The dispute between Schnitzer Steel and its carriers over defense at the Portland Harbor Superfund Site has been addressed many times in this blog, because it has raised many novel and fascinating (to me, anyway!) issues. Here is the latest: on November 12, 2014 Judge Mosman ruled on Schnitzer’s motion for attorney fees after Schnitzer prevailed completely at trial this last April, recovering more than $8 million in defense costs. Schnitzer then requested nearly $3.5 million in fees under ORS 742.061. In response, the carriers tried a “hail mary” to zap the fee entitlement entirely: they argued that because the statute applies only to actions brought on an insurance policy “in any court of this state,” and because actions brought in federal court are brough in a court in Oregon but not of Oregon, the statute did not apply.
Judge Mosman found the argument worthy of some consideration, but ultimately rejected it. Judge Mosman held that under Erie and consistent with the purposes of the statute, a federal court in Oregon is a court “of the state.” The court noted that any other result would produce an anomaly: a case in an Oregon state court applying Oregon law would result in a fee award, whereas the same case that was removed as of right by an insurance carrier to federal court would not.
This is another important development in the protection of one of the few levers available to policyholders in Oregon because other than in the environmental arena (as of last year), the conventional wisdom is that there is no “bad faith” remedy where an insurance carrier denies a defense under a liability policy. However, given the size of the attorney fee award (nearly all of what Schnitzer requested), the carriers certainly have an incentive to raise this issue again on appeal.