NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 21 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
NATIONAL SURETY CORPORATION, No. 23-35575 an Illinois corporation
Plaintiff-Appellee, D.C. No. 3:21-cv-00266-HZ
v. MEMORANDUM* TIG INSURANCE COMPANY, a California corporation, FKA Transamerica Insurance Company,
Defendant-Appellant.
Appeal from the United States District Court for the District of Oregon Marco A. Hernandez, Chief District Judge, Presiding
Argued and Submitted October 22, 2024 Portland, Oregon
Before: HAMILTON,** VANDYKE, and H.A. THOMAS, Circuit Judges. Concurrence by Judge HAMILTON.
TIG Insurance Company (“TIG”) appeals the district court’s order granting
summary judgment and awarding prejudgment interest to National Surety
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable David F. Hamilton, United States Circuit Judge for the Court of Appeals, 7th Circuit, sitting by designation. Corporation (“National”). This court reviews de novo a district court’s decision
granting summary judgment. Bank of N.Y. Mellon v. Enchantment at Sunset Bay
Condo. Ass’n, 2 F.4th 1229, 1231 (9th Cir. 2021). We have jurisdiction pursuant to
28 U.S.C. § 1291. We affirm in part, reverse in part, and remand.
Both TIG and National issued commercial liability insurance policies that
covered a dry cleaner facility which contaminated soil and groundwater. These two
insurers dispute the allocation of the costs incurred after the Oregon Department of
Environmental Quality made a claim for costs incurred from the cleanup of the
contamination. Oregon has addressed insurer contribution claims such as these
through the Oregon Environmental Cleanup Assistance Act, Or. Rev. Stat.
§§ 465.475–485, which governs “insurance coverage disputes involving insureds
who face potential liability for their ownership of or roles at polluted sites” in
Oregon. § 465.478.
1. TIG argues that National’s claims are time-barred under Or. Rev. Stat.
§ 12.080(2), which provides a six-year limitations period. Under Oregon law, a
cause of action for contribution does not accrue until a party has paid a common
debt, see Mansfield v. McReary, 497 P.2d 654, 657 n.4 (Or. 1972), and each payment
made for an environmental cleanup claim gives rise to its own cause of action for
contribution. The district court correctly held that each payment National made
triggered a six-year limitations period for that payment alone, and thus National may
2 23-35575 seek contribution for payments made on or after March 8, 2014, together with a
declaration of the parties’ future obligations. See Levald, Inc. v. City of Palm Desert,
998 F.2d 680, 688–89 (9th Cir. 1993).
2. The parties also dispute whether Or. Rev. Stat. § 465.480(5) applies to the
apportionment of defense costs, or only the apportionment of indemnity costs. The
district court held that § 465.480(5) does not apply to the apportionment of defense
costs. That was error. Section 465.480(6) refers to an insurer’s obligation to pay
“defense costs that would be allocated to the insured under subsection (5) of this
section.” § 465.480(6) (emphasis added). In other words, subsection (6) makes
explicit that defense costs are to be apportioned pursuant to subsection (5).
Moreover, including defense costs as part of the “covered damages” apportioned
under § 465.480(5) is consistent with the remainder of the statute. See, e.g.,
§ 465.480(7).
We remand for the district court to apply in the first instance the § 465.480(5)
factors to the apportionment of defense costs. The district court previously
apportioned the defense costs according to the insurers’ time on risk, finding that
policy limits are irrelevant in allocating defense costs in this case. Given the
considerable discretion that § 465.480(5) provides the district court in weighing the
factors, we do not direct that any specific weight must be applied to any one factor.
See § 465.480(5)(b). Indeed, as the district court concluded, policy limits may have
3 23-35575 little, if any, relevance to the apportionment of defense costs under § 465.480(5),
given that the insurers in this case had no overlapping policies and the policy limits
do not apply to defense costs.
3. The parties also dispute whether National can obtain contribution for
payments made while their 2011 interim cost-sharing agreement was in place.
National did not waive its statutory right to contribution through this agreement. The
“waiver of a statutory right requires an intentional relinquishment or abandonment
of a known right or privilege, which is demonstrated by a clear, unequivocal, and
decisive act of the party showing such a purpose[.]” Portland Fire Fighters’ Ass’n
v. City of Portland, IAAF Loc. 43, 518 P.3d 611, 616 (Or. Ct. App. 2022) (internal
quotation marks and citations omitted). The 2011 agreement between the parties
was an interim agreement and did not clearly or unequivocally reserve or waive
rights to seek contribution. We affirm the district court’s holding that National could
seek contribution for payments made while the parties’ interim cost-sharing
agreement was in place.
4. The parties finally dispute whether National is entitled to prejudgment
interest under Or. Rev. Stat. § 82.010(1) for payments made pursuant to the parties’
interim cost-sharing agreement. Section 82.010(1)(a) provides for prejudgment
interest on “[a]ll moneys after they become due,” § 82.010(1)(a), but the amount due
and “the time from which interest should run” must be “readily ascertainable” for a
4 23-35575 court to award prejudgment interest. Patton v. Mut. of Enumclaw Ins. Co., 438 P.3d
441, 445 (Or. Ct. App. 2019). To determine whether the amounts are readily
ascertainable, courts look “from an objective, post-judgment perspective.” L.H.
Morris Elec., Inc. v. Hyundai Semiconductor Am., Inc., 125 P.3d 1, 15 (Or. Ct. App.
2005) (quoting Wilson v. Smurfit Newsprint Corp., 107 P.3d 61, 76 (Or. Ct. App.
2005)). The amount owed here was readily ascertainable as of the time of the court’s
judgment, even though the insurers disputed the proportion that each owed. See
Interstate Fire & Cas. Co. v. Underwriters at Lloyd’s, London, 139 F.3d 1234, 1240
(9th Cir. 1998). The district court did not abuse its discretion in awarding
prejudgment interest. On remand, the district court may award prejudgment interest
based on the apportionment of defense costs after applying § 465.480(5), to the
extent those amounts differ from the current judgment.
The district court’s judgment is AFFIRMED IN PART, REVERSED IN
PART, AND REMANDED. Each party shall bear its own costs associated with
this appeal.
5 23-35575 FILED National Surety Corporation v. TIG Insurance Company, No. 23-35575 NOV 21 2024 MOLLY C. DWYER, CLERK HAMILTON, Circuit Judge, concurring in the judgment: U.S. COURT OF APPEALS
I agree with much of what is said in the memorandum disposition and concur
in the judgment. The district court correctly held under Oregon law that plaintiff
National Surety Corporation (NSC) is entitled to seek contribution and prejudgment
interest from defendant TIG Insurance Company (TIG) and that the statute of
limitations does not bar NSC’s claims. The district court erred, however, in one
important way in its reading of the Oregon Environmental Cleanup Assistance Act,
codified at O.R.S. §§ 465.475–465.485. Defense costs, as well as indemnity costs,
must be apportioned under § 465.480(5). On remand, the district court will need to
apply subsection (5) to apportion defense costs between NSC and TIG and will then
need to recalculate pre- and post-judgment interest. On these points, I agree with
my colleagues.
I write separately, however, because the majority’s memorandum disposition
suggests that the district court might not err on remand by declining to consider
policy limits when apportioning defense costs. The memorandum says that policy
limits may have “little, if any, relevance to the apportionment of defense costs.” Ante
at 3–4. With respect, I do not believe that suggestion is an accurate reflection of
Oregon law. It also suggests incorrectly that a court handling a contribution claim
like this one must do two separate calculations, one to apportion indemnity costs and another to apportion defense costs. As explained below, giving policy limits little or
no weight in allocating defense costs would be inconsistent with the Act and
longstanding Oregon case law in both the Oregon courts and this court.
Lamb-Weston, Inc. v. Oregon Auto. Ins. Co., 346 P.2d 643 (Or. 1959) (Lamb-
Weston II), and its progeny establish that policy limits are relevant under Oregon law
when apportioning defense costs as well as indemnity costs. Neither the Act nor
decisions of the Oregon courts signal any intent to reject Lamb-Weston II or to limit
it on the grounds identified by the district court or the majority memorandum.
Federal courts should apply O.R.S. § 465.480(5) in a manner that is consistent with
this body of law and give substantial weight to both policy limits and “time on risk”
when apportioning defense costs.
The Oregon Supreme Court considered how to apportion a common loss
between two insurers in the Lamb-Weston case. The case was a contribution action
between two insurers who were each fully liable for their co-insured’s liabilities from
a car accident. Both policies included “other insurance” clauses that sought to limit
or eliminate the insurer’s liability based on the availability of other insurance
policies to cover part or all of the losses. The Oregon Supreme Court held in its first
opinion that such conflicting “other insurance” clauses in policies covering the same
risk are mutually repugnant and without effect. Lamb-Weston, Inc. v. Oregon Auto.
Ins. Co., 341 P.2d 118–19 (Or. 1959) (Lamb-Weston I). Instead of deciding which
2 23-35575 policy should “yield to the provisions of the other,” the court allocated the loss
between the insurers equally. Id. at 118–19. On rehearing, the Oregon Supreme
Court refined its approach to apportionment, holding in Lamb-Weston II, that a
common loss between two insurers should be prorated in proportion to each insurer’s
applicable policy limit. 346 P.2d at 646.
Oregon courts continue to cite and apply Lamb-Weston. E.g., Oregon Mutual
Ins. Co. v. Those Certain Underwriters at Lloyd’s London Subscribing to Policy
Number OROAKG2-CNE, 437 P.3d 232, 234 (Or. Ct. App. 2019), even though such
common law rules are technically preempted in cases governed by the Act. See
O.R.S. § 465.480(4)(d). In this case, however, the district court concluded that the
Lamb-Weston rule was not relevant to its apportionment of defense costs on three
grounds, writing that Lamb-Weston “does not address defense costs, the two insurers
simultaneously provided coverage to the insured, and the incident happened at a
single identifiable point in time.” Those differences might be relevant in other states,
but not Oregon. They do not offer a persuasive reason to depart from Lamb-Weston
by assigning policy limits little or no weight when allocating defense costs under the
Act.
First, although Lamb-Weston and its progeny involved concurrent coverage of
discrete incidents, the Oregon Supreme Court’s reasons for adopting the Lamb-
Weston rule cannot be limited to those facts, nor have the Oregon courts suggested
3 23-35575 the rule is so limited. The Oregon Supreme Court adopted the Lamb-Weston rule as
an application of the general principle, stemming from the Old Testament and
centuries of admiralty law, that a common loss should be shared in proportion to the
benefit that each party received from the activity leading to the loss. Lamb-Weston
II, 346 P.2d at 646 (identifying, as the “controlling principle: when there is a loss
which should be shared, the respective shares will be determined by considering the
benefits which accrued to the contributors”). This principle is justified by the need
to prevent unjust enrichment. Id. at 644 (explaining that pro rata contribution “can
easily be justified on an unjust enrichment basis”). Lamb-Weston uses policy limits
as a proxy for premiums, which are the benefits that insurers receive under an
insurance contract. Id. at 647 (explaining that “the burden imposed on each insurer
is generally proportional to the benefit which he received, since the size of the
premium is most always directly related to the size of the policy”).
Because the Lamb-Weston rule apportions a common loss to avoid unjust
enrichment, Oregon courts apply it whenever a party has a right to equitable
contribution. Although insurers with concurrent coverage of a discrete event share
a common loss, a common loss can also exist based on other facts. In this case,
under the Act, both TIG and NSC are fully liable for all of the defense and indemnity
costs arising out of their co-insured’s claim, subject to the applicable limits of each
4 23-35575 policy. See O.R.S. § 465.480(3). They have a shared loss triggering the right to
contribution even though they are successive insurers.
Second, and perhaps most important, Oregon itself extends the Lamb-Weston
rule to defense costs. Burnett v. Western Pacific Ins. Co., 469 P.2d 602, 606 (Or.
1970) (“[T]he costs of defense should be governed by the same rule as the rest of the
loss and should be prorated.”). Burnett was a logical extension of Lamb-Weston’s
rule and reasoning. It is rational to apportion defense costs according to the benefit
each insurer received for taking on the duty to defend. “The insurer who stands to
bear the greater proportion of the loss will be benefited the most by a successful
defense.” Id. Other Oregon courts and this court have followed Burnett and used
the Lamb-Weston rule to apportion defense costs. See Forest Industries Ins.
Exchange v. Viking Ins. Co., 728 P.2d 943, 946 (Or. Ct. App. 1986) (applying Lamb-
Weston rule and prorating attorney fees according to “the total amount each insurer
had at risk”); General Acc. Fire & Life Assur. Corp. v. Continental Cas. Co., 287
F.2d 464, 468 (9th Cir. 1961) (“In neither of these Oregon decisions did the court
deal specifically with the question of contribution as to the expenses of defending a
damage suit. Yet the reasoning of the court in its opinion on rehearing strongly points
in the direction of proration as to suit expenses as well as of damages paid.”); Oregon
Auto. Ins. Co. v. United States Fidelity and Guar. Co., 195 F.2d 958, 960 (9th Cir.
5 23-35575 1952) (anticipating Lamb-Weston rule and prorating defense costs “in proportion to
the amount of insurance provided by their respective policies”).
Both the district court and the majority’s memorandum emphasize that policy
limits do not apply to defense costs. That fact does not necessarily undermine the
logic of the Lamb-Weston rule, and in any event, Oregon courts have not limited
Lamb-Weston on that basis.1 Premiums account for an insurer’s exposure to both
defense and indemnity costs and thus are relevant to the apportionment of both kinds
of costs. See Continental Cas. Co., 287 F.2d at 468 (“The premiums which each had
received, which the court assumed to be roughly related to the applicable policy
limits, were intended to compensate not only for the damage risk assumed but also
for the expense of defeating or minimizing damage claims. It follows that if a
comparison of policy limits is an equitable basis for prorating damage liability, it
1 In general, policy limits do not bear directly on a liability insurer’s duty to defend. Under most liability policies, however, “exhaustion of the policy limits . . . extinguishes an insurer’s duty to defend.” Siltronic Corp. v. Employers Ins. Co. of Wausau, No. 3:11-cv-1493, 2015 WL 13675133, at *7 (D. Or. Sept. 2, 2015). In this case, NSC’s and TIG’s policies provide that their duties to defend end once the insured reaches their respective policy limits for indemnity costs. As a result, two insurers with co-extensive duties to defend may still have different degrees of exposure to defense costs. This interaction between policy limits and the duty to defend creates incentives relevant in contribution actions between co-insurers. See Siltronic Corp. v. Employers Ins. Co. of Wausau, 176 F. Supp. 3d 1033, 1040 (D. Or. 2016) (explaining that the scale of defense costs in environmental remediation claims gives insurers incentives to meet policy limits as soon as possible to limit ongoing defense obligations).
6 23-35575 provides like justification for a similar proration of suit expenses.”). Because the
Lamb-Weston rule uses policy limits as a proxy for premiums, see Lamb-Weston II,
346 P.2d at 647, policy limits are relevant to apportionment of both kinds of costs.
Furthermore, in each of the cases in which Oregon courts or the Ninth Circuit applied
the Lamb-Weston rule to defense costs, as in this case, policy limits did not cap either
insurer’s liability for defense costs. Oregon courts have not refused to apply the
Lamb-Weston rule to defense costs on this basis, so federal courts applying Oregon
law should follow their lead.
To see why Oregon’s rule makes sense, imagine a simple hypothetical: two
insurers issue successive one-year commercial general liability policies to a business
that is later found to be liable for environmental contamination occurring during
those two years. Under the policies, both insurers have an unlimited duty to defend,
but one policy caps indemnity costs at $900,000 and the other caps indemnity costs
at $100,000. The insurer with a policy limit of $900,000 will have received a much
bigger benefit—i.e., a bigger premium—for covering the same risk as the insurer
with a policy limit of $100,000. If time on risk were the only significant factor, the
two insurers would split defense costs 50/50 even though one received a much larger
premium, perhaps nine times larger. As a result, the insurer with a smaller policy
limit would receive a smaller premium without benefiting from its lower policy
7 23-35575 limit.2 Meanwhile, the insurer with a higher policy limit would have kept the benefit
of its larger premium while shifting more of the defense burden to the other insurer.
Declining to give policy limits any weight in apportioning defense costs thus risks
unjustly enriching insurers with larger policy limits.
The risk of unjust enrichment is especially high in environmental cleanup
cases like this one. In other insurance disputes, indemnity costs often exceed defense
costs. As a result, the insurer with a higher policy limit receives a larger premium
(benefit) but is also liable for a greater share of the insured’s loss (burden). In an
environmental cleanup case, the opposite may be true. “In these actions, unlike more
typical disputes, defense costs might easily exceed the amounts that were within the
reasonable expectation of an insurer and its insured when the policy was purchased.”
Siltronic Corp. v. Employers Ins. Co. of Wausau, 176 F. Supp. 3d 1033, 1040 (D. Or.
2016), quoting Evraz Or. Steel Mills, Inc. v. Cont’l Ins. Co., No. CV 08–447–JE,
2009 WL 789658, at *14 (D. Or. Mar. 20, 2009). The mismatch between benefit
2 Subsection (5) directs a judge apportioning costs in this scenario to consider both policy limits and time on risk. As a result, the split may be neither 50/50 nor 90/10, but somewhere in between. Of course, real environmental cases are endlessly more complex than this simple hypothetical. Subsection (5) sets out the factors courts must consider but does not set out a particular formula. It gives courts discretion in crafting an allocation that accounts for all the factual complexities and relevant subsection (5) factors in a given case. See Northwest Pipe Co. v. RLI Ins. Co. (Northwest Pipe III), 649 F. App’x 643, 645-46 (9th Cir. 2016) (reviewing weighing of factors under O.R.S. § 465.480(5) for abuse of discretion).
8 23-35575 received and burden incurred can be even higher than usual for an insurer with a low
policy limit.
None of this is to say that the Lamb-Weston rule is the only rational way to
apportion defense costs incurred when cleaning up environmental damage. As the
district court wrote, many courts have concluded that time on risk is the most
equitable method of allocation under these circumstances. National Surety Corp. v.
TIG Insurance Co., No. 3:21-cv-00266, 2022 WL 16694733, at *4 (D. Or. Nov. 2,
2022), citing Century Indem. Co. v. Liberty Mut. Ins. Co., 815 F. Supp. 2d 508, 518-
19 (D.R.I. 2011) (time-on-risk method of allocation limits defense costs “to the slice
of progressive injury that providers choose to insure, which, in turn, advances the
public policy goals of reducing underwriting uncertainty and lowering premiums for
consumers”); see also, e.g., Towns v. Northern Sec. Ins. Co., 2008 VT 98, ¶¶ 35–36,
184 Vt. 322, 964 A.2d 1150 (2008) (time-on-risk method of allocating defense and
indemnity costs preferable because “its inherent simplicity promotes predictability,
reduces incentives to litigate, and ultimately reduces premium rates” (internal
quotation marks and alteration omitted) (quoting Comment, Allocating Progressive
Injury Liability Among Successive Insurance Policies, 64 U. Chi. L. Rev. 257, 276
(1997))); Public Service Co. of Colorado v. Wallis & Cos., 986 P.2d 924, 939–41
(Colo. 1999) (adopting time-on-risk method of allocating defense costs incurred for
environmental cleanup activities between successive insurers); Insurance Co. of
9 23-35575 North America v. Forty-Eight Insulations, Inc., 633 F.2d 1212, 1224–25 (6th Cir.
1980) (applying Illinois and New Jersey law and adopting time-on-risk method to
allocate defense costs incurred in asbestos products liability litigation).3
A pure time-on-risk approach is another reasonable solution to the problem,
but it is not Oregon’s solution. As this court has recognized, in Oregon, “equitable
considerations outweigh the somewhat technical considerations which have led to a
different result in the cited cases involving the law of other states.” Continental Cas.
Co., 287 F.2d at 468 (explaining why court applied Lamb-Weston rule to defense
costs). Oregon courts have decided that insurers who received a bigger premium in
exchange for issuing a higher policy limit should be on the hook for a greater share
of a common loss, including defense costs. Apportioning defense costs based on
time on risk alone does not effectuate that policy.
3 The district court said here it was applying the “majority position” on apportioning defense costs. As an empirical matter, that is far from clear. To support the proposition, the district court cited Century Indem. Co. v. Liberty Mut. Ins. Co., 815 F. Supp. 2d 508, 518 (D.R.I. 2011), which in turn cited a 1999 district court case that focused on New York law and did not conduct a systematic survey. See U.S. Fidelity & Guaranty Co. v. Treadwell Corp., 58 F. Supp. 2d 77, 105 (S.D.N.Y. 1999) (citing six cases applying New York law, one case applying Texas law and one case applying Minnesota law for the position that “the time-on-the-risk method has been applied by the vast majority of courts allocating liability”). For a 50-state survey of decisions focusing on allocation methodology, see Scott M. Seaman & Jason R. Schulze, Appendix A. 50 State Survey of Allocation Decisions, in Allocation of Losses in Complex Insurance Coverage Claims (12th ed. 2024). Determining the majority position is complicated by the existence of different underlying legal regimes between jurisdictions and conflicting decisions in many jurisdictions.
10 23-35575 The Oregon legislature has not signaled any intention to reject that policy in
environmental cleanup cases governed by the Act. To the contrary, the Act codifies
the first part of the Lamb-Weston rule regarding competing “other insurance”
clauses. See O.R.S. § 465.480(3)(a) (nullifying conflicting “other insurances”
clauses in policies covering the same environmental claim). Like subsection (3),
subsection (5) is consistent with Lamb-Weston. Subsection (5) expressly directs
courts to consider policy limits and time on risk, along with two other factors, when
apportioning defense costs. Subsection (5) departs from the Lamb-Weston rule by
adding new considerations to the mix, but it does not eliminate the established
relevance of policy limits in apportionment of defense costs.
There is also a practical dimension to giving meaningful weight to policy
limits under the Act. Everyone agrees that district courts should consider policy
limits when apportioning indemnity costs between insurers. It can be hard enough
to calculate one fair apportionment formula in a complex insurance dispute over
environmental clean-up. Does the court really need to calculate two formulas, one
for indemnity costs and another for defense costs, as the majority memorandum
implies? Nothing in § 465.480 suggests that district courts must or should perform
two different calculations for defense and indemnity costs. When the Oregon
legislature wanted courts to treat defense and indemnity costs differently, it said so
11 23-35575 explicitly. See O.R.S. § 465.480(6) (authorizing insurers to refuse to pay defense
costs, but not indemnity costs, under certain circumstances).
As a federal court applying state law, our job is to use our “best judgment in
predicting how [Oregon’s] highest court would decide the case.” Fast Trak
Investment Co., LLC v. Sax, 962 F.3d 455, 465 (9th Cir. 2020), quoting Fiorito Bros.,
Inc. v. Fruehauf Corp., 747 F.2d 1309, 1314 (9th Cir. 1984). In making this
prediction we “must ascertain from all available data what the state law is and apply
it.” Id., citing Estrella v. Brandt, 682 F.2d 814, 817 (9th Cir. 1982). The best
“available data” on this question is Lamb-Weston II and its progeny, not decisions of
other district courts in the Ninth Circuit or other jurisdictions—both of which the
district court here, and some other district court decisions in Oregon, have given
more weight than Lamb-Weston II. The Oregon Supreme Court and legislature have
stuck with the logic of Lamb-Weston II. Until Oregon changes course, federal courts
applying Oregon law should follow their lead by giving policy limits meaningful
weight when apportioning defense costs.
12 23-35575