Yesterday, the Oregon Court of Appeals dealt a hefty blow to insurance companies seeking to exclude coverage for property damage to multi-family dwellings and for awards of attorney fees. In Hunters Ridge Condominium Ass’n v. Sherwood Crossing, LLC, the Oregon Court of Appeals held that an insurance company’s “Multi-Unit New Residential Construction” exclusion was unclear as to whether it excluded coverage for property damage to both residential-only and mixed-use condominiums. Given there were two plausible ways to read the exclusion, the Oregon Court of Appeals held the exclusion must be construed against the insurance company. The result was a finding in favor of coverage for the association’s judgment. The case will now be remanded back to the trial court for a determination as to how much of the judgment is covered.
The Court of Appeals also held that an attorney fee award may also be covered either as “damages” under the policy’s coverage grant or as “costs taxed against the insured” under the policy’s Supplementary Payments provision.
This holding is especially significant because both the policy’s coverage grant and its Supplementary Payments provision are standard in most commercial general liability policies in Oregon. Furthermore, the Supplementary Payments provision typically spells out the insurer’s defense obligations, meaning an award of attorney fees may now be covered so long as the insurer has a duty to defend, which is an easier duty to trigger than the duty to indemnify.
The final piece of the case had to do with the constitutionality of an Oregon law requiring that garnishment proceedings against an insurance company be tried to the court. The Court of Appeals found that the statute at issue was unconstitutional in that either party should be entitled to a trial by jury where the case presents issues of fact to be decided.
The takeaway from Hunters Ridge is that insurers in Oregon are likely going to take a hard look at their commercial general liability policies to see how they can try and craft their policies in such a way to prevent rulings like the one issued in Hunters Ridge. Policyholders and judgment creditors should be on the lookout for these revised insurance policies and, in the case of policyholders, try to negotiate out of any exclusionary language so as to best protect themselves for future coverage situations.