Background
This contribution action arises from the Portland Harbor Superfund Site cleanup under Oregon’s Environmental Cleanup Assistance Act (OECAA). Schnitzer Steel Industries and a related entity were named as potentially liable parties. Schnitzer designated Continental Casualty Company as its “targeted insurer” to respond to environmental claims. In 2018, Continental paid defense costs for Schnitzer’s environmental liability, then sought contribution from other insurers, including Employers Insurance Company of Wausau, under ORS 465.480.
The case was previously before the Oregon Supreme Court, which reversed an earlier Court of Appeals decision and held that Wausau’s settlement with Schnitzer did not bar Continental’s right to contribution because Schnitzer had no remaining environmental claim against Wausau—Continental had already paid those defense costs. The case was remanded for the Court of Appeals to address remaining issues about what costs should be allocated among insurers in contribution.
The Court’s Holding
The Court of Appeals reversed the trial court in part and affirmed in part. On the central issue, the court held that statutory attorney fees awarded under ORS 742.061 (for Continental’s failure to settle a claim within six months) cannot be included in “recoverable costs” that must be apportioned among insurers in a contribution action. The court reasoned that “recoverable costs” under ORS 465.480(5) is synonymous with “covered damages” under the insurers’ policies—meaning defense and indemnity costs promised in the policies themselves. Statutory attorney fees are separate statutory obligations, not policy obligations, and thus are not shared liabilities that can be reallocated to other insurers.
By contrast, the court affirmed the trial court’s inclusion of prejudgment interest on unpaid defense bills ($2.8 million) in recoverable costs. Since the duty to defend is a shared obligation among all insurers with coverage, prejudgment interest on unpaid defense fees falls within “recoverable costs” under the statute. The court also addressed the applicability of statutory fee limitations on attorney rates for nonlocal counsel and remanded for reconsideration of the ultimate allocation of costs among the various insurers’ policies.
Key Takeaways
- Statutory attorney fees for an insurer’s failure to settle a claim are not “recoverable costs” in OECAA contribution actions—they remain the sole responsibility of the insurer that delayed settlement.
- Prejudgment interest on unpaid defense bills is a recoverable cost that must be apportioned among all insurers with coverage.
- “Recoverable costs” under ORS 465.480(5) means defense and indemnity costs covered under the insurers’ policies—obligations that all insurers share contractually.
- The statutory risk of standing alone for failure-to-settle penalties creates an incentive for the targeted insurer to promptly settle rather than litigate and later seek contribution.
- Nonlocal counsel may charge reasonable and necessary rates higher than local counsel rates when local counsel lack sufficient expertise for complex environmental claims like Superfund litigation.
Why It Matters
This decision clarifies the scope of cost allocation in OECAA contribution actions, which govern how multiple insurers share liability for environmental cleanup. By excluding statutory penalties from apportionment, Oregon law places responsibility for settlement delays squarely on the insurer that delayed—typically the targeted insurer with the largest policy. This structure creates strong financial incentives for prompt settlement and discourages protracted litigation. The ruling affects how environmental liability insurers calculate their exposure in multi-insurer environmental cleanup cases, particularly complex Superfund matters like Portland Harbor.
The distinction between shared policy obligations (defense costs and interest) and solo statutory obligations (failure-to-settle penalties) also illustrates how courts interpret insurance statutes. The court emphasized that when the legislature intends to reallocate costs among insurers, it does so by reference to shared contractual obligations, not separate statutory penalties arising from one insurer’s conduct.