Insurer CNA has filed its brief in the long running Schnitzer coverage litigation concerning defense coverage at the Portland Harbor Superfund Site and it’s interesting reading.  The issue here is not the duty to defend per se, because Schnitzer’s insurers are defending. The issue rather is whether the “independent counsel” provision of SB 814, the amendment to Oregon’s Environmental Cleanup Assistance Act (OECAA) passed this last legislative session, mean that Schnitzer’s insurers have to pay the full rates being charged by Schnitzer’s Los Angeles-based environmental defense counsel.  So far CNA has been paying only what it claims is its ordinary “panel” rate for Oregon defense lawyers, which is a small portion of the hourly rate charged by Schnitzer’s LA lawyers.

SB 814 contains a clause requiring an insurer to pay for experienced environmental counsel, which Schnitzer argues means whatever rates are charged by available experienced Superfund defense lawyers; since all of the lawyers with that kind of experience in Portland are already representing other entities at the Site, CNA must pay Los Angeles rates.

CNA makes the following arguments that I found interesting (and I’m paraphrasing heavily here): 1) the insurance policies (which are standard older GL forms) give it the absolute right to control the defense, and therefore the “savings clause” in the OECAA applies, negating the independent counsel provision; 2) SB 814 cannot apply to existing counsel that are already being paid by the insurance company because that would interfere with the Oregon State Bar’s rules on conflicts of interest and attorney ethics, and the Legislature cannot overrule the Bar’s rules.  The second point is the most creative, but seems a little thin at first glance.  The problem with the first argument is that Oregon courts have not directly confronted the scope of an insurer’s right to control the defense – which CNA acknowledges by citing only out-of-Oregon cases in its brief.  But if CNA wins the day, that could spell trouble for anyone trying to take advantage of the independent counsel provision, not just those in Schnitzer’s highly unusual situation.

Stay tuned, as they say.