Former Insurance Defense Counsel's Firm Permitted to Represent Insured Against Carrier

The Portland Harbor Superfund Site continues to generate new coverage-related law on issues beyond environmental contamination.  In a recent ruling from Oregon's federal court, Judge Acosta permitted Stoel Rives to substitute in as coverage counsel for steel company Evraz, Inc. in litigation between Evraz and many of its former carriers over coverage at the Superfund site.  The carriers, led by first named defendant Continental Insurance, contended that Stoel Rives had a conflict because at one point Continental was paying the firm to do the substantive environmental defense work for Evraz.  Continental claimed that under Oregon State Bar ethics opinions, that created a default "tripartite" relationship in which both Evraz and the insurance companies had been Stoel Rives' clients, meaning that there was a "prior client conflict" disqualifying Stoel Rives from prosecuting the coverage claim against Continental.  Judge Acosta held that no default status could be created by the ethics opinions because they have been held to be only "advisory."  The court went on to analyze the conflict issue under Oregon case law, and found that because Stoel Rives' environmental lawyers had not been retained initially by Continental, were not paid directly (but only indirectly) by Continental, and had gone to pains to advise Continental that they did not represent Continental during the prior work, there was no prior client conflict.