Oregon and Washington Case Law Update: Insurance Coverage Cases with “Okay” and “Awful” Results

Oregon and Washington Case Law Update: Insurance Coverage Cases with “Okay” and “Awful” Results

From the Desk of Smith Freed Eberhard: It’s been a busy spring in the Northwest courts. Oregon continues to strictly construe policy language against insurers, yet still within the framework of established coverage analysis. At the same time, Washington coverage law just got exponentially worse. This update contrasts the current outlook of these courts so that you can better understand where things are heading.

Claims Pointer: In this mixed bag of decisions:
1) The Oregon Court of Appeals rejected the argument that a default judgment is presumptively covered by liability insurance and affirms the insurer’s right to a jury trial on coverage exclusions. The court holds that there is coverage for attorneys’ fees under the policy and that a multi-unit residential building exclusion does not apply to mixed use projects.
2) The Washington Supreme Court up-ends the analytical framework of liability insurance coverage by applying the property insurance concept of “efficient proximate cause” to avoid the application of a pollution exclusion. This is really a big deal for construction defect and environmental litigation and has potential spill over into many other areas.

1) Oregon Court of Appeals: Hunters Ridge Condominium Association v. Sherwood Crossing, LLC, 285 Or.App. 416 (5/11/17).

In this case, the Oregon Court of Appeals essentially rejects the plaintiff’s argument that coverage should be expanded to cover the whole judgment against a subcontractor because some of the award involved property damages. It involved American Family Insurance which insured a siding subcontractor who was sued by both the developer and the general contractor in a construction defect lawsuit involving a mixed use (residential and commercial) condominium project. American Family declined the subcontractor’s defense as the policy contained a multi-unit residential building...

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