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West Hills Development Company v. Chartis Claims, Inc.

Court of Appeals of Oregon

March 1, 2017

WEST HILLS DEVELOPMENT COMPANY, an Oregon corporation, Plaintiff-Respondent,
v.
CHARTIS CLAIMS, INC., et al., Defendants, and OREGON AUTOMOBILE INSURANCE COMPANY, an Oregon company, Defendant-Appellant. OREGON AUTOMOBILE INSURANCE COMPANY, Third-Party Plaintiff,
v.
QUANTA SPECIALTY LINES INSURANCE COMPANY, Third-Party Defendant.

          Argued and Submitted March 31, 2015

         Washington County Circuit Court C107384CV D. Charles Bailey, Jr, Judge.

         Affirmed.

          Thomas M. Christ argued the cause for appellant. With him on the briefs was Cosgrave Vergeer Kester LLP.

          Michael E. Farnell argued the cause for respondent. With him on the brief were Emily S. Miller and Parsons Farnell & Grein, LLP.

          Before Armstrong, Presiding Judge, and Egan, Judge, and DeVore, Judge [*]

         Case Summary: Oregon Automobile Insurance Company (Oregon Auto) appeals a supplemental judgment awarding West Hills Development Company (West Hills) recovery of attorney fees. The supplemental judgment followed a settlement of a construction defect case and an ensuing decision that Oregon Auto had breached its duty to defend West Hills. See West Hills Development Co. v. Chartis Claims, 360 Or 650, 385 P.3d 1053 (2016). West Hills sought attorney fees after prevailing in that coverage decision. Oregon Auto argues that the coverage case was not properly characterized as an insured's claim on the policy, ORS 742.061(1), and that the action should instead be characterized solely as a suit for equitable contribution as among insurers-a suit that would not allow for recovery of attorney fees. Alternatively, Oregon Auto argues that the fee award failed to apportion attorney fees in consideration of the non fee claim of equitable contribution and the interests of two insurers who defended West Hills. Held: West Hills' frst claim was pleaded as an insured on the policy, and the litigated issues revolved around that claim. Thus, the trial court did not err in allowing West Hills to recover its attorney fees under ORS 742.061. The interests of the insurers who had defended West Hills included a claim for equitable subrogation asserting the rights of the insured, and that claim did allow recovery of attorney fees. The trial court reduced the award of attorney fees in consideration of the non fee claim for equitable contribution. Accordingly, the trial court did not did not abuse its discretion in apportioning and awarding attorney fees.

         Affirmed.

          DEVORE, J.

         Oregon Automobile Insurance Company (Oregon Auto) appeals a supplemental judgment awarding West Hills Development Company (West Hills) recovery of attorney fees in the sum of $74, 867.75. This dispute over attorney fees arose after settlement of a construction defect case and a prior decision in this case that Oregon Auto had breached its duty to defend West Hills in the underlying case. See West Hills Development Co. v. Chartis Claims. 360 Or 650, 667, 385 P.3d 1053 (2016) (prior proceedings in this case involving insurance coverage). Oregon Auto contends that it should not owe attorney fees for an insured's claim on the policy-a claim that allows attorney fees under ORS 742.061(1). Rather, argues Oregon Auto, this action should be recharacterized as a suit for equitable contribution as among coinsurers, such that ORS 742.061 would not apply, either in whole or in part. For the reasons that follow, we reject those arguments and affirm.

         The essential facts are undisputed. West Hills is a general contractor who employed L&T Enterprises, Inc., in a portion of the construction of a townhouse project. L&T was the named insured under an Oregon Auto general liability policy. An endorsement made West Hills an additional insured under the same policy. The townhouse owners brought a construction defect action against West Hills. West Hills tendered the defense of the action to eight putative insurers including Oregon Auto. Oregon Auto refused to defend West Hills.

         Two insurers assumed defense of West Hills. They were Quanta Specialty Lines Insurance Company (Quanta) and the Asset Protection Program Risk Retention Group, Inc. (RRG). Under a provision in the Quanta policy, West Hills was uninsured for the initial attorney fees or defense costs. That provision, dubbed a "self-insured retention" (SIR), concerned the initial $25, 000 in defense costs. In point of fact, West Hills paid $25, 418 out of pocket. By the time the homeowners' action finally settled, West Hills, Quanta, and RRG together spent $231, 075.32 in defense of West Hills.[1]

         West Hills initiated this action to recover its defense costs from Oregon Auto and other insurers who had refused to defend. The other insurers settled, except one, and all others, including the nonsettling one, were dismissed out of the case. Oregon Auto remained the lone defendant.

         In the final iteration of its complaint, West Hills brought three claims against Oregon Auto. The first claim alleged a breach of the contract based on the policy's promise to defend West Hills. That claim sought $28, 884.42. That sum represented a one-eighth share of the total defense cost-a sum calculated when the total defense cost was divided among eight insurers. In its second claim, West Hills sought "equitable contribution, " alleging that Quanta and RRG had "paid in excess of their equitable shares." The third claim sought "equitable subrogation, " alleging that Quanta and RRG had a right of subrogation to assert West Hills' rights against Oregon Auto so as to recover defense costs that "should be fairly attributed" to Oregon Auto. The second and third claims sought somewhat lesser damages of $25, 719.17.[2]

         West Hills was the only plaintiff, although the second and third claims made allegations relating to Quanta and RRG. To facilitate the latter claims, RRG assigned all rights or claims of any kind to West Hills. To avoid concern about the real party in interest, Quanta filed a ratification, consistent with ORCP 26, in which it authorized West Hills ...


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