Firemans Fund Insurance Compan v. North Pacific Insurance Company

FILED
NOT FOR PUBLICATION AUG 11 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
FIREMAN’S FUND INSURANCE No. 10-35414
COMPANY, a California company;
NATIONAL SURETY CORPORATION, D.C. No. 3:03-cv-00025-MO
an Illinois company,
Plaintiffs - Appellees, MEMORANDUM *
v.
NORTH PACIFIC INSURANCE
COMPANY, an Oregon company; Does 1-
100 inclusive & Does 101-200 inclusive;
OREGON AUTOMOBILE INSURANCE
COMPANY, an Oregon company,
Defendants - Appellants.
FIREMAN’S FUND INSURANCE No. 10-35814
COMPANY, a California company;
NATIONAL SURETY CORPORATION, D.C. No. 3:03-cv-00025-MO
an Illinois company,
Plaintiffs - Appellants,
v.
NORTH PACIFIC INSURANCE
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
COMPANY, an Oregon company; Does 1-
100 inclusive & Does 101-200 inclusive;
OREGON AUTOMOBILE INSURANCE
COMPANY, an Oregon company,
Defendants - Appellees.
FIREMAN’S FUND INSURANCE No. 10-35908
COMPANY, a California company;
NATIONAL SURETY CORPORATION, D.C. No. 3:03-cv-00025-MO
an Illinois company,
Plaintiffs - Appellees,
v.
OREGON AUTOMOBILE INSURANCE
COMPANY, an Oregon company;
NORTH PACIFIC INSURANCE
COMPANY, an Oregon company; Does 1-
100 inclusive & Does 101-200 inclusive,
Defendants - Appellants.
Appeal from the United States District Court
for the District of Oregon
Michael W. Mosman, District Judge, Presiding
Argued and Submitted July 14, 2011
Portland, Oregon
Before: PREGERSON, WARDLAW, and M. SMITH, Circuit Judges.
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In case number 10-35414, Defendants-Appellants/Cross-Appellees North
Pacific Insurance Company and Oregon Automobile Insurance Company
(collectively, North Pacific), appeal the district court’s judgment, entered after a
bench trial, holding that North Pacific owes Plaintiffs-Appellees/Cross-Appellants
Fireman’s Fund Insurance Company and National Surety Company (collectively,
Fireman’s Fund) approximately $2.1 million in equitable contribution toward
defense costs incurred by Ed Niemi Oil Company and related entities with respect
to environmental cleanup actions brought by the Oregon Department of
Environmental Quality. As the facts and procedural history are familiar to the
parties, we do not recite them here except as necessary to explain our disposition.
We have jurisdiction over the district court’s grant of summary judgment,
which rejected North Pacific’s untimely notice affirmative defense. 28 U.S.C.
§ 1291; see, e.g., Banuelos v. Constr. Laborers’ Trust Funds for S. Cal., 382 F.3d
897, 902–03 (9th Cir. 2004). Because Ortiz v. Jordan, 131 S. Ct. 884, 892 (2011),
expressly declined to consider whether such “purely legal issue[s]” are appealable
after a full trial on the merits, prior circuit precedents such as Banuelos remain
binding on this panel. See Miller v. Gammie, 335 F.3d 889, 900 (9th Cir. 2003)
(en banc). In addition, North Pacific sufficiently raised this issue before the district
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court by challenging the conduct of both Fireman’s Fund and the Ed Niemi Oil
Company.
With respect to the merits, Oregon law imposes an independent duty on
insurers to “inquire[] into the possibility of other insurance” whenever they seek
equitable contribution from other insurers. Am. Star Ins. Co. v. Allstate Ins. Co.,
508 P.2d 244, 247 (Or. Ct. App. 1973). If the defendant insurer “was prejudiced
by the delay in notice” of the underlying claim, Hartford Accident & Indem. Co. v.
Premier Ins. Co., 556 P.2d 960, 961 (Or. 1976), and if the plaintiff insurer failed to
“exercise ‘reasonable diligence’” in giving such notice to the defendant, then the
plaintiff may not obtain equitable contribution from the defendant, Am. Star Ins.
Co., 508 P.2d at 247.
Because the district court considered only whether the insured acted
unreasonably, it erred as a matter of law by failing to determine instead whether
Fireman’s Fund was reasonably diligent in giving notice to North Pacific and
whether the timing of that notice was prejudicial to North Pacific. As “a federal
appellate court does not consider an issue not passed upon below,” we remand this
issue so that the district court may consider it in the first instance. Golden Gate
Hotel Ass’n v. City & Cnty. of S.F., 18 F.3d 1482, 1487 (9th Cir. 1994) (internal
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quotation marks omitted). In doing so, the district court should consider
reasonable diligence and prejudice with respect to all six cleanup sites.
On remand, the district court should also “consider, under equitable
principles” and the specific facts and circumstances of this dispute, N. Ins. Co. of
N.Y. v. Allied Mut. Ins. Co., 955 F.2d 1353, 1361 (9th Cir. 1992), whether
Fireman’s Fund is entitled to contribution toward defense costs incurred prior to
the time that it informed North Pacific about the underlying claims. Contrary to
Fireman’s Fund’s argument, North Pacific did not waive this contention by
challenging “pre-tender costs” rather than “pre-notice costs” in the district court.
Even if North Pacific now uses different terminology than it used in the district
court, this is a purely legal question and Fireman’s Fund has not been “prejudiced
by the failure to raise the issue at the district court,” as the separate legal theories
are governed by substantially identical facts. Ariz. Cattle Growers’ Ass’n v. U.S.
Fish & Wildlife, 273 F.3d 1229, 1241 (9th Cir. 2001).
Because the district court’s resolution of these questions could conceivably
preclude Fireman’s Fund from obtaining any recovery at all, we reluctantly vacate
the district court’s amended judgment entered on April 19, 2010, and remand for
further proceedings consistent with this disposition. Although we are inclined to
agree with Fireman’s Fund on the bulk of the remaining issues presented to us in
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North Pacific’s appeal, we refrain from issuing a non-binding advisory opinion to
that effect.
With respect to case number 10-35814, which involves Fireman’s Fund’s
separate appeal of the district court’s September 2, 2010, denial of attorneys’ fees
under Oregon Revised Statutes § 742.061(1), the district court correctly concluded
that the reasoning in the intermediate state-court decision Certain Underwriters at
Lloyd’s London v. Massachusetts Bonding & Insurance Co., 230 P.3d 103, 114–15
(Or. Ct. App. 2010), supersedes our prior reasoning in Webb v. National Union
Fire Insurance Co., 207 F.3d 579, 583–84 (9th Cir. 2000). As there are no
“convincing” reasons for disagreeing with the intermediate state court, that
decision is a conclusive interpretation of the statute. See Watts v. Watts (In re
Watts), 298 F.3d 1077, 1082–83 (9th Cir. 2002). Thus, regardless of whether or
not Fireman’s Fund is the prevailing party with respect to the merits judgment, the
district court properly denied the motion for attorneys’ fees as a matter of law.
In case number 10-35908, the district court’s award of costs is vacated and
remanded. See Fed. R. Civ. P. 54(d)(1).
The judgment in 10-35414 is VACATED and REMANDED for further
proceedings; the order in 10-35814 is AFFIRMED; and the cross-appeal in 10-
35908 is VACATED and REMANDED. Each party shall bear its own costs.
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