An Oregon federal judge recently reaffirmed a broad approach to the duty to defend in a carrier-on-carrier dispute. The case is Seneca Insurance v. James River Insurance. As with many such cases in Oregon, the dispute centered around defective construction, this time on the coast. Plaintiff insurer, Seneca, agreed to defend its insured, a contractor. Seneca sued one of the contractor’s other insurers, James River, after James River refused to help fund the defense. James River argued that the property damage alleged in the complaint must have started before its policy kicked in, in mid-September, 2011. But the complaint did not specify when exactly the property damage happened. And as we know, the duty to defend is determined only by looking at the complaint and the policy – the “eight corners” rule.
The court lambasted James River for interpreting ambiguities in the complaint to exclude coverage, stating that James River was in most cases “looking through the wrong end of the telescope.” (Love that phrase!) The complaint alleged that the work was done in the late summer of 2011, and so James River argued that because “rain fell” and “wind blew” in the fall of 2011, property damage must have occurred then. The court rejected that argument as assuming too much about un-alleged damage. The court also flatly rejected James River’s argument that the reference to “fall 2011” in the complaint referred to the beginning of September as contradicted by meteorological science. Finally, the court also held that James River was not entitled to rely on the insured’s third-party complaint against downstream parties (sub-contractors and others) to deny the defense, strictly applying the “eight-corners” rule.