Court Opinion

ID: 4036470
Source: CourtListenerOpinion
Date Created: 2016-09-23 04:19:00.511467+00
Date Added: 2024-06-11T14:37:08.291819
License: Public Domain

No. 61	             September 22, 2016	341

            IN THE SUPREME COURT OF THE
                  STATE OF OREGON

 FOUNTAINCOURT HOMEOWNERS’ ASSOCIATION
 and FountainCourt Condominium Owners’ Association,
                     Plaintiffs,
                         v.
      FOUNTAINCOURT DEVELOPMENT, LLC;
                       et al.,
                    Defendants.
       FOUNTAINCOURT DEVELOPMENT, LLC;
                       et al.,
               Third-Party Plaintiffs,
                         v.
      ADVANCED SURFACE INNOVATIONS, INC.,
            an Oregon corporation; et al.,
              Third-Party Defendants.
                  VOSS FRAMING, INC.,
  assignee for FountainCourt Homeowners’ Association,
assignee for FountainCourt Condominium Owners’ Association,
      on behalf of FountainCourt Development, LLC,
       on behalf of Matrix Development Corporation,
        and on behalf of Legend Homes Corporation,
                   Fourth-Party Plaintiff,
                             v.
                   Dana CHRISTOPHER
              and Red Hills Construction, Inc.,
                 Fourth-Party Defendants.
 FOUNTAINCOURT HOMEOWNERS’ ASSOCIATION
 and FountainCourt Condominium Owners’ Association,
               Respondents on Review,
                          v.
           AMERICAN FAMILY MUTUAL
              INSURANCE COMPANY,
                Petitioner on Review.
          (CC C075333CV, CA A147420; SC S062691)
342	     FountainCourt Homeowners v. FountainCourt Develop.

    On appeal from the Court of Appeals.*
    Argued and submitted September 10, 2015.
   L. Kathleen Chaney, Lambdin & Chaney LLP, Denver,
Colorado, argued the cause and filed the briefs for petitioner
on review.
   Anthony L. Rafel, Rafel Law Group PLLC, Portland,
argued the cause and filed the brief for respondents on
review. With him on the brief was Katie Jo Johnson, McEwan
Gisvold LLP, Portland.
   Michael E. Farnell, Parsons Farnell & Grien LLP,
Portland, argued the cause and filed the brief for amici
curiae Associated General Contractors - Oregon Columbia
Chapter, Central Oregon Builders Association, Home
Builders Association of Marion and Polk County, Home
Builders Association of Metropolitan Portland, Independent
Electrical Contractors of Oregon Inc, National Association of
Home Builders, Northwest Utility Contractors Association,
Oregon Home Builders Association, Pacific Northwest
Chapter of the Associated Builders and Contractors Inc,
and Professional Remodelers Organization of the HBA of
Metropolitan Portland. With him on the brief was Steven
R. Powers.
   Bronson James, Bronson James LLC, Portland, filed the
brief for amicus curiae Oregon Trial Lawyers Association.
   Thomas M. Christ, Cosgrave Vergeer Kester LLP,
Portland, filed the brief for amicus curiae Oregon Association
of Defense Counsel.
  Before Balmer, Chief Justice, and Kistler, Walters,
Landau, Baldwin, and Nakamoto, Justices.**
    BALDWIN, J.
   The decision of the Court of Appeals is affirmed. The
supplemental judgment for garnishment is affirmed. The
______________
	**  Appeal from Washington County Circuit Court, Marco Hernandez, Judge.
264 Or App 468, 334 P3d 973 (2014).
	   **  Linder, J., retired December 31, 2015, and did not participate in the deci-
sion of this case. Brewer, J., did not participate in the consideration or decision of
this case.
Cite as 360 Or 341 (2016)	343

supplemental judgment awarding attorney fees, costs, and
disbursements is reversed as to the attorney fee award and
is otherwise affirmed.
    Case Summary: American Family Mutual Insurance Company (AFM)
insured one of the defendants, Sideco, Inc., in the underlying dispute concern-
ing construction defects in a housing development. After judgment was entered
against Sideco in the underlying action, the FountainCourt plaintiffs sought a
writ of garnishment against AFM for the amount owed by Sideco. After a hearing,
the trial court entered a judgment against AFM in FountainCourt’s favor, AFM
appealed, and the Court of Appeals affirmed. Held: An insurer litigating cover-
age issues after an insured has been held liable is not estopped by the underlying
judgment. The underlying judgment, however, must be considered in order for the
court deciding the coverage issue to determine what the insured became legally
obligated to pay as damages. The trial court correctly determined as a matter of
law that the underlying judgment was for property damage, as that term is used
in the insurance policies at issue. The trial court also correctly determined that
coverage had been triggered under those policies.
     The decision of the Court of Appeals is affirmed. The supplemental judgment
for garnishment is affirmed. The supplemental judgment awarding attorney fees,
costs, and disbursements is reversed as to the attorney fee award and is other-
wise affirmed.
344	   FountainCourt Homeowners v. FountainCourt Develop.

	       BALDWIN, J.
	        American Family Mutual Insurance Company
(AFM) seeks review of a decision of the Court of Appeals
that upheld a trial court judgment in a garnishment pro-
ceeding requiring AFM to pay a judgment that plaintiffs
FountainCourt Homeowners’ Association and FountainCourt
Condominium Owners’ Association (FountainCourt) had
obtained against AFM’s insured, Sideco, Inc. (Sideco).
FountainCourt Homeowners v. FountainCourt Develop., 264
Or App 468, 334 P3d 973 (2014). FountainCourt responds
that the Court of Appeals correctly upheld that supple-
mental judgment, but argues that that court erroneously
reversed a subsequent supplemental judgment that awarded
attorney fees. We reject without discussion FountainCourt’s
arguments concerning the subsequent supplemental judg-
ment. With respect to AFM’s arguments, we conclude that
the Court of Appeals correctly rejected them, and we affirm
the trial court’s judgment.
	       The underlying dispute concerns a housing devel-
opment that was constructed between 2002 and 2004 in
Beaverton. FountainCourt brought an action against the
developers and contractors seeking damages for defects in
the construction of the buildings in the development. Sideco,
a subcontractor, was brought in as a third-party defendant,
and a jury eventually determined that Sideco’s negligence
caused property damage to FountainCourt’s buildings.
Based on that jury verdict, the trial court entered judgment
against Sideco in the amount of $485,877.84. FountainCourt
then served a writ of garnishment on AFM in the amount
owed by Sideco, and, in response, AFM denied that the loss
was covered by its policies. FountainCourt moved for an order
to show cause in the trial court why judgment should not be
entered against AFM on the writ of garnishment. The trial
court ultimately agreed with FountainCourt and entered
judgment against AFM, after deducting the amounts that
had been paid by other garnishees. AFM appealed the judg-
ment, and the Court of Appeals affirmed.
	       On review, AFM raises numerous issues, some of
which, as we explain below, were not properly raised in the
lower courts, and others of which we reframe for purposes
Cite as 360 Or 341 (2016)	345

of organizing our discussion. We have reframed the issues
before us as follows: (1) Did the trial court properly resolve
the issues raised in the garnishment proceeding in a man-
ner that comported with this court’s case law concerning an
insurer’s duty to defend and right to litigate coverage issues,
and did not implicate AFM’s right to a jury trial; and (2) did
the trial court correctly interpret the insurance policies to
conclude that coverage had been triggered under the poli-
cies and that AFM was liable to FountainCourt in light of
FountainCourt’s verdict against Sideco in the underlying
negligence case? We conclude that the trial court correctly
resolved those legal issues, and we affirm the trial court and
the Court of Appeals.
         I.  FACTS AND PROCEDURAL POSTURE
A.  The Negligence Trial
	        Between 2002 and 2004, FountainCourt, a planned
community, was developed by defendant FountainCourt
Development and built by defendant Legend Homes
Corporation,1 and much of the work on the project was carried
out by subcontractors. The planned community consisted of
34 condominiums and 63 townhouses. The owners of the con-
dominiums and townhouses (represented in this litigation by
the plaintiff homeowners associations) experienced damage
to their properties caused by water intrusion into the build-
ings. In 2007, FountainCourt initiated the underlying action
against the developers and contractor, who, in turn, brought
in subcontractors as third-party defendants. In an amended
pleading, FountainCourt alleged direct claims of negligence
against some of the subcontractors, including Sideco. In par-
ticular, FountainCourt alleged that Sideco had installed sid-
ing and windows, among other things, in such a manner as
to cause water intrusion into the buildings, which resulted in
physical damage to those structures.
	        Sideco tendered defense of the action to its insurers,
including AFM. Sideco had general-liability insurance pol-
icies issued by AFM covering the period of May 1, 2004 to
May 1, 2006, and a general-liability insurance policy issued

	1
      Defendant Matrix Development Corporation is the parent company of both
FountainCourt Development and Legend Homes Corporation.
346	    FountainCourt Homeowners v. FountainCourt Develop.

by Clarendon National Insurance Company covering the
period of April 15, 2003 to May 15, 2004. Clarendon and
AFM accepted the tender of defense with a full reservation
of rights.
	         At trial, FountainCourt presented evidence in sup-
port of its claims. Ultimately, the only theory of the case that
went to the jury with respect to all defendants concerned
property damage, and the jury was instructed as follows:
   	 “If you find that the plaintiffs are entitled to prevail,
   then you must decide whether the plaintiffs have been
   damaged and, if so, the amount of their damages.
   	 “Plaintiffs must allege and prove physical damage to
   their property. * * * The amount of damages may not exceed
   the sum of $3,831,635. The plaintiffs must prove damages
   by a preponderance of the evidence.
   	 “If you find the plaintiffs are entitled to damages, you
   should—or shall determine the amount of physical damage
   to plaintiffs’ real property, if any, that was caused by the
   defendants’ fault or negligence. The measure of damages for
   partial destruction of real property is the reasonable cost of
   repairing the damaged property.”
(Emphasis added.)
	       The jury returned a verdict in FountainCourt’s
favor and allocated percentages of fault to various defen-
dants. While the main fault (66 percent) was found to be
with the developer/primary contractor group, various sub-
contractors also were determined to have been negligent.
The jury’s verdict indicated that plaintiffs’ total damages
were $2,145,156, and that 22.65 percent of the damages
were caused by Sideco’s negligence. The trial court accord-
ingly entered a judgment against Sideco in the amount of
$485,877.84.
B.  The Garnishment Proceeding
	        FountainCourt then mailed a writ of garnishment
to Sideco’s insurers for the amount of its judgment against
Sideco.2 AFM filed an answer asserting that FountainCourt

	2
      In the garnishment context, FountainCourt was, in essence, standing
in the shoes of Sideco, which was insolvent at that point in time. See generally
Cite as 360 Or 341 (2016)	347

had failed to state a claim. It argued that it was not obli-
gated to pay the Sideco judgment either because some or all
of the damages did not arise from “property damage” or an
“occurrence,” or because some or all of the property damage
resulted before or after the policy periods, or because one
or more exclusions applied to some or all of the losses. AFM
also asserted a counterclaim for declaratory judgment con-
cerning its liability under the policies. FountainCourt then
moved for a show-cause order as to why judgment should
not be entered against the insurers on the writ of garnish-
ment, seeking a hearing pursuant to ORS 18.775.3 AFM
and Clarendon objected to resolving the issues by way of a
hearing pursuant to ORS 18.775, arguing that they needed
additional time to prepare, that factual issues concerning
coverage that could not be resolved through such a hearing,
and that they were entitled to a jury trial on those factual
issues. The insurers identified as potential factual issues
pertinent to coverage “the timing and cause of the alleged
property damage, and the nature of the money damages
awarded in the underlying action, among other things.” The
insurers also argued that they had raised “various coverage
defenses, based upon policy endorsements and exclusions,
which also will be fact-sensitive and entitle the parties to a
jury trial.”
	        The trial court held a hearing at which the parties
argued their respective positions concerning how the cover-
age disputes should be resolved. The court indicated that it
would not conduct a jury trial, as the meaning of the insur-
ance policies presented a question of law. AMF’s counsel
suggested that the court should resolve some preliminary
questions of law such as “who has the burden of proof” and
“whether or not it’s even possible at this juncture, based on
the trial court record that was created, to establish when
damage occurred, whether it was under one insurer’s pol-
icy or another.” AMF’s counsel acknowledged that Sideco’s

State Farm Fire & Cas. v. Reuter, 299 Or 155, 167, 700 P2d 236 (1985) (garnishor
stands in the shoes of the judgment debtor).
	3
      Another insurer, Maryland Casualty Company, which insured Sideco
from April 2002 through April 2003 and had also been served with a writ of
garnishment, settled with FountainCourt during the course of the garnishment
proceeding.
348	     FountainCourt Homeowners v. FountainCourt Develop.

liability was determined in the underlying action, but argued
that additional factual issues needed to be determined:
    “One is when did damage occur. We’ve got three insurers.
    They do not have co-extensive policies. One ends. The next
    one begins. And each policy says it only applies to damage
    that occurs during the policy term. It was never an issue in
    the underlying case when damage occurred.”
Counsel also argued that there were potential issues con-
cerning the policy exclusions for certain multi-unit struc-
tures,4 adding that “[w]e’re going to have to assess what
damages were awarded, if possible in the—by the jury for
which buildings to determine the applicability of that exclu-
sion in this particular context.”
	        With the issues thus framed by the parties, the trial
court construed the pertinent provisions of the insurance
contracts. The AFM insurance policies at issue in this case
provided that AFM “will pay those sums that the insured
becomes legally obligated to pay as damages because of * * *
‘property damage’ to which this insurance applies.” The
policies define property damages as “[p]hysical injury to
tangible property, including all resulting loss of use of that
property. All such loss of use shall be deemed to occur at
the time of the physical injury that caused it.” The policies
also provide that an “occurrence” is “an accident, including
continuous or repeated exposure to substantially the same
general harmful conditions.” In addition, the policies con-
tain the following provisions relating to “property damage”:
    	 “b.  This insurance applies to * * * ‘property damage’
    only if:
    	   “* * * * *
    	 “(2)  The * * * ‘property damage’ occurs during the pol-
    icy period; and
	4
       Both the AFM policies and the Clarendon policy had exclusions for certain
types of multi-unit structures, but the provisions of those policies differed signifi-
cantly. The trial court ultimately concluded that Clarendon had met its burden
of proof with respect to the multi-unit exclusion in its policy. That aspect of the
court’s decision is not at issue in this appeal.
	   Several other policy exclusions were raised at the garnishment hearing, but
as we explain below, AFM did not raise any issues concerning the trial court’s
resolution of issues pertaining to exclusions in its assignments of error on appeal,
and thus we do not address any issues relating to policy exclusions.
Cite as 360 Or 341 (2016)	349

   	 “(3)  Prior to the policy period, no insured * * * knew
   that the * * * ‘property damage’ had occurred, in whole or in
   part.
   	   “* * * * *
   	 “c.  ‘[P]roperty damage’ which occurs during the policy
   period and was not, prior to the policy period, known to
   have occurred by any insured * * * includes any continua-
   tion, change or resumption of that * * * ‘property damage’
   after the end of the policy period.”
	        At the garnishment hearing, FountainCourt main-
tained that the insurers had the burden of proof to show
what portion of the jury’s verdict in the underlying case was
for damages that fell within policy exclusions and that the
insurers could not meet that burden. It further argued that,
in situations such as this where there are multiple insur-
ers on this type of loss, the burden in on the insurers to
work it out among themselves as to how much each insurer
pays, and it is not the burden of the insured to show how
that should be allocated. AFM, in contrast, argued that
FountainCourt had the burden to establish that the dam-
ages that were awarded by the jury in the underlying trial
were for the type of property damage covered by the policy
and to show how much property damage occurred during
which policy periods, but that FountainCourt could not meet
its burden of proof on those issues because the jury’s ver-
dict was not segregated in a way that allowed such determi-
nations to be made. In short, both parties argued that the
other had the burden of proof as to dispositive coverage or
exclusion issues, and could not meet that burden as a matter
of law, because it was not possible to get behind the jury’s
verdict to determine the precise basis on which the jury had
arrived at its decision concerning the extent of Sideco’s lia-
bility, when property damage occurred, and the amount of
property damage.
	        The record from the underlying trial was admit-
ted into evidence. FountainCourt also put on expert testi-
mony from the inspector who prepared the damage repair
estimates that were admitted in the underlying trial. He
testified, based on trial exhibits, about the completion
dates and composition of each of the buildings, as well as
350	    FountainCourt Homeowners v. FountainCourt Develop.

the general nature of the damage, some of which occurred
when the products were installed, and some which involved
water damage and that began in the fall or winter after
the work was done and occurred continuously thereafter.
He further testified that there was damage to underly-
ing materials due to defects in Sideco’s work during the
time that the AFM policies were in effect. He opined that
it was not possible to quantify how much of the consequen-
tial water damage occurred during which insurance policy
period. He further testified that water damage of this type
increases exponentially the longer it goes unrepaired. The
witness testified that his firm’s damage estimate allocated
approximately $1.5 million in damages caused by Sideco’s
negligence. When asked if the $485,000 awarded by the
jury against Sideco could all have been awarded to cover
consequential water damages rather than Sideco’s own
work,5 he replied that it could have. AFM presented tes-
timony by a forensic architect who opined that the water
damage to the buildings could not be precisely defined in
terms of when it began or ended, and that this type of dam-
age is cumulative.
	        The court concluded that FountainCourt had “met
its prima facie burden of proving coverage under the poli-
cies,” that the burden was on AFM “to prove what portions,
if any, of the judgments entered against Sideco, Inc., are
excluded by the policies,” and that AFM had not met that
burden. The court noted specifically that AFM was “unable
to show whether or how the jury apportioned damages
among the FountainCourt buildings; accordingly, its multi-
unit exclusion is inapplicable.” The court entered judgment,
and AFM appealed.
C.  The Appeal
	         In the Court of Appeals, AFM raised four assign-
ments of error. It first argued that the court erred in deter-
mining that FountainCourt had met its initial burden
because “FountainCourt failed to prove that any, let alone
all, of the damages awarded against Sideco fell within the
insuring agreement of its policy.” That argument focused
	5
       One of the policy exclusions that AFM raised concerned excusions of the
policyholder’s own work.
Cite as 360 Or 341 (2016)	351

primarily on whether the damage shown by the evidence
in the underlying negligence case constituted “property
damage” within the meaning of the AFM policies. Second,
AFM argued that, because FountainCourt’s own expert at
the garnishment hearing testified that it was not possible
“to segregate the [jury’s] verdict after-the-fact” in the gar-
nishment proceeding, there was no evidence to support a
conclusion that “the awarded damages were within Sideco’s
insuring agreement.” Third, AFM argued that the trial
court had erred in denying it a jury trial on the issue of what
part of the damage to the FountainCourt buildings occurred
during its policy periods. Fourth, it argued that the trial
court erred in awarding FountainCourt attorney fees.
	        The Court of Appeals rejected all but the fourth
assignment of error. FountainCourt Homeowners, 264 Or
App at 471. The court first addressed AFM’s argument that
FountainCourt had failed to meet its burden of proving that
the jury awarded damages for “property damage” as that
term was used in its policies. The court noted that AFM’s
primary argument in that regard was that the jury’s verdict
could have included costs not only for repairing consequential
water damage caused by Sideco’s negligence, but also “the
cost of repairing Sideco’s own faulty work.” Id. at 481. The
court recognized, however, that the policy provision on which
AFM relied was not, in fact, a limitation within the policy’s
definition of “property damage,” but rather was an exclusion
on which AFM had the burden of proof. Id. at 483-85.
	        The court then rejected AFM’s argument that
FountainCourt was required, and failed, to prove that all
of the damages awarded in the underlying negligence case
were for property damage that occurred during its policy
periods. Id. at 487. It also rejected AFM’s argument that
the trial court’s conclusion that FountainCourt had met its
initial burden to show coverage under the Clarendon pol-
icy as well necessarily meant that some of the damage had
occurred during the Clarendon policy period instead of the
AFM policy period, stating that “the award of damages is
not tied to discrete instances of property damages along a
time continuum; instead the liability for property damage
may be the same in every triggered policy period.” Id. On
the jury question, the court rejected AFM’s argument that
352	   FountainCourt Homeowners v. FountainCourt Develop.

a factual issue had been raised because “there was evidence
presented during the garnishment proceeding that would
have permitted a jury to find that consequential water
damage did not occur while American Family was on the
risk.” Id. at 491. The court explained that the issue in the
garnishment proceeding was one of law rather than fact:
“[B]ecause the entry of the judgment triggered American
Family’s obligation to pay a covered debt, the court was
called upon to determine the import of that judgment under
the parties’ contract as a legal matter.” Id. (emphasis in
original). Therefore, the Court of Appeals affirmed the trial
court’s judgment on the merits, although it reversed on the
attorney fee award. Id. at 495. AFM sought review, which
we allowed.
D.  Limitations on Review
	        Under ORAP 9.20(2), “the questions before the
Supreme Court include all questions properly before the
Court of Appeals that the petition or response claims were
erroneously decided by that court.” After we accepted review
in this case, we determined that several of the issues argued
by AFM on review were neither raised in its Court of Appeals
briefs nor adequately developed in the trial court. In partic-
ular, AFM did not raise any issue in the Court of Appeals as
to whether there were genuine issues of material fact con-
cerning the exclusions on which it bore the burden of proof,
or whether the trial court erred in concluding that AFM
failed to satisfy its burden of proof regarding exclusions.
Accordingly, we do not address arguments that AFM makes
on review concerning policy exclusions. AFM also makes a
very brief argument that it was denied both discovery and
due process by the manner in which the garnishment pro-
ceeding was conducted. Because AFM failed to raise, assign
error to the pertinent rulings, and adequately develop those
arguments, we do not address them.
	        In addition, we note that, although the parties and
amici curiae have discussed to some extent the “all sums”
and “pro rata” rules of allocation of damages among mul-
tiple insurers, AFM’s arguments in this case, both in the
trial court and in the Court of Appeals, have never been
about how, if damage occurred over multiple policy periods
Cite as 360 Or 341 (2016)	353

involving different insurers, such damages should be appor-
tioned. Rather, AFM maintained that FountainCourt failed
to meet its burden of proof and that, as a result, AFM was
not liable at all.6 Thus, although we briefly discuss the “all
sums” rule below, see 360 Or at 366 n 11, this case does not
present the opportunity to decide whether the “all sums” or
“pro rata” approach should be used in this context.
	        Accordingly, as previously stated, we reframe the
issues before us on review as follows: (1) Did the trial court
properly resolve the issues raised in the garnishment pro-
ceeding in a manner that comported with this court’s case
law concerning an insurer’s duty to defend and right to lit-
igate coverage issues, and did not implicate AFM’s right to
a jury trial; and (2) did the trial court correctly interpret
the insurance policies to conclude that coverage had been
triggered under the policies and that AFM was liable to
FountainCourt in light of FountainCourt’s verdict against
Sideco in the underlying negligence case?
	         To answer those questions, we first examine some of
the basic principles of insurance law and garnishment law,
and then, we turn to the question whether the trial court
properly concluded that AFM was liable under the policies
at issue.
                               II. ANALYSIS
A.  Preliminary Issues
	        We begin with several preliminary issues regard-
ing how this insurance dispute came to be litigated in a
garnishment proceeding separate from, but in conjunction
with, a negligence action. We first discuss, as an initial mat-
ter, why insurance coverage issues generally are litigated
separately from the liability of the insured, and then turn to
issues related to garnishment proceedings.

	6
       We further note that AFM, in its questions presented on review, referred
to the present case as a “mixed coverage” case, which it described as “involving
some damage that is payable by an insurer and some damage that is not.” That
framing of the issue implicitly assumes that an “all sums” approach is imper-
missible under Oregon law. See 360 Or at 366 n 11. Because, as explained below,
AFM did not raise or litigate the applicability of the “all sums” approach below,
we do not reach it.
354	   FountainCourt Homeowners v. FountainCourt Develop.

    1.  Duty to defend and right to separately litigate cover-
        age issues
	         An insurer has a duty to defend its insured in an
action against the insured if the action involves any claim
stated against the insured that could impose liability for
conduct covered by the policy. Ledford v. Gutoski, 319 Or
397, 399, 877 P2d 80 (1994). That duty remains even if the
complaint also alleges conduct or damages that would not
fall within the policy’s coverage. Id. at 399-40. Thus, an
insurer’s duty to defend its insured in an action is not nec-
essarily co-extensive with its duty to indemnify its insured
when the insured does not prevail in that action. For that
reason, insurers defend under a reservation of rights, in
order to separately litigate coverage issues, as explained
below. That is, situations may arise in which the insured’s
liability in the underlying action, despite being potentially
covered under the policy in light of the pleadings, may not
ultimately be covered by the policy. The insurer’s and the
insured’s interests may align perfectly in the underlying
proceeding in which the insurer has a duty to defend, in
that both share the interest in establishing that the insured
is not liable to the plaintiff. Beyond that point, however,
the interests may diverge, particularly in cases in which
the insured’s liability may be based on conduct that is not
covered, on occurrences outside of the scope of the policy,
or on specifics embodied in policy exclusions, among other
reasons. Of course, the insured would prefer that, if found
liable, the damages be covered by insurance, whereas the
insurer would prefer that if its insured is found liable, the
liability is for something that is not within the policy’s cov-
erage. Thus, the potential for a conflict of interest often is
present in situations in which an insurer is obligated to
defend its insured.
	        When an insured is represented by attorneys pro-
vided by the insurer, the insured relinquishes control over
the defense of the claim, and a fiduciary relationship is
created between the insured and insurer that exists inde-
pendent of the insurance contract. Georgetown Realty v.
The Home Ins. Co., 313 Or 97, 111, 831 P2d 7 (1992). In
this situation, insurers are required “to exercise due dil-
igence in the defense of claims against insureds.” Maine
Cite as 360 Or 341 (2016)	355

Bonding v. Centennial Ins. Co., 298 Or 514, 518, 693 P2d
1296 (1985). As a practical matter, this means that an
insurer that defends its insured in an underlying action in
a way that is detrimental to the insured in order to favor
the insurer may become liable to the insured in tort. See,
e.g., Goddard v. Farmers Ins. Co., 344 Or 232, 179 P3d 645
(2008) (upholding punitive damage award against insurer
based on insurer’s bad faith in litigating underlying action
against insured).
	        The tension created by situations where the insureds’
and insurers’ interests are not perfectly aligned has been
the subject of much litigation over the years, culminating
in the rule of law announced in Ferguson v. Birmingham
Fire Ins., 254 Or 496, 460 P2d 342 (1969). In Ferguson, the
insured was sued for timber trespass and tendered defense
to the insurer. The insurer offered to defend under a res-
ervation of rights, but the insured declined. At trial in the
underlying action, the jury found that the trespass had
occurred, but that it was not intentional. The insured then
brought an action against the insurer seeking to recover the
damages as well as the costs of defending the underlying
action. Id. at 500-01. The insurer maintained that it had no
duty to defend because a policy exclusion applied. This court
explained that the insurer did have a duty to defend under
these circumstances, and discussed the potential difficulties
faced by an insurer in such a situation:
   	 “If the insurer assumes the defense in the face of the
   insured’s refusal to accede to insurer’s request for a res-
   ervation of rights, it is said that the insurer ‘waives’ or is
   ‘estopped’ to assert the defense of noncoverage. And if the
   insurer, in order to avoid the loss of its right to question
   coverage, rejects the tender of the defense, it loses the ben-
   efits that accrue from being represented by its own counsel
   who ordinarily is experienced in the defense of such actions.
   And if it guesses wrong on the question of coverage, it will
   be required to pay the judgment and the costs of defense.
   Thus the insurer is forced to choose between two alterna-
   tives either of which exposes it to a possible detriment or
   loss.
   	 “What is the justification for imposing this dilemma
   upon the insurer? Where there is a conflict of interest
   between the insurer and insured and the judgment in the
356	   FountainCourt Homeowners v. FountainCourt Develop.

   action against the insured can be relied upon as an estoppel
   by judgment in a subsequent action on the issue of cover-
   age, the control of the action by the insurer could adversely
   affect the insured if the judgment was based upon conduct
   of the insured not falling within the coverage of the policy.
   Likewise, the insurer could be adversely affected by a judg-
   ment based upon conduct for which there is coverage. But we
   see no reason for applying the rule of estoppel by judgment
   in such cases. The judgment should operate as an estop-
   pel only where the interests of the insurer and insured
   in defending the original action are identical—not where
   there is a conflict of interests. If the judgment in the orig-
   inal action is not binding upon the insurer or insured in a
   subsequent action on the issue of coverage, there would be
   no conflict of interests between the insurer and the insured
   in the sense that the insurer could gain any advantage in
   the original action which would accrue to it in a subsequent
   action in which coverage is in issue.”
Id. at 509-11 (emphasis added; footnotes omitted). In sum,
an insurer is not precluded (collaterally estopped) by the
judgment in the underlying action from taking a position
in a later coverage proceeding that the damages awarded
in the underlying action are not covered by the insurance
policy. See Paxton-Mitchell Co. v. Royal Indemnity Co., 279
Or 607, 613 n 2, 569 P2d 581 (1977) (so noting).
	        Relying on Ferguson, AFM argues that its interests
and Sideco’s interests were in conflict with respect to cov-
erage, and therefore it was “not bound by the facts of the
underlying lawsuit,” and “not bound by the factual findings
assumed within the judgment.” It argues therefore that “the
nature of Sideco’s liability” was a genuine issue of material
fact that could not be decided based on the verdict in the
underlying case, but was subject to being litigated anew in
the subsequent proceeding. AFM contends that the trial
court, in effect, precluded it from litigating Sideco’s liability
as a factual issue at the garnishment proceeding and thus
collaterally estopped AFM, in a manner inconsistent with
the holding of Ferguson. Although we agree with AFM’s ini-
tial proposition—that there were potential conflicts between
AFM and Sideco and that the rule from Ferguson does have
application here—AFM misapprehends how the rule from
Ferguson applies in this case.
Cite as 360 Or 341 (2016)	357

	         At the center of this dispute is a provision in the
insurance contract stating that AFM “will pay those sums
that the insured becomes legally obligated to pay as damages
because of * * * ‘property damage’ to which this insurance
applies.” (Emphasis added.) What the insured is legally
obligated to pay as damages can be determined only by
reference to the underlying action, which determined the
insured’s legal obligation to pay damages. Thus, in the sub-
sequent proceeding, the insurer is not, as AFM contends,
entitled to second-guess or retry “the nature of Sideco’s lia-
bility.” (Emphasis added.) That is not, however, because it is
“collaterally estopped” from doing so. Rather, that is because
the subsequent proceeding requires the court to evaluate—
as a matter of contract law—what, precisely, the insured
has become legally obligated to pay as damages in the prior
proceeding, in order to determine whether the policy covers
those damages. In other words, an insurer cannot, in a sub-
sequent proceeding, retry its insured’s liability, or alter the
nature of the damages awarded in that proceeding.
	         Ferguson does not suggest otherwise. Ferguson
indicates that an insurer is not obligated to pay a judgment
entered against its insured if it has not had an opportunity
to litigate, on its own behalf and not as a part of its duty
to defend the insured in the underlying proceeding, cover-
age issues such as whether an exclusion applies or whether
the damages awarded are otherwise covered by the policy.7
	7
        As the parties recognize, an attorney attempting to do both at the same
time in the same proceeding faces not only practical but potential ethical dilem-
mas. See, e.g., Oregon Formal Ethics Opinion No. 2005-121 (opining that attorney
hired by insurer to defend insured under reservation of rights could not ethically
move for dismissal of only claim covered by insurance); cf. Eastham v. Oregon
Auto. Ins. Co., 273 Or 600, 607, 540 P2d 364 (1975) (in settlement negotiations in
this context, insurer must give equal consideration to the conflicting interests of
itself and its insured).
	    AFM argues on review that both the trial court and Court of Appeals deci-
sion in the present case impermissibly gave preclusive effect to the verdict in the
underlying case and, in essence, would require an attorney defending an insured
to try coverage issues in the underlying proceeding in a manner that is ethically
problematic. We disagree. The coverage issues were not, and could not have been,
tried in the underlying negligence proceeding. That the damages awarded in the
underlying proceeding needed to be considered in determining coverage in the
later proceeding does not in any way suggest that the coverage issues could or
should have been litigated in the underlying proceeding, or that AFM was pre-
cluded from making any legal argument or presenting any evidence on a genuine
issue of material fact in the garnishment proceeding.
358	   FountainCourt Homeowners v. FountainCourt Develop.

Those matters may be litigated in a subsequent proceed-
ing, but what is subsequently litigated is constrained by the
nature of the contractual obligations between the insurer
and the insured which, as noted above, here involves evalua-
tion of what “the insured [became] legally obligated to pay as
damages” in the underlying proceeding. Contrary to AFM’s
suggestions, what the insured became legally obligated to
pay as damages in the underlying proceeding did not pres-
ent a “genuine issue of material fact” for a jury to decide in
the later proceeding. Rather, what the insured had become
obligated to pay as damages and whether the insurer ulti-
mately was liable under its policy presented questions of law
for the court to determine by reference to (a) the contract and
(b) the judgment and record in the underlying proceeding.
	       That is not to say, however, that the judgment in
the underlying case had any preclusive effect as to factual
issues and legal issues relating to insurance coverage, which
brings us to our next topic of discussion—how such determi-
nations are to be made in subsequent proceedings concern-
ing insurance coverage.
     2.  Garnishment as a method for determining insurance
         obligations
	        There are numerous ways that insurance litigation
after an insured has become liable for damages may come
before the courts. Often either the insurer or the insured
seeks a declaratory judgment. See, e.g., ZRZ Realty v.
Beneficial Fire and Casualty Ins., 349 Or 117, 241 P3d 710
(2010), on recons, 349 Or 657, 249 P3d 111 (2011). Sometimes
such issues are raised by way of equitable claims for contri-
bution. See, e.g., Firemen’s Ins. v. St. Paul Fire Ins., 243 Or
10, 411 P2d 271 (1966). Sometimes, as in this case, the issue
is raised by way of garnishment. See, e.g., A&T Siding, Inc. v.
Capitol Specialty Ins. Corp., 358 Or 32, 359 P3d 1178 (2015).
	        ORS 18.352 provides:
    	 “Whenever a judgment debtor has a policy of insurance
    covering liability, or indemnity for any injury or damage
    to person or property, which injury or damage constituted
    the cause of action in which the judgment was rendered,
    the amount covered by the policy of insurance shall be
Cite as 360 Or 341 (2016)	359

   subject to attachment upon the execution issued upon the
   judgment.”
ORS 18.710(1) provides that “[a] debtor’s challenge to a gar-
nishment shall be adjudicated in a summary manner at a
hearing before the court with authority over the writ of gar-
nishment.” ORS 18.782 allows for the calling of witnesses at
the hearing, and provides that “[t]he proceedings against a
garnishee shall be tried by the court as upon the trial of an
issue of law between a plaintiff and defendant.” (Emphasis
added.)
	         Thus, the garnishment statutes contemplate that
issues such as those presented here will be resolved by a
trial to the court. AFM argues that because a garnishment
proceeding is an action at law rather than in equity, a party
is entitled to a jury trial on fact issues. See Or Const, Art I,
§ 17 (“In all civil cases the right of Trial by Jury shall remain
inviolate.”); Or Const, Art VII (Amended), § 3 (“In actions
at law, where the value in controversy shall exceed $750,
the right of trial by jury shall be preserved[.]”); Horton v.
OHSU, 359 Or 168, 173, 376 P3d 998 (2016) (“Article I, sec-
tion 17, guarantees a jury trial in those cases in which the
right to a jury trial was customary at the time the Oregon
Constitution was adopted and in cases of like nature.”).
	        On review, AFM makes a sweeping argument
that there were triable issues of fact relating to (1) what
damages were caused by an “occurrence” under the poli-
cies and occurred during the policy periods; (2) whether the
damages in the underlying case were “property damage”
under the policies; and (3) whether various exclusions, such
as the multi-unit exclusion and “one or more of the busi-
ness risk exclusions,” barred coverage. The first two issues,
as litigated in this case, involve questions of law concern-
ing the interpretation of the insurance policies in light of
undisputed facts; we discuss them below. As for the third,
concerning the applicability of various exclusions, although
we agree in general that the determination of matters per-
taining to exclusions often will require trying issues of
fact, we need not resolve in the present case whether the
trial court erroneously failed to submit any such issues to
a jury. As noted above, AFM failed to assign error or make
360	   FountainCourt Homeowners v. FountainCourt Develop.

any arguments in the Court of Appeals concerning factual
issues relating to any policy exclusions, see 360 Or at 352,
so no questions concerning policy exclusions were “properly
before the Court of Appeals,” ORAP 9.20, and therefore
they are not properly before this court. Thus, in light of our
discussions below concerning the meaning of various pol-
icy provisions and triggers of coverage, and in light of the
limitation of the issue before us on review, we have no need
to address whether the trial court erred in denying AFM’s
motion for a jury trial.
B.  Coverage Issues
	       As noted, AFM raises issues concerning whether
the trial court properly allocated the burden of proof,
whether FountainCourt proved that the underlying judg-
ment against Sideco was “property damage,” whether
FountainCourt proved an “occurrence” that triggered cov-
erage, and whether the damages were properly allocated to
AFM. We turn first to burdens of proof.
    1.  Burdens of proof
	      With respect to burdens of proof, the law is settled.
As we noted in ZRZ:
   “[T]he insured * * * has the burden to prove coverage while
   the insurer * * * has the burden to prove an exclusion from
   coverage. Compare Stanford v. American Guaranty Life Ins.
   Co., 280 Or 525, 527, 571 P2d 909 (1977) (insurer has the
   burden to prove an exclusion), with Lewis v. Aetna Insurance
   Co., 264 Or 314, 316, 505 P2d 914 (1973) (insured has the
   burden to prove coverage).”
349 Or at 127. There is no ambiguity in how that rule
applies in the present case. Both “property damage” and
“occurrence,” as used in the policy, relate to coverage, and
thus AFM is correct that FountainCourt, standing in the
shoes of the insured, had the burden of demonstrating both
that Sideco had become “legally obligated to pay as dam-
ages because of * * * ‘property damage,’ ” and that there
had been an “occurrence,” defined by the policy. AFM, by
contrast, had the burden as to issues relating to its policy
exclusions.
Cite as 360 Or 341 (2016)	361

    2.  Property damage
	        AFM contends that FountainCourt failed to estab-
lish that Sideco had become obliged to pay damages because
of “property damage.” The gist of AFM’s argument seems to
be that, under Ferguson, 254 Or at 510-11, the parties were
not bound by the facts found by the jury in the underlying
trial, and at most, FountainCourt established a mere possi-
bility that the damages found by the jury were for “property
damage” as defined in the insurance policies. In particu-
lar, AFM argues that the damages found by the jury in the
underlying proceeding are not “property damage” as defined
in the insurance policy, because the damages in the under-
lying proceeding could have included the costs of repairing
“defective work” by Sideco, and “defective work” does not
constitute property damage (citing Wyoming Sawmills v.
Transportation Ins. Co., 282 Or 401, 578 P2d 1253 (1978)).
	        As explained above, Ferguson does not require a
court resolving an insurance coverage issue to disregard
the nature of the damage award in the underlying action.
Indeed, given that the coverage generally is based on the
“sums the insured becomes legally obligated to pay as dam-
ages” because of property damage, the damage award in the
underlying proceeding is a key to resolution of the coverage
issue. 360 Or at 357. The policies at issue here define prop-
erty damage as “[p]hysical injury to tangible property.” In
this case, as noted, the only claim that went to the jury with
respect to Sideco concerned property damage, and the jury
was instructed that FountainCourt was required to “prove
physical damage to their property,” and that the “measure of
damages for partial destruction of real property is the rea-
sonable cost of repairing damaged property.” 360 Or at 346
(emphasis added). The jury was not instructed that it could
award damages for “defective work”—it was instructed it
could award damages for “physical damage.” Contrary to
AFM’s urging, Wyoming Sawmills does not stand for the
proposition that actual physical damage to property is not
covered under an insurance policy merely because it may
be associated with defective workmanship by an insured.
Rather, that case addressed whether “intangible” damage
such as “depreciation in value” fell within the meaning of
362	     FountainCourt Homeowners v. FountainCourt Develop.

“physical damage” as used in an insurance policy. 282 Or at
406. This court held that “in the absence of a showing that
any physical damage was caused to the rest of the building
by the defective studs and that the labor cost was for the rec-
tification of any such damage, plaintiff cannot recover.” Id.
at 406-07. Here, in contrast to Wyoming Sawmills, the jury
awarded damages based on Sideco’s negligence that caused
physical damage to the FountainCourt buildings. See id. at
407 (“We do not hold that if damage was occasioned to any
part of the building [other than the defective studs] such
damage is not covered.”). This case was tried to the jury
on the theory that Sideco’s negligence had caused physical
damage to property. We find no significant legal distinction
between physical damage to property as awarded in the
underlying case and “physical injury to tangible property”
as used in the insurance contracts.8 The trial court did not
err in determining, as a matter of law based on interpre-
tation of the insurance contracts, that the sum that Sideco
became legally obligated to pay as damages in the underly-
ing action were for “property damage.”
     3.  Trigger of coverage
	        That brings us to AFM’s argument that Fountain-
Court was obligated to, but could not, establish that the
damage was caused by an “occurrence” within the periods
covered by the AFM policies. As noted, both parties took the
position at the garnishment hearing that the water damage
at issue here is cumulative, and that it was not possible to
determine how much of it had occurred during what pol-
icy periods. We do not understand AFM to be contending
otherwise on appeal. Rather, it argues that Oregon follows
an injury-in-fact rule for the triggering of coverage, that
FountainCourt failed to prove “based on facts in evidence
at the trial” the amount of damages that occurred between
May 1, 2004 and May 1, 2006, when the AFM policies were
in effect, and that therefore coverage was not triggered. As

	8
      Much of AFM’s argument in regard to “property damage” appears to be
based more on what is in the exclusions found in its policies, rather than the defi-
nitions. However, as noted, the insurer bears the burden of establishing that an
exclusion applies, and AFM neither assigned error nor argued on appeal that the
trial court had erred in concluding that it failed to meet its burden with respect
to exclusions.
Cite as 360 Or 341 (2016)	363

explained below, AFM is incorrect about how trigger-of-
coverage issues are analyzed in cases such as this involving
continuous damage that occurs over the course of multiple
policy periods.
	In St. Paul Fire v. McCormick & Baxter Creosoting,
324 Or 184, 923 P2d 1200 (1996), this court addressed
trigger-of-coverage issues concerning a number of general
comprehensive liability insurance policies, in the context of
deciding an insurance dispute about environmental dam-
age to real property that occurred over the course of several
decades. Several of those policies used the terms “occur” and
“occurrence” in a manner similar to the policy at issue here.
Id. at 194-95, 197-99, 200. The damage in that case had
been discovered in the 1970s, and the question presented
was whether coverage was triggered under any or all of the
pre-1970 insurance policies. The insurers argued that cov-
erage was not triggered until the damage was discovered.
This court rejected that argument:
   	 “The operative phrase in the trigger clauses contained
   in the caused-by-accident policies is ‘during the policy
   period.’ The common meaning of ‘during’ is ‘at some point
   in the course of.’ Webster’s Third New Int’l Dictionary 703
   (unabridged ed 1993). The trigger clause states that, if an
   insurable event—i.e., an accident—happens at some point
   in the course of the policy period, then that event is cov-
   ered. There is no wording in the pertinent policies that
   would support the insurers’ reading, and the insurers that
   issued the caused-by-accident policies point to none.
   	   “* * * * *
   	 “[Various policies from the 1960s] contain definitions
   of ‘occurrence’ that provide that an occurrence has taken
   place if there is ‘direct injury to or destruction of tangible
   property during the policy period.’ (Emphasis added.) Those
   words are unambiguous. If property is injured during the
   policy period, there has been an ‘occurrence,’ and coverage
   under the policy is triggered.”
324 Or at 201 (emphasis in original). The court stated that
“[t]he policies do not make an ‘occurrence’ depend on the
fixing of financial responsibility, or damages.” Id. The court
therefore concluded that those insurers were not entitled to
364	     FountainCourt Homeowners v. FountainCourt Develop.

summary judgment on the ground that their policies had
not been “triggered.” Id. at 202. Implicit in this court’s hold-
ing was that, although the damage at issue there had begun
to occur before the policies were in effect, and continued to
occur after the policies were no longer in effect, coverage
under those policies was nonetheless “triggered” because
the damage was ongoing during the policy periods.
	        That conclusion comports not only with the policy
language at issue in St. Paul Fire,9 but also with the deci-
sions of most other courts that have considered the issue,
as well as treatises discussing this topic. See, e.g., Allan D.
Windt, Insurance Claims and Disputes § 11.4, 11-102 (6th ed
2013) (“The correct answer, and the rule in the vast majority
of the courts to have addressed the issue, is that coverage
is triggered from the date of the first latent injury/damage
and continues to be triggered at least until the date the
injury/damage first becomes manifest.”); id. § 11.4 at 11-107
(“[W]hen there is an ongoing process of property damage or
bodily injury, every policy period in effect during the ongoing
damage/injury process provides coverage.”); cf. Lee R. Russ
and Thomas F. Segalla, 15 Couch on Insurance § 220:26 (3d
ed 2005) (“in continuous trigger cases, insurers face liabil-
ity up to their respective per-occurrence limits for separate
occurrence for each triggered policy year in which they were
on the risk”).
	        AFM does not seriously dispute that there was proof
that some property damage did occur during the time its
policies were in effect. Indeed, both parties provided expert
opinion that supported that conclusion. Rather, AFM’s posi-
tion has been that, because FountainCourt had the burden
of demonstrating an “occurrence” during the policy period,
it necessarily was required to demonstrate the amount of
damage that occurred during the policy period. That posi-
tion is inconsistent with our holding in St. Paul Fire, and
it appears to be at odds with the provision in the policies
indicating that property damage not known to the insured
	9
       The policies at issue here similarly support such an interpretation. See, e.g.,
360 Or at 349 (“ ‘[P]roperty damage’ which occurs during the policy period and
was not, prior to the policy period, known to have occurred by any insured * * *
includes any continuation, change or resumption of that ‘bodily injury’ or ‘prop-
erty damage’ after the end of the policy period.”).
Cite as 360 Or 341 (2016)	365

prior to the policy period “includes any continuation, change
or resumption of that ‘bodily injury’ or ‘property damage’
after the end of the policy period.” 360 Or at 349 (emphasis
added).10 In sum, no genuine issue of material fact needed
to be resolved at the garnishment proceeding concerning
whether at least some property damage occurred when the
AFM policies were in effect. The court correctly rejected,
as a matter of law, AFM’s arguments that FountainCourt
was required to prove the precise amount of damages that
occurred during the policy period in order to demonstrate
that there had been an “occurrence” that triggered coverage
under the policies.
      4.  Allocation of liability among multiple insurers
	        Inherent in many of AFM’s arguments in this court
is an assumption that, because it insured Sideco for only
a portion of the time that the damage was occurring, it
cannot be held liable for the entire amount that Sideco is
legally obliged to pay to FountainCourt. As described above,
AFM’s primary position throughout this litigation has
been that it has no liability at all. However, AFM also sug-
gests at least implicitly in its arguments to this court that
any liability that it has should not be for the full amount
of damages that Sideco owes to FountainCourt. Whatever
the abstract merits of AFM’s assumption might be, the fact
is that AFM did not argue at the garnishment proceeding
about how, if it were found to be liable for damages awarded
to FountainCourt against Sideco, such damages should be
allocated among policy periods and/or multiple potentially
responsible parties. It did not argue in the trial court, or
in the Court of Appeals, that it might be liable for some but
not all of the damages. In this court, as noted above, see

	10
      AFM’s position also is inconsistent with the following observation from
Windt 3 Insurance Claims and Disputes § 11.4 at 11-107-08, that
   “when there is an ongoing process of property damage or bodily injury, every
   policy period in effect during the ongoing injury process provides coverage.
   The burden should be on the insured to prove that there was, in fact, such
   injury/damage during the policy period. The insured should also have the
   burden of quantifying such injury/damage, unless (i) the issue is how to allo-
   cate the injury/damage among policies covering consecutive policy periods, or
   (ii) quantification is impossible.”
(Emphasis added; citations omitted.)
366	     FountainCourt Homeowners v. FountainCourt Develop.

360 Or at 353 n 6, AFM described this case as “involving
some damage that is payable by an insurer and some dam-
age that is not.” That framing of the issue led to the parties
and various amici raising questions and making arguments
about how liability should be allocated in situations where
multiple insurers may be potentially liable.
	        In situations such as this, where it is not possible,
as a matter of proof, to quantify how much continuous dam-
age took place during specific policy periods, courts have
resolved the question by reference to policy provisions, or
when a policy does not contain specific provisions about
allocation among insurers, by adopting a judicially created
method of allocation. “Because in these types of cases it is
virtually impossible to allocate to each policy the liability for
injuries occurring only within its policy period, the courts
are left with the nettlesome problem of how to allocate dam-
ages among the policies.” Russ and Segalla, 15 Couch on
Insurance § 220:25. Most of the courts that have addressed
this problem have taken one of two possible approaches:
One is often referred to as the “all sums” approach, and
the other is often called the “pro rata” approach.11 AFM has
	11
         The “all sums” approach is exemplified by Keene Corp. v. Insurance Co. of
North America, 667 F2d 1034, 1047 (DC Cir 1981), which involved asbestos expo-
sure over a long period of time:
     	 “The policies at issue in this case provide that the insurance company
     will pay on behalf of [its insured] ‘all sums’ that [the insured] becomes legally
     obligated to pay as damages because of bodily injury during the policy period.
     * * * [When the insured was] held liable for an asbestos-related disease, only
     part of the disease will have developed during any single policy period. The
     rest of the development may have occurred during another policy period or
     during a period in which [the insured] had no insurance. The issue that
     arises is whether an insurer is liable in full, or in part, for [the insured’s]
     liability once coverage is triggered. We conclude that the insurer is liable in
     full, subject to [policy provisions relating to other insurance].”
The court in that case further noted: “There is nothing in the policies that pro-
vides for a reduction of the insured’s liability if an injury occurs only in part
during a policy period.” Id. at 1048. The court observed that the policies “do
not distinguish between injury that is caused by occurrences that continue to
transpire over a long period of time and more common types of injury. Nor do
the policies provide that ‘injury’ must occur entirely during the policy period for
full indemnity to be provided.” Id. at 1049 (footnote omitted). See also Russ and
Segalla, 15 Couch on Insurance § 220.27 (citing cases following the “all sums”
approach).
	 The “pro rata” approach, by contrast, takes into account the span of time
over which the damage occurred, then allocates to each insurer a portion of the
liability based on how much of that time that insurer’s policy was in effect. This
Cite as 360 Or 341 (2016)	367

never taken the position in this litigation that Oregon courts
should eschew the “all sums” approach in favor of a “pro rata”
approach, or vice versa. Rather, it has taken the position
that neither approach is consistent with Oregon law because
in this circumstance, an insured is unable to demonstrate
that there is coverage at all. That is, AFM’s position has
been that, in cases in which damage occurs over a number
of years, and spans different insurance policies, and no way
exists to pinpoint what amount of damage occurred at what
point in time, the insured cannot establish that coverage
has been triggered. As we explained above, 360 Or at 364-
65, we disagree with the premise of that argument, i.e., that
coverage was not triggered if it is impossible for an insured
to demonstrate how much damage occurred during a policy
period.
	         It appears that the trial court implicitly did apply
some variation of the “all sums” approach in this case. That
is, the trial court concluded that FountainCourt had estab-
lished that the AFM policies had been triggered—property
damage had occurred during the AFM policy periods. It also
concluded that the Clarendon policy had been triggered, but
that Clarendon had met its burden to establish that it none-
theless was not liable because the damages fell within a pol-
icy exclusion. By entering judgment against AFM for the
entire unpaid amount of the underlying judgment against
Sideco, the court implicitly concluded that AFM was respon-
sible for the entire amount and not a prorated amount,
although some of the damage necessarily had occurred
when the Clarendon policy was in effect, given the court’s
conclusion that that policy was triggered. The trial court’s
conclusion appears to be consistent with Cascade Corp. v.

approach was explained in Boston Gas Co. v. Century Indem. Co., 454 Mass 337,
361, 910 NE2d 290 (2009), as consistent with the “occurrence” definitions in the
policies at issue in that case, and superior, to the “all sums” approach as a matter
of policy, because the “all sums” approach does not solve the problem of allocation
among insurers, but merely postpones it, leaving it to be decided in a subsequent
action for contribution. The “pro rata” approach is premised on the notion that an
insurer should be responsible for the amount of damage that took place during
its policy period. See generally Windt, 2 Insurance Claims and Disputes § 6.47
(“If * * * the covered damages cannot, as a practical matter, be allocated to one
particular policy period as opposed to another, the damages should ultimately be
allocated among the solvent insurers based upon the period of time each insurer
covered the ongoing damage.”).
368	     FountainCourt Homeowners v. FountainCourt Develop.

American Home Assurance Co., 206 Or App 1, 8-10, 135 P3d
450 (2006), rev dismissed, 342 Or 645 (2007). In that case,
the Court of Appeals, in a somewhat analogous context con-
cerning liability of multiple excess insurers, indicated that,
while a pro rata approach was suitable in determining allo-
cation among insurers in contribution actions, it did not pro-
vide a basis for reducing the insurer’s liability to its insured.
	        AFM did not raise any issue in the Court of Appeals
in the present case that the trial court erred in taking that
approach. Nor did the Court of Appeals decide any such
issue, but in fact, specifically determined that it “need not
reach that question.” FountainCourt, 264 Or App at 488
n 12. Thus, while the “all sums” rule was implicated here
in that the trial court’s judgment appears to have embodied
that approach, the propriety of the trial court doing so was
not preserved for our review, and we decline to address it.12
                             III. CONCLUSION
	        To summarize, no genuine issue of material fact was
presented by the parties at the garnishment hearing about
whether some property damage to FountainCourt’s build-
ings occurred during the AFM’s policy periods due to Sideco’s
negligence. The “genuine issues of material fact” that AFM
urged in the trial court concerned (1) what damage occurred
during the policy periods, and (2) whether “property dam-
age” under the policies differed in some legally significant
way from the property damage for which Sideco had been
held liable in the underlying proceeding. As to the first ques-
tion, AFM’s casting of the timing-of-damage issue as a gen-
uine issue of material fact on which FountainCourt bore the
burden of proof was based on AFM’s mischaracterization of
the policy as barring coverage of any damages that fell out-
side of the policy periods, and on its erroneous assumption
that an insured in this situation is required to demonstrate

	12
        We emphasize that the application of an “all sums” or “pro rata” approach
to determining liability is not simply an abstract question of insurance law, but
often is a matter that must be determined based on the language of the insurance
policies at issue, when such issues are properly raised by the parties. Neither
party in the present case has made any argument about how specific policy pro-
visions, such as the provision quoted above concerning “continuation” of property
damage “after the end of the policy period,” might affect such an analysis. 360 Or
at 349.
Cite as 360 Or 341 (2016)	369

the precise amount of damage that occurred at a given time
in order to establish that there has been an “occurrence”
that triggered coverage. As explained above, the legal prem-
ises of both of those arguments are flawed. As to the second
question, the trial court properly addressed it as a question
of law, requiring it to interpret the policies’ provisions in
light of the judgment and record from the underlying pro-
ceeding. Given the manner in which AFM chose to litigate
this case at the garnishment proceeding and in the Court of
Appeals, and given the limited scope of the issues before us
on review, we conclude that the trial court and the Court of
Appeals correctly rejected AFM’s arguments as a matter of
law.
	        The decision of the Court of Appeals is affirmed.
The supplemental judgment for garnishment is affirmed.
The supplemental judgment awarding attorney fees, costs,
and disbursements is reversed as to the attorney fee award
and is otherwise affirmed.