By David A. O’Neill, JD, Director of Investigations, PolicyFind
A new law passed by the Oregon Legislature and signed into law by Governor Kitzhaber sets out a new statutory scheme relating to various insurance issues regarding environmental claims. Senate Bill 814, as enacted amends ORS 465.479 and ORS 465.480 to create new provisions regarding several important issues pertaining to the identification of lost general liability insurance policies, the rights of policyholders and insurers under these policies and the tendering of environmental damage claims. SB 814 applies not only to new environmental claims, but to existing and even past claims, as long as no final judgment was entered on the claim before June 10, 2013
Senate Bill 814 gives policyholders the right to sue insurers for bad faith and collect triple the actual damages when insurers fail to quickly investigate or pay claims, wrongfully deny a claim or delay payments to policyholder attorneys or consultants.
Choice of Laws
The new Oregon statute clearly states that if the site of environmental damage is in Oregon state, Oregon insurance law pertains.
Owned Property Exclusion Diminished
The “Owned Property Exclusion” has sometimes been cited by insurers as a reason not to pay the full cost of environmental clean-up. Under Oregon’s new statute however, policy provisions that bar coverage for pollution on the insured’s own property cannot be enforced if there is any possibility of pollution migrating onto neighboring lands, wetlands or waterways. This replaces the ruling of the Oregon Supreme Court in Schnitzer Invest. Corp. v. Certain Underwriters at Lloyds of London, 137 P.3d 1282 (Ore. 2006).
Assignments of Policy Rights
Senate Bill 814 renders “anti-transfer” clauses in general liability policies inapplicable to environmental property damage claims. It allows policyholders to assign their rights under general liability insurance policies to claimants, allowing these claimants to then stand in the policyholder’s shoes in pursuing the claim. This provision goes beyond the law in most states which require the insurer to first have breached the insurance contract by wrongfully failing to provide a defense. Here there is no such prerequisite.
Policy Searches Required
Senate Bill 814 requires policyholders to conduct a diligent records search as a prerequisite to putting alleged insurers on notice of lost general liability insurance policies. At minimum, this search must include a thorough review of the insured’s own insurance records and those of its past and present insurance agents.
All notices of lost policies must be made by the policyholder in writing. Within thirty days of receiving written notice of a lost policy, an insurer must begin an investigation of its own records and if it determines that it issued the lost policy, it must investigate whether the terms and conditions of the lost policy relate to the environmental claim as filed. If the insurer is unable to locate portions of the lost policy or determine its terms, conditions or exclusions, the insurer must provide copies of all potentially applicable policy forms it had in use at the time of the issuance of the lost policy. Should it be unable to do this, it must explain to the policyholder why it cannot.
Policy Limits Determined
If as a result of its diligent search, the policyholder can produce documents that “tend to show” the policy limits applicable to a lost policy, then the burden of proof shifts to the insurer to prove that other limits or exclusions apply. Should the policyholder’s search establish that the insurer was the likely issuer of a lost policy but does not identify the policy’s limits, the new law creates an assumption that the minimum policy limits and exclusions in use by the insurer apply.
PRP Notice Can Be “Suit”
Should the insuring agreement of the policy require a “suit” or a “lawsuit” to trigger the insurer’s duty to defend, Senate Bill 814 makes it clear that litigation is not required. Actions taken under the written direction of the Oregon Department of Environmental Quality (“DEQ”) or the United States Environmental Protection Agency (“USEPA”) will constitute a “suit” or “lawsuit” to satisfy these policy requirements. Furthermore, “insurance coverage for any reasonable or necessary fees, costs or expenses, including remedial investigations, feasibility study costs and expenses” in response to such administrative directives “shall not be denied” as long as the directives are in writing.
Oregon An “All Sums” State
Should the identified general liability policy provide that the insurer has a duty to pay “all sums” arising out of a risk covered by the policy, the insurer “must pay all defense or indemnity costs” up to its limit of liability. The policyholder must place all known insurers on notice but may select which of its policies will be required to satisfy its claim.
Defense and Indemnity Defined
The new Oregon statute also creates a rebuttable presumption that the costs of preliminary assessments, remedial investigations, risk assessments or other necessary investigations are defense costs payable by the insurer as required by its policy’s provisions. Further, it creates a second rebuttable presumption that the costs of remedial actions and feasibility studies are indemnity costs that reduce the insurer’s limit of liability on its indemnity obligations under its policy.
Independent Counsel and Consultants
Once the insurer has undertaken a defense of the policyholder’s environmental claim under a reservation of rights the insurer is required to provide independent counsel to defend the insured “who shall represent only the insured and not the insurer.” The insurer may also retain environmental consultants to assist an independent counsel. Should counsel and consultants experienced in “responding to the type and complexity of the environmental claim at issue” not be available in the insured’s community, those outside the community “must be considered.”