Oregon's federal court has struck another blow against the insurance industry's attempts to limit prejudgment interest in duty-to-defend disputes. Somewhat ironically, this ruling comes a case that has turned into a carrier v. carrier fight over contribution.
In the latest ruling in the long-running Northwest Pipe v. RLI coverage litigation, the court held that a non-defending carrier had to pay prejudgment interest to the defending carriers based on when the defense costs were paid, irrespective of when demand was made for reimbursement. The non-defending carrier argued that it did not know, until demand was made on it, what the defense costs were. The court rejected that argument, reasoning that if the carrier had not breached its contract and had agreed to defend, it would have been aware of the defense costs as they were being paid.
This new decision echoes Judge Hernandez' ruling in the Ash Grove litigation, which awarded prejudgment interest from when the policyholder paid the defense costs, without regard for when the insurance companies learned of the defense costs.
