Oregon Supreme Court Affirms Insurers' Contribution Rights in Environmental Cleanup Case

On April 10, 2025, the Oregon Supreme Court delivered a landmark decision affirming the right of Continental Casualty Company to seek contribution from a co-insurer for environmental cleanup defense costs it had paid. This verdict, in the case of Continental Casualty Co. v. Argonaut Insurance Co., 373 Or 389 (2025), marks a significant step in clarifying the rights under Oregon’s Environmental Cleanup Assistance Act (OECAA) regarding multi-insurer environmental claims. The dispute originated from the extended cleanup operations at the Portland Harbor Superfund Site, a 10-mile stretch of the Willamette River, identified by the US Environmental Protection Agency under CERCLA as requiring extensive remediation. Among the entities held responsible was Schnitzer Steel Industries, Inc., which sought insurance coverage from multiple insurers, including Continental Casualty Company, Employers Insurance Company of Wausau, and Century Indemnity Company. These insurers entered into a cost-sharing agreement, with Continental assuming the substantial share of 70 percent of the defense costs.

The seeds of the legal battle were sown in 2010 when disagreements over attorney billing rates led Schnitzer to sue Continental in federal court. Under the OECAA’s provision ORS 465.480(3)(b), Schnitzer identified Continental as the 'targeted insurer,' demanding full reimbursement of defense costs, which included the higher rates of Schnitzer’s appointed legal counsel. The trial ended with the federal court ruling in favor of Schnitzer, which resulted in an award exceeding $15 million in defense costs and associated fees. Consequently, Continental was held responsible for covering 100 percent of the defense costs related to Schnitzer’s claims, subject to policy limits, a decision later upheld by the Ninth Circuit in 2016. Following this, Continental completed its financial obligations by 2018.

In a strategic move in 2016, Continental initiated a contribution action under ORS 465.480(4)(a) against Wausau and Century, seeking reimbursement for the defense costs as Schnitzer’s targeted insurer. In an unexpected development during 2019, while this contribution action was still pending, Wausau reached a separate settlement with Schnitzer, extricating itself from any future defense and indemnity obligations related to the Portland Harbor cleanup. However, this settlement was contingent upon judicial dismissal of Continental’s contribution claim. Wausau contended that the settlement barred Continental’s claim under ORS 465.480(4)(a), which frowns upon contribution claims against insurers who have concluded good-faith settlements with the insured.

The trial court, however, rejected Wausau’s motion, stating that Schnitzer no longer held any claims for defense costs already compensated by Continental as per the federal judgment. The court’s judgment mandated Wausau to remit approximately $3.6 million to Continental in legal fees and interest. Dissatisfied, Wausau pursued an appeal, resulting in the Oregon Court of Appeals overturning the lower court’s decision. Nevertheless, the Oregon Supreme Court reinstated the trial court’s judgment, asserting that since the contested defense costs were already settled by Continental, Schnitzer had no extant claims to settle with Wausau. The court’s judgment safeguarded Continental’s statutory rights to contribution, emphasizing the statutory term 'the environmental claim,' which was bound to the specific costs that had been settled. The decision underscores the OECAA’s objective: to enable prompt payments by allowing policyholders to focus on a single insurer while preserving the equitable distribution of claims costs among involved insurers. This ruling provides a crucial touchstone for insurers engaged in multifaceted environmental claim disputes, reinforcing the assurance that contributions can be sought even after settling targeted payments, preventing unilateral burden-bearing due to settlements between the insured and other insurers.