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Kollman v. National Union Fire Ins. Co.

United States District Court, D. Oregon, Medford Division

March 2, 2015

DARYL J. KOLLMAN, Plaintiff,
v.
NATIONAL UNION FIRE INS. CO. OF PITTSBURGH, PA., Defendant. CELL TECH INTERNATIONAL, INC., Plaintiff-in-Intervention,
v.
NATIONAL UNION FIRE INS. CO. OF PITTSBURGH, PA., Defendant-in-Intervention.

ORDER

OWEN M. PANNER, District Judge.

Defendant National Union Fire Insurance Co. (National Union) moves for summary judgment on the bad faith claims brought by plaintiffs Cell Tech International (Cell Tech) and Helen-Frazer, bankruptcy trustee for the estate of Donald Hateley. I grant the motion for summary judgment.

BACKGROUND

In 2002, Daryl Kollman filed an action in Klamath County Circuit Court against Cell Tech, Marta Carpenter, Hateley, and others. Cell Tech tendered Kollman's complaint to National Union, which had issued a Executive and Organization Liability Policy to Cell Tech. Cell Tech sought coverage for itself as well as for the officers and directors named as defendants in Kollman's lawsuit.

National Union responded that the liability policy did not cover Kollman's claims. National Union relied primarily on the policy's exclusion for claims brought by an insured against another insured, the "insured-versus-insured" exclusion. National Union also concluded that the policy did not cover Kollman's claims against Cell Tech itself because those claims were not "Securities Claims" as defined by the policy.

Throughout the litigation of Kollman's claims in the state trial court, National Union denied any duty to defend Cell Tech or the individual defendanis. The state court trial resulted in a jury verdict for Kollman. After resolution of post-trial motions, the final judgment entered in 2004 awarded $40 million to Kollman against Carpenter and Hateley. See Kollman v. Cell Tech Int'l, Inc., 250 Or.App. 163, 279 P.3d 324 (2012) (affirming judgment), review denied, 353 Or. 410, 298 P.3d 1226 (2013 (two petitions).

Kollman then brought this action against National Union. Cell Tech intervened, alleging National Union acted in bad faith by failing to settle with Kollman for the policy limit of $5 million.

Meanwhile, Hateley filed for Chapter 7 bankruptcy, listing the $40 million judgment as the principal liability. Frazer, as trustee, brought an action in this court against National Union for breach of contract. After Kollman settled with Frazer, Bruce Moore, Kollman's attorney, became Frazer's attorney in the action against National Union.

In 2007, this court concluded that National Union had incorrectly denied coverage based on the policy's insured-versus-insured exclusion. This court also concluded that National Union had no duty to defend Cell Tech itself because Kollman's claims against Cell Tech were not "security claims" as defined by the policy. The Ninth Circuit affirmed these rulings. Kollman v. Nat'l Union Fire Ins. Co., 542 F.Appx. 649 (9th Cir. 2013).

STANDARDS

The court must grant summary judgment if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56©. If the moving party shows that there are no genuine issues of material fact, the nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

DISCUSSION

I. National Union Did Not Have a Special ...


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