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United Pacific Insurance Co. v. Sunset Cove Inc.

October 27, 1972

UNITED PACIFIC INSURANCE CO., RESPONDENT,
v.
SUNSET COVE, INC., APPELLANT



Appeal from Circuit Court, Clatsop County. Thomas E. Edison, Judge.

Jeanyse R. Snow, Astoria, argued the cause for appellant. With her on the brief were Macdonald, Dean, McCallister & Snow, Astoria.

David B. Templeton, Portland, argued the cause for respondent. With him on the brief were Dusenbery, Martin, Bischoff & Templeton, Portland.

Tongue, Justice. O'Connell, Chief Justice, and Denecke, Holman, Howell and Bryson, Justices.

Tongue

This is an action by an insurance company to recover attorney fees and other costs incurred by it in defending its insured in a prior lawsuit, alleging that under the terms of an indemnity agreement between defendant and plaintiff's insured defendant was liable to plaintiff for such costs. After trial before the court, without a jury, judgment was entered in favor of plaintiff. Defendant appeals. We affirm.

Defendant contends that "the trial court erred in ignoring the actions of [the insured] and the legal effects thereof" and that "[t]he facts show either that defendant fulfilled its duty to [the insured] or [the insured] waived its right to a defense under the indemnity agreement."

Defendant Sunset Cove, Inc., made a contract with plaintiff's insured (hereinafter referred to as "Contractor") to remove sand from the beach at Seaside. That contract included an indemnity agreement that Sunset Cove would hold Contractor harmless from any claims resulting from such work.*fn1

The state of Oregon then filed a suit for injunction and for $500,000 in damages, naming both Sunset Cove and Contractor as defendants. Sunset Cove's attorney, Mr. Lawrence Dean, then undertook to defend both defendants. His partner also mailed a copy of the complaint to plaintiff as the insurer for Contractor for plaintiff's "information and notice as their insurers."

At a preliminary hearing (at which Mr. Dean appeared to represent both defendants), Contractor retained as independent counsel Mr. Gerald Robinson, who took the position that Sunset Cove's attorney could not also properly represent Contractor because of a conflict of interest in that Contractor then had a large and unpaid claim against Sunset Cove and the amount of insurance carried by Sunset Cove was inadequate to provide protection to Contractor against so large a claim by the State. It was then understood that Sunset Cove would pay the attorney fees of Mr. Robinson. Sunset Cove also says that it "repeatedly assured Contractor that [it] would take care of attorney fees and other expenses incurred by Contractor in the State suit."

Plaintiff then undertook to investigate the case

and its attorney, Mr. John Beatty, contacted Mr. Dean in response to his letter. At first plaintiff took the position that the State's claim against Contractor was not covered by its policy and that it would defend the claim only under a reservation of rights. Later plaintiff withdrew that reservation and ...


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