Northwest Pipe Co. v. RLI Insurance

FILED
NOT FOR PUBLICATION
MAY 13 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
NORTHWEST PIPE COMPANY, an No. 14-35542
Oregon corporation, FKA Northwest Pipe
& Casing Company, D.C. No. 3:09-cv-01126-BR
Plaintiff - Appellee,
MEMORANDUM*
v.
RLI INSURANCE COMPANY, an Illinois
corporation,
Defendant-third-party-
plaintiff - Appellant,
v.
ACE FIRE UNDERWRITERS
INSURANCE COMPANY, a
Pennsylvania company; et al.,
Third-party-defendant -
Appellees.
Appeal from the United States District Court
for the District of Oregon
Anna J. Brown, District Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Argued and Submitted May 2, 2016
Portland, Oregon
Before: GOODWIN, TALLMAN, and HURWITZ, Circuit Judges.
RLI Insurance Company (“RLI”) appeals the district court’s Rule 54(b) Final
Judgment in an insurance coverage action brought by Northwest Pipe Company (“NW
Pipe”) against RLI, ACE Property and Casualty Insurance Company and ACE Fire
Underwriters Insurance Company (collectively “ACE”), and Employers Insurance of
Wausau (“Wausau”) relating to environmental contamination at the Portland Harbor
Superfund Site (“Site”). The district court held that RLI had a duty to defend NW
Pipe, allocated defense costs between RLI, ACE, and Wausau, and awarded
prejudgment interest against RLI in favor of ACE and Wausau. We have jurisdiction
over the appeal under 28 U.S.C. § 1291, and we affirm.
1. The district court properly determined that RLI has a duty to defend NW
Pipe. RLI’s duty to defend was triggered by an “occurrence” that other insurers
did not cover. The letters from the U.S. Environmental Protection Agency and the
Oregon Department of Environmental Quality contemplate the possibility that the
contamination at the Site was the result of an occurrence in 1985-86, when RLI’s
policy was in place and no other insurers were on the risk. Accordingly, RLI has a
duty to defend under Oregon law. Schnitzer Inv. Corp. v. Certain Underwriters at
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Lloyd’s of London, 104 P.3d 1162, 1167-68 (Or. Ct. App. 2005) (stating that the
duty to defend arises when there is “any basis for which the insurer provides
coverage,” even if the suit also alleges conduct beyond the policy’s coverage)
(quoting Ledford v. Gutoski, 877 P.2d 80, 83 (Or. 1994)).
Neither RLI’s status as an umbrella insurer, the “Other Insurance” clause,
nor “Condition S” negates RLI’s duty to defend. RLI’s policy provided “gap
coverage” for property damage arising from an occurrence not covered by other
insurers. See Legacy Vulcan Corp. v. Superior Court, 110 Cal. Rptr. 3d 795, 806-07
(Cal. Ct. App. 2010) (finding that “umbrella coverage constituted primary
coverage” when “the underlying insurance provided no coverage,” triggering the
duty to defend). The RLI policy’s “Other Insurance” clause does not alter our
conclusion, because no other insurance was available.
“Condition S” does not affect RLI’s duty to defend. NW Pipe complied
with the Condition by maintaining the Wausau policy, with its absolute pollution
exclusion, from July 8, 1985, the effective date of the Wausau and RLI policies.
Further, the fact that Wausau and ACE are also defending NW Pipe does not
obviate RLI’s duty to defend. RLI’s duty does not depend on whether other
insurers are defending claims. Rather, RLI’s duty to defend is triggered when the
occurrence is not covered by another policy. Because the loss may have occurred
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while RLI was the only insurer on the risk for a pollution incident, RLI must
defend, along with Wausau and ACE. See Timberline Equip. Co. v. St. Paul Fire
& Marine Ins. Co., 576 P.2d 1244, 1247 (Or. 1978).
2. The district court did not abuse its discretion in allocating defense costs
under Oregon Revised Statute § 465.480(4) (current version at § 465.480(5)
(2013)). Section 465.480 requires courts to consider the insurer’s time on the risk
and the applicable policy limits, and the district court appropriately weighted those
factors. After the district court allocated defense costs in this case, the Oregon
legislature amended § 465.480 to require courts to consider the policy terms related
to equitable allocation between insurers, and made that amendment retroactive.
See OR. REV. STAT. § 465.480(5)(d); 2013 Oregon Laws Ch. 350 (S.B. 814). We
do not believe, however, that this additional factor would have changed the district
court’s determination. We find no abuse of discretion in the district court’s
allocation of defense shares and decline to remand for further consideration.
3. Nor did the district court abuse its discretion in awarding prejudgment
interest from the dates Wausau and RLI paid NW Pipe’s defense costs. See OR.
REV. STAT. § 82.010(1). The amount owed was ascertainable as of those dates,
even if the three insurers disputed the proportion of the total each owed. Interstate
Fire & Cas. Co. v. Underwriters at Lloyd’s, London, 139 F.3d 1234, 1240 (9th Cir.
4
1998).
Costs are awarded to Appellees Wausau and ACE.
AFFIRMED.
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