The United States District Court for the Western District of Washington recently held that several insurers breached their insurance contracts when they refused to defend their insureds against letters from the EPA and the Washington State Department of Ecology identifying them as potentially liable parties at a Washington Superfund site. King Cty. v. Travelers Indem. Co., No. 2:14-cv-01957-BJR, Order Granting in Part and Denying in Part King County’s Motion for Summary Judgment and Denying Travelers’ Motion for Summary Judgment (W.D. Wash. Feb. 10, 2017) (“Order”). While some Washington court of appeals and federal court decisions under Washington law have approached this holding, this is the first clear decision on this point under Washington law. Continue Reading
In a decision issued last week, the Washington Supreme Court narrowed the possible relief available to policyholders who are harmed by insurer misconduct, holding that a claim cannot be brought under the Insurance Fair Conduct Act based on claims handling, unless there has been an actual denial of coverage.
In 2007, Washington enacted the Insurance Fair Conduct Act (the “IFCA”) which gives insureds a statutory “bad faith” cause of action against insurers who unreasonably deny coverage. On its face, the IFCA broadly addresses unfair insurer practices. Since enactment, however, Washington courts have been split as to the scope of the law. Policyholders and insurers have hotly contested whether unfair claims-handling practices and regulatory violations are actionable under the IFCA, or whether the law requires an unreasonable denial of coverage. In its recent decision, Perez-Crisantos v. State Farm Fire & Casualty Co., the Washington Supreme Court answered the question in favor of insurers, holding that the IFCA creates a private cause of action only when an unreasonable denial of coverage has occurred.
In a decision issued yesterday, February 2, 2017, the Oregon Supreme Court reversed several lower-court decisions and held that a policyholder that is forced into litigation with its insurer can recover attorney fees if the insurer settles the case for more than the insurer offered before litigation began, clearing a significant roadblock to resolution of coverage disputes in Oregon.
In Oregon, when a policyholder is forced to litigate a coverage claim against its insurer, the policyholder can often recover its attorney fees if the insurer does not settle the claim within six months of its presentation and the policyholder successfully recovers in excess of any tender made by the insurer within that six-month time frame. See ORS 742.061. This right to recover attorney fees serves the important public policy of ensuring that wronged policyholders will not be forced to bear the financial costs of enforcing their insurance rights. In practice, the costs of enforcing an insurance contract often exceed the value of the underlying claim, and in major coverage cases attorney fees can surpass a million dollars. The recovery of attorney fees is always a critical consideration in deciding whether to initiate insurance coverage litigation. Continue Reading
Last year our partner Seth Row reported on an Oregon Court of Appeals decision, West Hills Development Co. v. Chartis Claims, Inc., 273 Or App 155 (2015).
In West Hills, Oregon Auto Insured, a subcontractor, and the liability policy named the general contractor as an additional insured. In an underlying lawsuit by homeowners alleging construction defects, the complaint alleged that the general contractor had negligently supervised its subcontractors, who themselves were negligent, but did not name or identify Oregon Auto’s insured subcontractor. The policy provided that the general contractor, West Hills, was an additional insured “only with respect to liability arising out of [the subcontractor’s] ongoing operations performed for [West Hills].” Oregon Auto refused to defend. In West Hills’ subsequent lawsuit, both the trial court and the court of appeals held that Oregon Auto owed its additional insured a defense. Continue Reading
Many tort lawsuits are resolved by an insured defendant’s stipulating to a judgment in favor of the plaintiff, and the plaintiff’s agreeing not to execute on the judgment against any of the defendant’s assets except for its insurance. Simultaneously, the defendant typically assigns its claims against its insurer to the settling plaintiff, who then pursues recovery for the judgment directly from the insurer. Under Washington law, in cases in which the insurer has failed in bad faith to defend, or has engaged in bad faith while defending under a reservation of rights, the insurer is estopped from contending that the underlying claim was not covered. If certain procedures are followed, courts will also impose a rebuttable presumption that the stipulated judgment was a reasonable settlement that establishes the amount of harm caused to the defendant by the insurer’s bad faith.
Virtually every insurance contract imposes on the policyholder a “duty to cooperate” with the carrier during the fact-gathering and investigation process. Typically, this requires the policyholder to assist its carrier in the investigation, defense, and settlement of a claim or suit, both in the coverage context and in a third-party liability case. The failure to cooperate can have severe consequences, as it did recently in Charter Oak Fire Ins. Co. v. Interstate Mechanical, Inc., where it resulted in complete denial of coverage. There, the insurer won summary judgment on its argument that the insured breached the duty to cooperate by colluding with the plaintiff in the underlying lawsuit. Indeed, the insured and the plaintiff shared a common owner and failed to maintain even the appearance of an arm’s-length relationship. Given such consequences, policyholders would be well-advised to consider what the duty to cooperate really requires, especially because the answer can vary significantly with jurisdiction and context.
The Montana Supreme Court issued a decision Thanksgiving week clarifying that when a
policyholder is owed a defense by multiple general liability insurers, all of those insurers must participate in the defense, or risk severe penalties for breaching the duty to defend. In J&C Moodie Properties LLC v. Scottsdale Insurance Company the court held that Scottsdale Insurance breached the duty to defend its insured in an underlying construction defect action, and was therefore exposed to extra-contractual remedies, despite the fact that the policyholder was defended by another insurer. In so doing the court clarified precedent that had seemed to suggest that a co-insurer could escape liability for breach of the duty to defend in such situations, and strengthened the hand of policyholders in Montana. Continue Reading
Most business owners understand that in exchange for paying premiums for workers compensation insurance, they get immunity from suit from their own injured employees. This is usually referred to as the workers compensation “exclusive remedy”: if an employee accepts workers compensation insurance benefits, the employee may not sue the employer (subject to certain exceptions for egregious cases). So why, as the title of this post suggests, do many employers feel like they end up paying twice for their employees’ injuries? It boils down to three words: additional insured promises.
Earlier this year the Oregon Supreme Court expanded the potential liability of contractors and others for injury to employees of others on a job site, making it more critical than ever for contractors to ensure that they have additional insured protection. In Yeatts v. Polygon Northwest, an employee of a framing subcontractor on a building project was injured when a railing gave way. The general contractor on the project was Polygon. The injured worker sued Polygon under Oregon’s Employer Liability Law (ELL) (ORS 654.305) alleging that Polygon was a “indirect employer” under the law because Polygon was involved in ensuring job-site safety, and was therefore liable for the injuries.
Can a policyholder that knowingly purchases contaminated property be covered for the costs of cleaning up that property under policies of insurance issued before the purchase? Yes, according to a new unpublished decision from the Washington Court of Appeals.
In 1999, the Port of Longview purchased property that had been used from the 1950s through 1982 to treat wood products with creosote and other chemicals. Groundwater contamination had been discovered at the site as early as 1981. The Port knew of the groundwater contamination at the time of purchase, and knew that its acquisition of the site would automatically make the Port liable under the Washington Model Toxics Control Act (“MTCA”) for the contamination there. In 2005, the Washington Department of Ecology (“DOE”) formally notified the Port that it was a potentially liable party (“PRP”) under MTCA for the cleanup of contamination at the site. Continue Reading