In the golden days of yesteryear, Oregon law was mostly a model of fairness to insurance companies. But it increasingly appears that those days must be safely tucked away in the nostalgia file. The tenor of case law has changed considerably in recent years, as Oregon court decisions become more and more insured friendly, and it is less and less surprising to see cases stretching the envelope for policyholders.
The most recent evidence of this trend is the Oregon Court of Appeals’ decision in Hunters Ridge Condominium Association v. Sherwood Crossing, LLC. 285 Or.App. 416 (2017). In that case, the Court of Appeals answered a question that has long been asked by insurers and insureds alike: does the phrase “costs taxed” in the Supplementary Payments provision of the insurance policy include attorney fees?
The few earlier cases that addressed this issue were inconclusive or contained cursory analysis, leading to confusion and the profusion of a variety of potentially credible arguments for and against insurer payment of attorney fees owed by an insured in underlying lawsuits. The Court of Appeals has now analyzed this question in great depth and given a more or less clear answer. The answer, it appears, is yes, due to the ambiguity of the phrase “costs taxed”. And given the generally anti-insurer trend of the Oregon Supreme Court, it seems unlikely the Oregon high court will disagree, if Hunters Ridge or another similar case finds its way there. But wait, in insurance coverage, if you lose the battle for one hill, isn’t there always another hill to retreat to and fight on? There must be a silver lining, right? Sure, if you consider that the ISO has already amended insurance policies to make clear that costs taxed does not actually include attorney fees going forward. Unfortunately that does not help insurers whose earlier policies are in question.
The amended ISO form also offers no comfort to insurers when attorney fees are awarded against the insured as “consequential damages” when the insured’s tortious or wrongful conduct forced the underlying plaintiff into litigation with a third party. In other words, if a construction subcontractor’s deficient work causes the general contractor to be sued by a homeowner (yes, I have just described almost every construction defect case), the subcontractor’s carrier would now owe a proportionate amount of the fees incurred by the general contractor in defending and settling those claims as “damages”.
Did I mention that the Court of Appeals also determined that certain Multi-Unit exclusions are now ambiguous due to a very generous reading of the term “residential building”? Let that sink in for a moment.
Again you say, but but but but but, these dark clouds must have a bright side where the sun eternally shines! And they do! The Court found that an Oregon statute that compelled garnishment proceedings be conducted by bench trial was unconstitutional. Therefore, insurers have the “right” to have questions of fact determined by a jury. Hallelujah. There’s your bright side, Sunshine. An expensive jury trial waits just for you! Now you feel better, right? – Elissa Meyrowitz Boyd
