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American Star Insurance Co. v. Allstate Insurance Co.

March 26, 1973


Appeal from Circuit Court, Multnomah County. Clifford B. Olsen, Judge.

George Wittemyer, P.C., Portland, argued the cause for appellant. With him on the briefs were William E. Tassock and Barzee, Leedy & Tassock, Portland.

James H. Clarke, Portland, argued the cause for respondent Allstate Insurance Company. With him on the brief were McColloch, Dezendorf, Spears & Lubersky and Richard S. Borst and Richard H. Williams, Portland.

Al J. Laue, Assistant Attorney General, Salem, argued the cause for respondent State of Oregon. With him on the brief were Lee Johnson, Attorney General, and John W. Osburn, Solicitor General, Salem.

Thornton, Judge. Foley, Judge. Schwab, Chief Judge, specially concurring.


This is a declaratory judgment proceeding in which plaintiff, American Star Insurance Company, seeks contribution on two insurance claims from either

Allstate Insurance Company, the State Highway Commission, or both. The trial court denied plaintiff's claim for contribution, and American Star appeals.

This proceeding arises from two accidents, both of which occurred on defendant Commission's right-of-way property. The first accident, involving one Exe, was on March 13, 1967. The second, in which one Zwetzig was injured, happened on February 24, 1968.

During the time period relevant to this case, American Star insured the Commission against liability arising specifically from accidents occurring on right-of-way property. The American Star policy limited its bodily injury liability to $1,000,000 per person.

Commission employes, learning of the Exe and Zwetzig accidents, notified American Star pursuant to this insurance policy. American Star eventually settled both claims, paying $27,500 on the Exe claim on February 14, 1969, and $800 on the Zwetzig claim on December 13, 1969. Another insurer, apparently representing a lessee of right-of-way property, contributed an additional $2,500 to the settlement of the Exe claim.

During this period Allstate Insurance Company also insured the Commission under a general liability policy providing for bodily injury coverage up to $500,000 per person. Allstate received no notice of the Exe and Zwetzig accidents until August 7, 1970, when a claims adjuster, representing American Star, wrote to Allstate informing it of the Exe claim and seeking contribution to the settlement. A second letter, dated October 29, 1970, notified Allstate of the Zwetzig claim.

Thus, Allstate received no notice of the Exe

claim until more than three years after the accident, and about a year and a half after the settlement. Notice on the Zwetzig claim came more than two and a half years after the accident, and about 10 months after the settlement. The Commission never notified Allstate of either accident.

Both the American Star and Allstate policies contained the following clauses:

"When an accident occurs written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place and circumstances of the accident, the names and addresses of the injured and of available witnesses."

"If the insured has other insurance against a loss covered by this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss."

American Star contends that under these facts, and the "other insurance" or prorata provision, it is entitled to contribution from Allstate of one-half of the settlement payments made on the Exe and Zwetzig claims. We do not reach the question of the reasonableness of the settlements, or the application of the socalled Lamb-Weston formula (see, Lamb-Weston et al v. Ore. Auto Ins. Co., 219 Or 110, 341 P2d 110, 346 P2d 643, 76 ALR2d 485 (1959)). The trial judge found, and we agree, that Allstate has no obligation to make any contribution to American Star.

Allstate defended against American Star's demand for contribution on the basis of lack of timely notice of the accidents. Initially, American Star contends that Allstate waived this defense by also pleading another affirmative defense, that of excess coverage, in Allstate's original answer.

This contention has no merit. Allstate has consistently urged the defense of lack of notice in this case. Great American Ins. v. General Ins., 257 Or 62, 475 P2d 415 (1970), is clearly distinguishable.

In the Great American case the defendant insurance company, which was seeking to deny liability, was held to have waived the defense of late notice because it had twice exclusively relied on another defense before ever raising the later notice argument. The Supreme Court said that the insurer had waived late notice since it had always been aware of that defense, and had knowingly chosen to defend on other grounds.

In contrast, here Allstate has always denied liability on the basis of late notice.

In addition to the "other insurance" and notice provisions in Allstate's insurance policy, the contract also provides:

"No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy * * *."

Thus, under the Allstate insurance contract with the Commission, notice given "as soon as practicable" is a condition precedent to Allstate's obligation to indemnify the Commission. Oregon Farm Bureau v. ...

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