ZRZ Realty Co. v. Fire

255 Or.App. 524

300 P.3d 1224

ZRZ REALTY COMPANY, an Oregon corporation, for itself and as trustee of the Zidell Remediation Funding Trust, an Oregon trust; Zidell Marine Corporation, a Washington corporation; Tube Forgings of America, Inc., an Oregon corporation; and Pon Exploration, Inc., a Delaware corporation, fka Zidell Explorations, Inc., an Oregon corporation, Plaintiffs–Respondents, Cross–Appellants,

v. BENEFICIAL FIRE AND CASUALTY INSURANCE COMPANY, succeeded in interest by J.C. Penney Life Insurance Company, et. al., Defendants,andCertain Underwriters at Lloyd's of London, and Certain London Market Insurance Companies, aka “Lloyd's,” including the following defendant companies: Assicurazioni Generali S.P.A., Insurance Company of North America (UK) Ltd., Commercial Union Assurance Company, PLC, Edinburgh Assurance Company, Ltd., Ocean Marine Insurance Company, Ltd., World Auxiliary Insurance Corporation, Ltd., Cornhill Insurance Company, Ltd., Dominion Insurance Company, Ltd., Eagle Star Insurance Company Ltd., The Threadneedle Insurance Company, Ltd., Excess Insurance Company Ltd., London & Edinburgh General Insurance Company Ltd., New Zealand Insurance Company, Ltd., Road Transport & General Insurance Company, Ltd., South British Insurance Company, Ltd., Ulster Marine Insurance Company, Ltd., The United Scottish Insurance Company, Ltd., Yorkshire Insurance Company, Ltd., Hansa Re & Marine Insurance Company (UK), Ltd., LA Reunion Francaise (UK) Ltd., Economic Insurance Company, Ltd., Norwich Union Fire Insurance Society, Ltd., Fireman's Insurance Company of Newark, New Jersey, Swiss Union General Insurance Company, Ltd., Leadenhall Insurance Company, Ltd., Bishopgate Insurance Company, Ltd., Home Insurance Company, Nippon Fire & Marine Insurance Company (UK), Ltd., Switzerland General Insurance Company, Ltd., River Thames Insurance Company, Ltd., Royal Insurance Company, Ltd., British Fire Insurance Company, Ltd., British & Foreign Insurance Company, Ltd., National Provincial Insurance Company, Ltd., The Scottish Lion Insurance Company, Ltd., Skandia Marine Insurance Company (UK), Ltd., Drake Insurance Company, Ltd., Sphere Insurance Company, Ltd., Sphere Drake Insurance Company, PLC, Alliance Assurance Company, Ltd., British Law Insurance Company, Ltd., and Continental Assurance Company of London, Ltd., Liverpool Marine & General Insurance Company, Ltd., Phoenix Assurance Company, Ltd., Fine Art & General Insurance Company, Ltd., Anglo–French Insurance Company, Ltd., Baloise Marine Insurance Company, Ltd., Baltica Insurance Company (UK), Ltd., Fuji Fire & Marine Insurance Company (UK), Ltd., R.W. Gibbon Group, LA Preservatrice Group, Switzerland General Insurance Company (London), Ltd., Yasuda Fire & Marine Insurance Company, Ltd., Iron Trades Mutual Insurance Company, Ltd., Minster Insurance Company, Ltd., Reliance Insurance Company, Sirius (UK) Insurance, PLC, Indemnity Marine Assurance Company, Ltd., London & Hull Maritime Insurance Company, Ltd., and Associated Companies, C.A. Parr Agencies, Ltd., Sun Insurance Office, Marine Insurance Company, Limited, and Sumitomo Marine & Fire Insurance Company, Limited, Defendants–Appellants, Cross–Respondents.

970806226; A121145.

Court of Appeals of Oregon.

Submitted on Remand June 18, 2012.

Decided March 6, 2013.

Thomas W. Sondag and Lane Powell PC, and John Folawn and Kirklin Folawn LLP for appellants-cross-respondents.

Dean D. DeChaine, William H. Walters, Bruce L. Campbell, Michelle E. Barton, and Miller Nash LLP, and Robert M. Horkovich, Edward J. Stein, and Anderson Kill & Olick, P.C., for respondents-cross-appellants.

Gregory L. Baird and Gordon & Polscer, LLP, for amicus curiae Complex Insurance Claims Litigation Association.

Before WOLLHEIM, Presiding Judge, and SERCOMBE, Judge, and NAKAMOTO, Judge.

WOLLHEIM, P.J.

This case comes to us on remand after the Supreme Court affirmed in part and reversed in part our decision in ZRZ Realty v. Beneficial Fire and Casualty Ins., 222 Or.App. 453, 194 P.3d 167 (2008) (ZRZ Realty I ), modified on recons,225 Or.App. 257, 201 P.3d 912 (2009) (ZRZ Realty II ), aff'd in part and rev'd in part,349 Or. 117, 241 P.3d 710 (2010) (ZRZ Realty III ), modified on recons,349 Or. 657, 249 P.3d 111 (2011) (ZRZ Realty IV ). In our original decision, ZRZ Realty I, we addressed, among other issues, whether plaintiffs (collectively Zidell) or defendants (collectively London) had the burden to prove whether environmental damage resulting from the operation of Zidell's business was expected or intended for purposes of various insurance policies issued by London. We held that the trial court had correctly allocated that burden to London as to certain policies, i.e., the “implied fortuity polices” that, by their terms, provided coverage without regard to whether resulting property damage was expected or intended; but, we held that the trial court had erred in allocating that burden to London on “express fortuity policies,” i.e., policies that expressly limited coverage to property damage that was not expected or intended. We reversed the judgment (including an attorney fee award) in favor of Zidell and also vacated a supplemental judgment that awarded Zidell additional attorney fees. ZRZ Realty I, 222 Or.App. at 497, 194 P.3d 167. On reconsideration, we modified our opinion but adhered to our disposition, again remanding the case for retrial as to all policies. ZRZ Realty II, 225 Or.App. at 262–65, 201 P.3d 912. In light of our disposition, we did not reach some of the parties' assignments of error on appeal and cross-appeal, including most of the parties' assignments concerning attorney fees. ZRZ Realty I, 222 Or.App. at 478, 480, 495–97, 194 P.3d 167;ZRZ Realty II, 225 Or.App. at 264–65, 201 P.3d 912.

The Supreme Court subsequently affirmed our decision as it pertained to the allocation of the burden of proof, but concluded that our remand was too broad. The Supreme Court reasoned that “[t]he remand should have been limited, at least initially, to the question whether, for the purposes of the express fortuity policies, Zidell either expected or intended that a series of contaminants resulting from the operation of its business would damage the environment.” ZRZ Realty III, 349 Or. at 147, 241 P.3d 710. The court also held that we had erred in reversing the attorney fee award in the judgment and in vacating the attorney fee award in the supplemental judgment, because the issue to be retried—whether Zidell expected or intended the damage resulting from its business activity for purposes of express fortuity policies—“would have no effect on either the trial court's ruling that London had a duty to defend Zidell in DEQ's enforcement action or the trial court's conclusion that ORS 742.061 authorized Zidell to recover attorney fees it incurred in this action in establishing and enforcing London's duty to defend.” Id. at 150, 241 P.3d 710.

After reversing our decision in those respects, the court sent the case back to us for consideration of the assignments of error that we previously did not reach. The court described the remand this way:

“Because we conclude that the Court of Appeals erred in reversing and vacating the fee awards, it follows that we must remand this case initially to the Court of Appeals to permit it to consider those assignments of error. On remand before the Court of Appeals, the parties are also free to ask the court to consider, if appropriate, those assignments of error that the court did not reach because it remanded the case for a new trial on both the express and implied fortuity policies. Because at least some of those issues must go back to the Court of Appeals for its resolution before the case returns to the trial court, we remand this case initially to the Court of Appeals.”

ZRZ Realty III, 349 Or. at 150–51, 241 P.3d 710.

The remand, however, did not reach this court immediately, because the Supreme Court issued two more opinions—one on reconsideration that clarified that the trial court was not foreclosed from taking live testimony on remand, ZRZ Realty IV, 349 Or. 657, 249 P.3d 111, and another dealing with Zidell's petition for an award of attorney fees for prevailing on appeal, 351 Or. 255, 266 P.3d 61 (2011) (ZRZ Realty V ).

In June 2012, we received the remand judgment from the Supreme Court and invited further briefing from the parties on what issues remain to be decided by this court. Having reviewed the original briefs, the various appellate decisions in this case, and the parties' most recent submissions, we conclude that the following assignments of error merit further discussion on remand: on appeal, London's second assignment (dismissal of claims as a matter of law), third assignment (inconsistencies in the trial court's findings and conclusions), fourth assignment (expected losses under certain bumbershoot policies), and eighth, ninth, and tenth assignments (each pertaining to attorney fees); and, on cross-appeal, Zidell's first assignment (allocation of indemnity costs), second assignment (defense costs under ship dismantling policies), and fourth and fifth assignments (both concerning attorney fees). And, for the reasons that follow, we now affirm the trial court's rulings concerning the implied fortuity policies; vacate the initial attorney fee award because it includes fees for time spent on issues other than the duty to defend; reject London's argument concerning the supplemental fee award; and decline to reach the allocation question, which will benefit from a better-developed record below.

I. BACKGROUND

The facts underlying this appeal are set out in the Supreme Court's opinion, which we repeat here to provide context for the various assignments of error.

“Plaintiffs (collectively Zidell) are a group of related companies that began acquiring and dismantling decommissioned navy and merchant marine ships after World War II. Zidell towed the decommissioned ships to a...