Trial Court Rejects Constitutional Challenge to New Provisions of OECAA

Today the trial court judge in the long-running environmental coverage contribution battle between Lloyd's and several other carriers for Zidell Marine rejected a constitutional challenge mounted by Lloyd's to one of the newest provisions of the Oregon Environmental Cleanup Assistance Act (OECAA).  This case has had many zigs and zags but to briefly sum up, Zidell sued its carriers for failing to defend it in a cleanup action brought by the state, both for defense costs and for the cost of the cleanup.  Several of the carriers including Beneficial settled with Zidell.  Lloyd's did not.  Lloyd's later was tagged in the coverage action (which itself has gone on for years with multiple trips up the appellate chain) for millions of dollars; Lloyd's then sued Beneficial and others arguing that those carriers did not contribute to the overall "pie" in proportion to their coverage.  In June of this year new amendments to the OECAA went into effect.  One provision of the amendments provides that a carrier that has settled with a policyholder in "good faith" is protected from a contribution suit by other, non-settling carriers.  Beneficial and the other defendants in the Lloyd's contribution case filed a motion to dismiss arguing that under that new provision, Lloyd's has no cause of action.  Lloyd's in turn argued, among other things, that a) the statute does not apply if there has been a "final judgment" in the underlying coverage case; b) the statute is unconstitutional; c) there are questions of fact about whether the Beneficial et al. settlements were in "good faith."  In today's decision the trial court held that there has been no "final judgment" in the coverage case between Zidell and Lloyd's, meaning that the statute applies, and rejected the constitutional argument.  She held, however, that there are some questions of fact and allowed discovery into whether the settlements were in good faith.  More appeals appear inevitable, so stay tuned.  However, this appears to be the first enforcement by a trial court of the new provisions of the OECAA, and the first rejection of a constitutional challenge to one of the new provisions, and it's certainly notable for that alone.

Insurers Start Duking It Out Over Impact of SB 814 on Oregon Environmental Coverage Law

Ironically enough, the first attempt that I've heard of to take advantage of the new pro-policyholder provisions of the Oregon Environmental Cleanup Assistance Act (OECAA) was by an insurance company.  That effort, in the form of a motion to dismiss recently filed in the Multnomah County Circuit Court Lloyd's of London v. Beneficial Insurance case, is here.  As I've reported in earlier posts, one provision of SB 814 (which went into effect in early June) added "contribution protection" to the OECAA.  To put it very simply, the provision has this effect: if insurance company A settles a coverage claim with the policyholder in good faith, and the policyholder also sues insurance company B over the same loss and wins, insurance company B can't then sue insurance company A for contribution, arguing that insurance company A didn't pay its righteous share of the loss, and insurance company B overpaid, so company A owes company B.  The idea behind the provision was to encourage insurance companies to settle these claims early, by removing the fear that they will then have to pay again if sued for contribution.

The Lloyd's of London v. Beneficial Insurance contribution case arises out of the Zidell "Moody Avenue" contaminated site (not the Portland Harbor Superfund Site).  Zidell settled early on with Beneficial, then went after Lloyd's, and tagged Lloyd's for a considerable amount (that litigation is still going, after having gone up the appellate court ladder several times, like the contribution case).  Lloyd's sued Beneficial for contribution.  Judge You, who has had this case at the trial level for some time, earlier ruled that because of the date of the DEQ enforcement action against Zidell, the OECAA does not apply to the case.  Beneficial is now trying to both undo that ruling, and assert that the Lloyd's claim is barred by the contribution protection provision of SB 814.  This motion is just the opening salvo.

I can't say I'm unhappy about insurance companies having to spend money on very good lawyers on both sides of a dispute that may help clarify how this new provision of the OECAA, and perhaps related retroactivity and constitutionality problems, will work out in practice.  Stay tuned, as always.