARGONAUT INSURANCE COMPANY, Defendant,andInsurance Company of North America, now known as Century Indemnity Company, successor to CCI Insurance Company, Defendant-Counterclaimant-Cross Claimant, Respondent,

and

Employers Insurance Company of Wausau, Defendant-Counterclaimant-Cross Claimant, Respondent Cross-Appellant,

and

Insurance Company of the State of Pennsylvania, Defendant-Cross Claim Defendant, Appellant Cross-Respondent.

A176743

Court of Appeals of Oregon.

Argued and Submitted October 10, 2023

February 22, 2024

Multnomah County Circuit Court, 16CV14319; David F. Rees, Judge,

William C. Perdue, Washington D. C., argued the cause for appellant-cross-respondent. Also oh the briefs were Robert Reeves Anderson, Colorado, Samuel I. Ferenc, and Arnold & Porter Kaye Scholer LLP, Washington, D. C. and Thomas W. Brown, Julie A. Smith, and Cosgrave Vergeer Kestler LLP and Stephen R. Wong, Kenneth H. Sumner, and Sinnott, Puebla, Campagne & Curet APLC, California.

Laurie J. Hepler, California, argued the cause for respondents Continental Casualty Company and Transportation Insurance Company. Also on the brief were. Rachel A. Beyda and Greines Martin Stein & Richland LLP, California, and Lawrence Gottlieb, Jeremy Schultze, H. Matthew Munson, and Betts, Patterson & Mines, P.S., Washington.

David C. Linder, Minnesota, argued the cause for respondent-cross-appellant Employers Insurance Company of Wausau. Also on the brief were Larson King LLP, Minnesota, and Thomas W. Sondag, Carter M. Mann, and Lane Powell, PC.

Thomas M. Christ and Sussman Shank LLP filed the brief for respondent Insurance Company of North America.

Before Egan, Presiding Judge, and Kamins, Judge, and DeVore, Senior Judge.

EGAN, P. J.

₂₈In Continental Casualty Company v. Argonaut Insurance Company (A176763) (Wausau), 331 Or App 38, — P3d — (2024), we set out the background facts and legal context for this claim by plaintiff Continental Casualty Company and Transportation Insurance Company (collectively, Continental) for contribution from defendant/appellant Insurance Company of the State of Pennsylvania (ICSOP) and other insurers, for costs that Continental has incurred and is obligated to pay to Schnitzer Steel Industries, Inc. (SSI), and MMGL Corp (formerly Schnitzer Investment Corp) (SIC) (collectively "Insureds"), relating to the defense of claims by the United States Environmental Protection Agency (EPA) for environmental cleanup of the Portland Harbor Superfund Site. In that opinion, we reversed that portion of the trial court’s judgment holding that defendant Employers Insurance Company of Wausau (Wausau), which had issued comprehensive general liability insurance to the Insureds, was subject to Continental’s contribution claim. ICSOP issued three "umbrella" policies to the Insureds during the relevant period.¹ In this separate appeal by ICSOP from that same judgment, ICSOP challenges the trial court’s determination on ICSOP’s and Continental’s cross-motions for summary judgment that, based on its umbrella policies, ICSOP is subject to Continental’s claim for contribution to defense costs. Continental contends in a cross-assignment of error that, in the event that we determine that ICSOP is not subject to contribution, the judgment should be remanded for reallocation of contribution.²

On ICSOP’s appeal, we conclude that the trial court erred. We therefore reverse that portion of the judgment holding that ICSOP is subject to Continental’s contribution claim and remand the judgment for a reallocation of contribution.

We set forth additional facts as necessary to address the legal issues raised on appeal. After the EPA designated the Insureds as parties potentially responsible for cleanup ₂₉of the Portland Harbor Superfund Site, the Insureds filed claims for defense and indemnity with their comprehensive general liability insurers, including Continental. They also filed a claim with ICSOP, which had provided what was entitled "umbrella" insurance to the Insureds during the relevant period, with limits of $5,000,000. The ICSOP policies provided excess coverage for losses within the scope of coverage of the underlying insurance named in the policy.³ ICSOP denied coverage or a duty to defend, contending that, based on the provisions of its policies with the Insureds, the Insureds’ environmental claims were subject to the excess liability portions of the policies and those provisions had not been triggered.

A federal judgment determined that Continental had a duty to defend the Insureds in the Portland Harbor Superfund Site claims by the EPA. Continental brought this action for contribution against all other insurers that had provided insurance to the Insureds during the relevant period, including ICSOP, as permitted by the Oregon Environmental Cleanup Assistance Act (OECAA), ORS 465.475 to 465.485.

ICSOP argued that it should not be allocated any portion of contribution toward defense costs, because its ₃₀policies with respect to the Insureds’ environmental claim had two features: (1) The policies provided excess, not primary, coverage of any liability that the Insureds might have for cleanup of the Portland Harbor Superfund Site, meaning that the policies were excess to the loss covered by the underlying insurance listed in the policies—in this case, El Dorado Insurance Company, which is defunct. (2) ICSOP contended that its policies required "horizontal exhaustion," meaning that, before ICSOP’s coverage was triggered, there must be an exhaustion of all comprehensive general liability policies the Insureds held for the covered loss, not just the El Dorado policies. Because there had not been exhaustion of the Insureds’ comprehensive general liability policies, ICSOP asserted that ICSOP’s policies were not triggered, and that it had no liability and no duty to defend.

ICSOP cited provisions of its policies that it contends support its construction. The policies’ coverage provision stated:

"The Company hereby agrees, subject to the limitations, terms and conditions hereinafter mentioned, to indemnify the Assured for all sums which the Assured shall be obligated to pay by reason of the liability

"(a) Imposed upon the Assured by law, or

"(b) Assumed under contract or agreement by the Named Assured and/or any officer, director, stockholder, partner or employee of the Named Assured, while acting in his capacity as such,

"for damages, direct or consequential and expenses, all as more fully defined by the term ‘ultimate net loss’ on account of:—

"(i) Personal injuries, including death at any time resulting therefrom,

"(ii) Property Damage,

"(iii) Advertising liability,

"caused by or arising out of each occurrence happening anywhere in the world."

The policies’ "Limit of Liability" provision stated:

₃₁"The Company shall only be liable for the ultimate net loss the excess of either

"(a) the limits of the underlying insurances as set out in the schedule in respect of each occurrence covered by said underlying insurances, or

"(b) the amount as set out in the declarations as the self-insured retention in respect of each occurrence not covered by said underlying insurances (hereinafter called the "Underlying Limits")[.]

"* * * * *

"In the event of reduction or exhaustion of the aggregate limits of liability under said underlying insurances by reason of losses paid there-under, this policy shall

"(1) in the event of reduction pay the excess of the reduced underlying limit

"(2) in the event of exhaustion continue in force as underlying insurance. The inclusion or addition hereunder of more than one Assured shall not operate to increase the Company’s limit of liability."

As noted, the policies’ coverage was for "ultimate net loss." The policies defined "ultimate net loss":

"The term ‘Ultimate Net Loss’ shall mean the total sum which the [Insured] or any company as his insurer or both become obligated to pay by reason of * * * property damage * * *, and shall also include expenses for * * * lawyers * * * and investigators and other persons and for litigation, adjustment and investigation of claims and suits which are covered here-under [.]

"[ICSOP] shall not be liable for expenses as aforesaid when such expenses are included in other valid and collectible insurance."

(Emphasis added.) Thus, ICSOP’s coverage and liability to indemnify for expenses constituting "ultimate net loss,"—including the Insureds’ defense costs—as defined in the first paragraph above, arose only if, as stated in the second paragraph, such incurred expenses were not included in other "valid and collectible" insurance.

₃₂ICSOP’s policies also included a Loss Payable provision stating, in part:

"Liability under this policy with respect to any occurrence shall not attach unless and until the Assured, or the Assured’s underlying insurer, shall have paid the amount of the underlying Emits on account of such occurrence."

The policies also included an "Other Insurance" provision:

"If other valid and collectible insurance with any other insurer is available to [the Insureds] covering a loss also covered by this policy * * * the insurance afforded by this policy shall be excess of and shall not contribute with such other insurance."

(Emphasis added.) Those paragraphs, ICSOP contended, established ICSOP’s excess coverage as requiring "horizontal exhaustion," meaning that, before ICSOP’s excess coverage could be triggered, all insurance provided by all other insurers for the covered loss during the relevant time must have been exhausted. Because the Insureds had other insurance policies that were "valid and collectible" on their environmental claim during the relevant periods, ICSOP asserted that it had no liability for defense costs or any loss that had been incurred by the Insureds.

ICSOP’s policies included a provision for"Maintenance of Underlying Insurances,"...