Court Opinion

ID: 178317
Source: CourtListenerOpinion
Date Created: 2010-10-29 00:03:56+00
Date Added: 2024-06-11T09:13:17.067555
License: Public Domain

FILED
                            NOT FOR PUBLICATION                             OCT 28 2010

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

CONTINENTAL CASUALTY                             No. 09-35484
INSURANCE COMPANY, an Illinois
corporation,                                     DC No. 3:07 CV-0913 KI

              Plaintiff - Appellee,
                                                 MEMORANDUM *
  v.

ZURICH AMERICAN INSURANCE
COMPANY, a New York corporation;
TCR PACIFIC NORTHWEST
CONSTRUCTION 2002 LIMITED
PARTNERSHIP, a foreign limited
partnership,

              Defendants,

  and

SAFWAY SERVICES, INC., a Delaware
corporation,

              Defendant - Appellant.

CONTINENTAL CASUALTY                             No. 09-35523
INSURANCE COMPANY, an Illinois
corporation,                                     DC No. 3:07 CV-0913 KI

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
          Plaintiff - Appellant,

 v.

ZURICH AMERICAN INSURANCE
COMPANY, a New York corporation,

          Defendant,

 and

TCR PACIFIC NORTHWEST
CONSTRUCTION 2002 LIMITED
PARTNERSHIP, a foreign limited
partnership; SAFWAY SERVICES, INC.,
a Delaware corporation,

          Defendants - Appellees.

CONTINENTAL CASUALTY                    No. 09-35696
INSURANCE COMPANY, an Illinois
corporation,                            DC No. 3:07 CV-0913 KI

          Plaintiff - Appellant,

 v.

ZURICH AMERICAN INSURANCE
COMPANY, a New York corporation;
TCR PACIFIC NORTHWEST
CONSTRUCTION 2002 LIMITED
PARTNERSHIP, a foreign limited
partnership,

          Defendants,

                                    2
 and

SAFWAY SERVICES, INC., a Delaware
corporation,

           Defendant - Appellee.

CONTINENTAL CASUALTY                   No. 09-35697
INSURANCE COMPANY, an Illinois
corporation,                           DC No. 3:07 CV-0913 KI

          Plaintiff - Appellee,

 v.

ZURICH AMERICAN INSURANCE
COMPANY, a New York corporation,

          Defendant,

 and

TCR PACIFIC NORTHWEST
CONSTRUCTION 2002 LIMITED
PARTNERSHIP, a foreign limited
partnership,

          Defendant - Appellant,

 v.

SAFWAY SERVICES, INC., a Delaware
corporation,

          Defendant - Appellee.

                                   3
                     Appeals from the United States District Court
                               for the District of Oregon
                       Garr M. King, District Judge, Presiding

                        Argued and Submitted October 5, 2010
                                  Portland, Oregon

Before:        TASHIMA, PAEZ, and CLIFTON, Circuit Judges.

      The parties appeal from the district court’s grant of summary judgment in a

coverage dispute between contractors on a Portland apartment construction project.

At issue is responsibility for defense costs incurred in a personal injury action

brought by an employee of subcontractor Safway Services, Inc. (“Safway”), who

suffered serious injuries while working on the project. We have jurisdiction under

29 U.S.C. § 1291. We affirm in part and reverse in part the district court’s grant of

summary judgment in favor of general contractor TCR Pacific Northwest

Construction (“TCR”) and Continental Casualty Insurance Company

(“Continental”), the insurer of subcontractor Performance Contracting, Inc.

(“PCI”). We have jurisdiction over Continental and TCR’s appeals of the district

court’s post-judgment order on attorneys’ fees, Whitaker v. Garcetti, 486 F.3d 572,

585 (9th Cir. 2007), and we affirm.

          1.   This court reviews de novo a district court’s decision to grant

summary judgment. McDonald v. Sun Oil Co., 548 F.3d 774, 778 (9th Cir. 2008),

                                            4
cert. denied sub nom. Sunoco, Inc. v. McDonald, 129 S. Ct. 2825 (2009). Safway

challenges the district court’s determination that the “procure insurance” provision

of Safway’s contract with PCI is valid under Oregon law. Safway first argues that

the provision is invalid under Or. Rev. Stat. § 656.018, Oregon’s workers’

compensation exclusivity statute. The Oregon Court of Appeals has held that

§ 656.018 does not void contractual agreements to procure insurance. Montgomery

Elevator Co. v. Tuality Cmty. Hosp., 790 P.2d 1148, 1149-50 (Or. Ct. App. 1990)

(in banc). In the absence of contrary case law, there is no “convincing evidence”

that the Oregon Supreme Court would reach a different conclusion. Briceno v.

Scribner, 555 F.3d 1069, 1080 (9th Cir. 2009) (“In the absence of a

pronouncement by the highest court of a state, the federal court must follow the

decision of the intermediate appellate courts of the state unless there is convincing

evidence that the highest court of the state would decide differently.”)

Accordingly, we conclude that § 656.018 does not void Safway’s contractual

promise to procure insurance.

      Safway next argues that Oregon’s anti-indemnity law, Or. Rev. Stat. §

30.140, voids the “procure insurance” provision. This statute specifically does not

affect an indemnification provision “that requires a person or that person’s surety

or insurer to indemnify another against liability for damage” to the extent that

                                          5
damage “arises out of the fault of the indemnitor.” Or. Rev. Stat. § 30.140(2).

Here, the plain language of the contractual procure insurance provision limits

coverage to liability arising out of Safway’s own negligence. Furthermore, even if

the provision could be read as improperly requiring Safway to procure insurance

covering the upstream contractors for their own negligence, it can still be enforced

to the extent it requires coverage for liability arising out of Safway’s own

negligence. See Hays v. Centennial Floors, Inc., 893 P.2d 564, 567 (Or. Ct. App.

1995). Accordingly, we conclude that § 30.140 does not void Safway’s promise to

procure insurance.

      Safway contends that even if the provision is valid, Safway did not breach it

by obtaining a policy with a $1 million self-insured retention.1 We disagree.

Safway is correct that the contract does not explicitly prohibit self-insured

retentions. However, the contract requires Safway to procure “primary” insurance,

with minimum limits of $1 million, issued by “an A-rated or better carrier

satisfactory to [PCI].” Under this language, if Safway intended to self-insure in an

      1
              Safway contends that Continental is not entitled to enforce the
contract because it is not a party to the contract. As PCI’s insurer and by the terms
of its contract with PCI, Continental is properly subrogated to PCI’s contract
claims against Safway. Nat’l Fire Ins. Co. v. Mogan, 206 P.2d 963, 969 (Or. 1949)
(holding that insurer was subrogated to the insured’s rights arising out of breach of
contract of bailment).

                                           6
amount equal to the dollar amount of coverage it agreed to obtain, it should have

notified PCI to allow PCI to decide whether Safway’s self-coverage was

“satisfactory.” Instead, Safway obtained a policy with a self-insured retention, so

that Safway’s insurer had no duty to defend until the retention was exhausted

(which, in this case, it never was). As a consequence, Safway’s insurer did not

provide the upstream contractors with the primary coverage they expected. See

Ostrager & Newman, 1 Handbook on Insurance Coverage Disputes § 6.03[a] (15th

ed. 2010) (“Excess or secondary insurance is coverage that attaches only after a

predetermined amount of primary coverage has been exhausted.”). Accordingly,

we conclude that Safway breached its promise to procure insurance.

      Finally, Safway appeals the district court’s damages award, contending that

the district court improperly included attorneys’ fees unrelated to the underlying

personal injury suit. We agree. On this point, we reverse and remand to the

district court to subtract from the damages award the disputed attorneys’ fees

arising out of: (1) Continental and TCR’s coverage dispute with Safway; (2)

TCR’s coverage dispute with Continental; and (3) TCR’s dispute with PCI relating

to PCI’s contractual obligations to TCR. This requires a $35,248.50 deduction

from TCR’s damages award and a $19,160 deduction from Continental’s damages

award.

                                          7
      2.     In its cross-appeal, Continental contends that it is entitled to its

attorneys’ fees incurred in the coverage action from Safway under Or. Rev. Stat. §

742.061. We agree. The Oregon Supreme Court has held that entities other than

traditional insurance companies may be considered “insurers” under Oregon law if

they elect to self-insure. Haynes v. Tri-County Metro. Transp. Dist. of Or., 103

P.3d 101, 104 (Or. 2004); Or. Rev. Stat. § 731.106 (defining “insurer”). Here, to

the extent of the self-insured retention, Safway acted as a self-insurer: it received,

reviewed, and rejected tenders of defense from Continental and TCR. In other

instances, Safway has accepted tenders and paid for the defense of third parties to

the extent of its retained limits. In this way, Safway’s conduct is indistinguishable

from a traditional third-party insurance company. See, e.g., Hillegass v. Landwehr,

499 N.W.2d 652, 655 (Wis. 1993) (finding it “fundamentally unfair” to allow

companies “to self-insure and thereby escape both the expense of premium

payments and the possibility of being held liable as primary insurer”); State Farm

Mut. Auto. Ins. Co. v. Budget Rent-A-Car Sys., Inc., 359 N.W.2d 673, 676 (Minn.

Ct. App. 1984) (“Budget made a risk management decision not to buy coverage for

the first $100,000. To treat Budget as anything other than an insurer for the first

                                           8
$100,000 would create a windfall for Budget.”). We reverse and remand to the

district court to determine the appropriate award under § 742.061.2

      3.     Continental and TCR filed separate appeals of the district court’s post-

judgment attorneys’ fees order. Where, as here, a district court’s award of

attorneys’ fees turns on a question of state law or of contract interpretation, this

court reviews de novo. FDIC v. Lugli, 813 F.2d 1030, 1034 (9th Cir. 1987). TCR

and Continental each contend that Safway is bound by the attorneys’ fees provision

of TCR’s contract with PCI. We disagree. The PCI-Safway contract specifically

limits the incorporation of the TCR-PCI contract to those terms and conditions

“related directly or indirectly to the Work and the performance thereof.”

Continental and TCR’s assertion that the attorneys’ fees provision relates

“indirectly” to the erection and dismantling of scaffolding would render this

limiting language meaningless. See Yogman v. Parrott, 937 P.2d 1019, 1021 (Or.

1997) (en banc). Accordingly, we conclude that Continental and TCR are not

contractually entitled to attorneys’ fees. We affirm the district court’s post-

judgment attorneys’ fees order.

      2
               Our determination that Continental is not entitled to its attorneys’ fees
related to its coverage dispute with Safway as contract damages does not prevent
the district court from considering on remand whether such fees are recoverable
under § 742.061.

                                            9
    Each party shall bear its own costs on appeal.

AFFIRMED in part, REVERSED in part, and REMANDED.

                                      10