Recent Oregon Supreme Court Decision

Yesterday, the Oregon Supreme Court issued a decision clarifying the statute of limitation for negligent construction claims. In Goodwin v. Kingsmen Plastering Inc., 359 Or. 694 (June 16, 2016), the Court was asked to identify the period of limitations for a negligent construction claim. Plaintiffs in the case filed a claim for negligence and negligence per se, alleging construction defects that led to water intrusion at a single family residence built in 2001.  Plaintiffs argued that the six-year statute of limitation set forth in ORS 12.080(3), which applies to actions “for interference with or injury to any interest of another real property,” governed their claims.

Defendant, a siding subcontractor, argued that the action was not for injury to an “interest” in real property, but rather for damage to the property itself, and should be governed by a two-year statute of limitations set for in ORS 12.110(1). That statute applies to tort actions in general.

The Oregon Supreme Court determined conclusively that the two-year statute of limitations set forth in ORS 12.110(1) applied. The Court found that ORS 12.080(3) applied only to an injury to an “interest” in real property, such as trespass or waste. It did not apply to actions arising from damage to the property itself. The Court further held that the Plaintiff’s discovery of the damage to the property initiates the two year period of limitation. As a result, the Supreme Court remanded the case back to the Court of Appeals for determination of whether or not the action was brought within two years of when the Plaintiffs knew or should have known about the damage.

This case provides clarity as to the appropriate statute of limitations in Oregon for negligent construction claims. Previously there had been some confusion over what statute should apply. The arguments presented in theGoodwin case were common. Parties often argued whether the six-year or two-year period was appropriate for actions involving construction defects. The Court has now clarified that a party has two years from which to bring a claim for negligent construction. Moreover, the Court clarified that this two-year period of limitations allows for discovery of the claim. As a result, the operative date for any statute of limitations defense will be when the claimant knew or should have known about the damage to the property.

Lether & Associates regularly represents insurers in a number of construction matters and other insurance claims in the State of Oregon.  This includes some of the most significant construction defect claims in that jurisdiction.  A number of our attorneys are licensed to practice in Oregon.  We are always happy to discuss representation of clients in that jurisdiction.

Oregon’s Latest Take On Stipulated Judgments

Over the last decade we have seen a significant increase in the number of stipulated judgments. Stipulated judgments (also known as consent judgments and/or stipulated/consent settlements) most commonly arise when a liability insurer allegedly fails to settle a claim or defend its insured. The insured then proceeds to settle the claim with the third-party in exchange for the third-party agreeing not to execute the judgment against the insured. In exchange, the insured assigns whatever extra-contractual and contractual claims the insured has against its own insurer.

Prior to November, 2015, Oregon Courts required that parties entering into a stipulated judgment only make an assignment after entry of judgment. See Stubblefield v. St. Paul, 267 Ore. 397, 400-01, 517 P.2d 262 (1973). Under Stubblefield, Oregon law precluded an action against an insurer based on an assignment made prior to a non-execution agreement. Accordingly, the insurer had no payment obligation to the assignor inured and the assignee acquired no enforceable rights against the insurer. On November 19, 2015, the Oregon Supreme Court overruled Stubblefield with Brownstone Homes Condo. Ass’n v. Brownstone Forest Heights, LLC, 358 Or. 223, 363 P.3d 467 (2015).

Brownstone Homes is a construction defect matter where a condo association (Brownstone) sued a siding contractor (A&T) for negligence. A&T tendered a claim to its insurer (Capitol) who refused to defend. Thereafter, Brownstone and A&T entered into a stipulated judgment against A&T. The stipulated judgment included a covenant by Brownstone not execute against A&T and an assignment of A&T’s claims against Capitol. The judgment was entered and Brownstone attempted to garnish Capitol for the unpaid judgment. Relying on Stubblefield, Capitol rejected the writ of garnishment, arguing that Capitol had no coverage obligation. The Oregon Circuit Court granted Capitol’s motion for summary judgment and the Oregon Court of Appeals affirmed. Overruling Stubblefield, the Oregon Supreme Court reversed and remanded.

The Oregon Supreme Court articulated “that Stubblefield erred when it concluded that a covenant not to execute obtained in exchange for an assignment of rights, by itself, effects a complete release that extinguishes an insured’s liability and, by extension, the insurer’s liability as well.” Consistent with this holding, the Oregon Supreme Court held that the Brownstone Homes trial court “erred in concluding that the existence of such a covenant not to execute as a component of the parties’ settlement agreement had the effect of extinguishing A&T’s liability to Brownstone and, as a result, had the effect of extinguishing Capitol’s liability as well.”

If you would like a full copy of this decision or would like to discuss the outcome of this case, please feel free to contact our office.

About Lether & Associates

Lether & Associates, PLLC is a boutique insurance law firm located on the shores of Lake Union in Seattle, Washington. Our focus is on complex insurance coverage matters in a number of jurisdictions across the United States and internationally. Our attorneys are licensed in Washington State, Idaho, Oregon, Alaska, Ohio, the Federal Courts in all of those jurisdictions, the 9th Circuit Court of Appeals, and the Federal Court for Colorado. The firm also handles cases from all over the United States on a pro hac vice basis. The firm specializes in all types of insurance litigation as well as the litigation of extra-contractual claims.

Thomas Lether our Founder, has been involved in the insurance industry for approximately 30 years. In addition to being an attorney, he acts as a mediator, lecturer, arbitrator, and expert witness on insurance related matters.

Although the firm focuses on complex insurance disputes, Lether & Associates enjoys a healthy sense of humor and outside activities which focus on our waterfront location.

L&A – Leading the way in insurance law through experience, collaboration, and results.

Peter Berg

Peter Berg

Attorney at Lether & Associates

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FRCP 26 AMENDMENTS AND THE EFFECTS ON INSTITUTIONAL DISCOVERY

The December 1, 2015 amendments to FRCP 26 focus largely on the proportionality of discovery by expressly outlining factors to be weighed in determining the proper scope of discovery, including the “importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.”

While courts have long considered the burden created by discovery requests, these amendments affirm the growing importance of proportionality. The Advisory Committee which proposed the changes appears to have been motivated to curb the high costs of discovery, especially those presented due to the increasing role and utilization of electronically-stored information. To that end, FRCP 26(c)(1)(B) was also amended to expressly grant the court’s the authority to make orders regarding allocation of discovery expenses in ruling on protective order motions. The commentary which accompanied the amendments further indicates the motivation of the Advisory Committee, stating:

The burden or expense of proposed discovery should be determined in a realistic way. This includes the burden or expense of producing electronically stored information. Computer-based methods of searching such information continue to develop, particularly for cases involving large volumes of electronically stored information. Courts and parties should be willing to consider the opportunities for reducing the burden or expense of discovery as reliable means of searching electronically stored information become available.

These high costs are particularly felt by institutional parties as they are more likely to have voluminous records and data subject to discovery. The amendments to FRCP 26 make the burden of preparing and producing discovery, and the potentially large amount of information, a primary consideration in determining how to proceed with discovery in a given case. They should also provide ammunition for institutional parties to fight back against opposing attorneys who seek to obtain leverage through overly abusive and costly discovery tactics. Until attorneys fully buy-in to the changes, we expect the amendments to FRCP 26 will result in a temporary increase in protective order motion practice initiated by parties seeking to avoid the burdens and abuses meant to be reduced by this new rule.

About Lether & Associates

Lether & Associates, PLLC is a boutique insurance law firm located on the shores of Lake Union in Seattle, Washington. Our focus is on complex insurance coverage matters in a number of jurisdictions across the United States and internationally. Our attorneys are licensed in Washington State, Idaho, Oregon, Alaska, Ohio, the Federal Courts in all of those jurisdictions, the 9th Circuit Court of Appeals, and the Federal Court for Colorado. The firm also handles cases from all over the United States on a pro hac vice basis. The firm specializes in all types of insurance litigation as well as the litigation of extra-contractual claims.

Thomas Lether our Founder, has been involved in the insurance industry for approximately 30 years. In addition to being an attorney, he acts as a mediator, lecturer, arbitrator, and expert witness on insurance related matters.

Although the firm focuses on complex insurance disputes, Lether & Associates enjoys a healthy sense of humor and outside activities which focus on our waterfront location.

L&A – Leading the way in insurance law through experience, collaboration, and results.

Westin McLean

Westin McLean

Attorney at Lether & Associates

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Washington Court’s Most Recent Analysis on “Arising Out Of” Language in the Context of UIM Claims

This month’s introductory blog addresses the new Washington State Supreme Court decision in Kroeber v. Geico Insurance Company, Washington Supreme Court No. 91846-5. The Kroeber decision was issued on January 14, 2016. The case specifically involved questions of whether there was underinsured motorist (“UIM”) coverage for an injury to an insured pedestrian resulting from the intentional firing of a gun from an uninsured pickup truck. In the decision, the Supreme Court addressed two certified questions from the United States District Court for the Western District of Washington. These specific questions involve whether the subject injury arose out of the use of the motor vehicle and whether the shooter’s intent was material.

In regard to the first question, the Court clarified the test for whether the subject injury arose out of the motor vehicle. The Court clarified that the test in Washington is that there must be a causal connection between the subject injury and the use of the vehicle. Simply because the vehicle was the site of the accident does not necessarily mean that the accident arose from the use of the motor vehicle. The Court clarified the test as follows:

The rule our cases have established is that some causal connection exists when the events leading up to an injury involve vehicle use, unless the vehicle is merely the coincidental location of the accident… an injury does not “arise out of” vehicle use when the vehicle is merely the situs of the accident.

However, the Court did not define “arising out of” nor did it define “situs of the accident”. Further, the Court did not actually hold that the subject injury arose out of the tortfeasor’s vehicle.

In regard to the intent issue, the Court found that the shooter’s intent was immaterial given the fact that both parties agreed that the loss involved an accident. It is unclear what the Court would have ruled as to that issue had there been a question from the insured regarding whether the loss involved an accidental injury.

The question of whether a loss arises out of the use of a motor vehicle comes up in the context of not only UIM claims, but also PIP claims and third-party liability claims. The question of what involves vehicle use has been addressed around the country in different courts. This decision will certainly feed that discussion.

If you would like a full copy of this decision or would like to discuss the outcome of this case, please feel free to contact our office.

Welcome to the Lether & Associates blog. The purpose of this blog is to provide an up to date resource on developments in the insurance industry, in our practice areas, and around the country. Watch for what’s new and exciting at Lether & Associates. We hope you enjoy the articles and information we will provide in our blog.  We invite any responses, questions, or thoughts as you review the same.

About Lether & Associates

Lether & Associates, PLLC is a boutique insurance law firm located on the shores of Lake Union in Seattle, Washington. Our focus is on complex insurance coverage matters in a number of jurisdictions across the United States and internationally. Our attorneys are licensed in Washington State, Idaho, Oregon, Alaska, Ohio, the Federal Courts in all of those jurisdictions, the 9th Circuit Court of Appeals, and the Federal Court for Colorado. The firm also handles cases from all over the United States on a pro hac vice basis. The firm specializes in all types of insurance litigation as well as the litigation of extra-contractual claims.

Thomas Lether our Founder, has been involved in the insurance industry for approximately 30 years. In addition to being an attorney, he acts as a mediator, lecturer, arbitrator, and expert witness on insurance related matters.

Although the firm focuses on complex insurance disputes, Lether & Associates enjoys a healthy sense of humor and outside activities which focus on our waterfront location.

L&A – Leading the way in insurance law through experience, collaboration, and results.

Luisa Taddeo

Luisa Taddeo

Attorney at Lether & Associates

Read about Luisa