Insurer Not Entitled to Attorney Fees from Excess Insurer

Insurer Not Entitled to Attorney Fees from Excess Insurer

The Oregon federal district court recently issued an opinion in Chartis Specialty Ins. Co. v. American Contractors Ins. Co., No. 3:13-CV-01669-KI, 2015 WL 364315 (D. Or. Jan. 27, 2015), addressing whether an insurance carrier is entitled to direct recovery of its attorney fees against another insurer when it is forced to litigate the number of “occurrences” for purposes of determining insurance coverage.  In this case, the Oregon federal district court determined that there was no basis under ORS 742.061 for recovery of attorney fees.

The case involved insurance coverage dispute between Chartis Specialty Insurance Company (“Chartis”) and American Contractors Insurance Company Risk Retention Group (“ACIG”), both of which provided insurance policies covering the development of a condominium complex built by the same insured contractor. The Chartis policy provided excess coverage of $2 million per “occurrence” with a $4 million aggregate limit.  The ACIG Commercial General Liability policy was primary, with a limit of $2 million per “occurrence” and an aggregate limit of $4 million.

In 2011, the condominium complex discovered a structural problem, prompting a lawsuit against the insured.  ACIG and Chartis together paid $3.6 million to settle that lawsuit in February 2013.  ACIG paid $2 million and Chartis paid $1.6 million with a reservation of rights to seek reimbursement from ACIG.  Chartis then sought a declaratory judgment that the property damage alleged in the lawsuit was caused by more than one “occurrence.”  If correct, Chartis should have been reimbursed the $1.6 million it paid to help settle the lawsuit.  ACIG filed a cross claim for declaratory judgment on the number of occurrences and a claim to statutory attorney fees under ORS 742.061.

As an initial matter, the Oregon federal district court ruled that, as a matter of law, there was a single “occurrence” under the ACIG policy. This ruling eliminated Chartis’ reimbursement claim against ACIG.  However, ACIG still maintained it was entitled to declaratory relief and attorney fees against Chartis.  The Oregon federal district court ruled that ACIG’s claim for declaratory judgment was moot because the Court had already found in its favor regarding the number of “occurrences” under the policy.  The court then went on to rule that regardless of whether ACIG is entitled to judgment on its claim for declaratory judgment, as an insurer, it is not entitled to recover attorney fees from Chartis as a matter of law.  The court reasoned that ACIG could not recover its fees because it was not standing in the shoes of the insured, had not received an assignment from the insured, and was not a judgment creditor.  As such, ACIG had no direct cause of action for attorney fees against the excess carrier Chartis under ORS 742.061 and summary judgment was appropriate.

The attorneys at Maloney Lauersdorf Reiner frequently represent clients in disputes involving issues regarding the number of occurrences, excess insurance coverage and recovery of attorney fees. Please contact us with any questions you may have regarding this case or any other matter addressed on MLR’s Insurance Coverage Blog.

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