City of Medford et al v. Argonaut Group, Inc. et al, No. 1:2006cv03098 - Document 89 (D. Or. 2011)

Court Description: Opinion & Order. Plaintiffs' motion to amend 74 is granted. Plaintiffs' amended motion for partial summary judgment 50 is granted as to the duty to defend. Argonaut's motions for summary judgment 62 and for reconsideration 72 are denied. Northland's motion for partial summary judgment 57 is granted. Ordered & Signed on 12/1/11 by Judge Owen M. Panner. Associated Cases: 1:06-cv-03098-PA, 1:11-cv-03037-PA (kf)

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City of Medford et al v. Argonaut Group, Inc. et al Doc. 89 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON CITY OF MEDFORD, et al., No. 1:06-cv-03098-PA Plainti CONSOLIDATED CASES v. OPINION AND ORDER ARGONAUT INSURANCE GROUP, et al., Defendants. CITY OF MEDFORD, et al., No. 1:11 cv-03037-PA Plaintiffs, v. ARGONAUT INSURANCE GROUP, et al., Defendants. PANNER, J. The City of Medford Michael Dyal, t (collectively referred to as the City), br 1 City Manager these two - OPINION AND ORDER Dockets.Justia.com consolidated actions for declaratory relief and breach of contract against defendants Argonaut Group, Inc., Trident Insurance Se City cl ces, , and Northland Insurance Companies. Argonaut has a duty to fend it from lawsuits fi by current City employees (the employees (the Doyle litigat City's lit ). ion) and retired City The lawsuits challenge the ilure to make health insurance available to its employees a retirement. Argonaut and judgment. City fi cross-motions summary Argonaut also moves to reconsider an earl Medford v. Argonaut Insurance Group, 2007 WL 4570713 2007). The Northland moves for summary judgment order, (D. Or. inst Argonaut seeking partial reimbursement for expenses Northland incurred while defending the City. On duty to defend, I grant the mot Northland and deny Argonaut's motions. s of the ty and ng resolution of the ongoing state court proceedings, I reserve ruling on whet r defendants have a duty to indemnify. DISCUSSION I. Argonaut's Duty to Defend A. Interpreting Insurance Policies The in retation of an surance licy is a question of Argonaut has stat Trident is a aims administrator the Argonaut group of companies, and is not an insurer itself. 2 OPINION AND ORDER law. St. Paul Fire & Marine Ins. Co. v. McCormick & Baxter Creosoting Co., 324 Or. 184, 192, 923 P.2d 1200, 1205 (1996). The court is guided by "the understanding of the ord purchaser of insurance." Botts v. Hartford Accident & Indem. Co., 284 Or. 95, 100, 585 P.2d 657, construes ambiguities in 659 (1978). 1 burden of showing insurer. The insured has coverage exists, and the has the burden of showing that coverage. The court policy's terms against St. Paul Fire, 324 Or. at 192, 923 P.2d at 1205. the init ry policy excludes Employers Ins. of Wausau v. Tektronix, Inc., 211 Or. App. 485, 509, 156 P. 3d 105, 119 (2007). B. Argonaut' s Arguments Argonaut argues has no duty to defend because: ( 1 ) Argonaut should not be required to de "known loss" or a "loss in progress"; the City from a (2 ) the lawsu s aga City were not bas "negli act, error or omission"; (3) Argonaut's policy excludes on an ins ' s scrimination claims; (4) the al conduct g ng rise to liability occurred be July 2003, the effect date of Argonaut's policy; and (5) as to the litigation, t plaintiffs sought only de ry and injunctive relief, not damages. (1) Known Loss or Loss in Progress Argonaut contends that it has no duty to defend because the City knew about its potent insurance from Argonaut. 3 - OPINION AND ORDER 1 losses when it first purchased Argonaut argues it was fore July 2003, when the policy took effect, that the City chose to purchase health insurance that did not cover retirees. Argonaut concedes "no case 'known loss' or 'loss in p s expressly adopted the ress' doctrine," but argues that the doctrine is consistent with Oregon's public policy insuring entionally harmf conduct. inst See, e.g., Nielsen v. St. Paul Cos., 283 Or. 277, 280-81, 583 P.2d 545, 547 (1978) ("Insurance coverage inflicts the protection of one who intentionally ury upon another is against public whether the insurer is licy, and ieved for this reason from of an action against its insured depends upon the defense legations of the complaint."). Argonaut loss" doct ne. Even assuming Oregon would adopt doctrine, it would not apply here. all to have viol ,Or. Rev. Stat. ยง y was 243.303, is ambiguous, Ith insurance retirees "insofar as and to the extent possible." federal ss The statute the C requiring local governments to continue Circuit was "known s not shown that Oregon would adopt r When the Ninth red to interpret the statute to resolve a process issue, Ninth Circuit chose to certi question to the Oregon Supreme statute itself. the rather than construe the Doyle v. City of Medford, 565 F.3d 536, 544 (9th Cir. 2009); Doyle v. City of Medford, 347 Or. 564, 576, 227 P.3d 683, 690 4 (2010) (answering certif - OPINION AND ORDER question, stating section 243.303 provides that "local governments make an obligation to lth insurance available to retirees, but that there may be ual circumstances that excuse that obI a state trial court later ion"). ermined the City did violate the statute, "Mere unlawfulness of the act s not raise any necess implication injure." Nielsen, 283 Or. at 281, 583 P.2d at 547. that t known loss doctr Although it was the actor's intention to , even if it appl I conc , would not bar cove (2) Coverage for a "negligent act, error or omission" Argonaut's policy covers an insured's" or omission." Argonaut contends it has no the comp ints in Bova and intent lly, not negl ligent act, error y to defend because alleged the City acted ly, when it fai to provide employees with health insurance after retirement. I previously reject this argument: City] allegedly red the advice of counsel and purchased insurance , according to counsel, would olate ORS 243.303(2) Resolut 57 5. I conclude plaintiffs' al considered a cove "negligent act, error or omiss under the policy. Cf. Carmel v. Clapp & Eisenberg, P.C., 960 F.2d 698, 703 (7th Cir. 1992) ("a plaintiff ient's failure low legal advice may constitute contributory igence in a legal malpractice case"). Although the sion to go against the advice of counsel could also considered intentional, the ambiguity should be construed against insurer. City of Medford v. Argonaut Ins. Group, 2007 WL 4570713, at *3 (D. Or. De c. 26, 2007). 5 OPINION AND ORDER the difficulty of interpreting t ambiguous statute conclusion City aIle the City's y viola , I adhere to my ilure to provide continued coverage could be considered a negligent act or error. (3) Exclusion for Discrimination Argonaut argues that excludes coverage has no duty to de r discrimination. The policy excludes "[a]ny shonest, fraudulent, criminal or mali discriminat , or humil hough the , slander, aints against the City seek damages ints also s violations of section 243.303, a c ly independent of the a insurer has a duty to de be cove act, I ion." discrimination, the comp fact because policy damages that is I lly and scrimination claim. if any cl r An laint could in the , even when other claims are subject to an exclusion. Nielsen, 283 Or. at 280, 583 P.2d at 547. (4) Conduct occurred during Argonaut's coverage Argonaut argues coverage occurred 2003. the acts r which the C seeks fore Argonaut's policy took effect Argonaut notes that health insurance for was in 1990 that the C July y purchased lice officers that did not cover retirees, and that the City purchased s r insurance other 2001. I have previously rejected this argument: I with plaintif that leged wrong conduct here, which was choosing health insurance 6 - OPINION AND ORDER loyees cove cove that did not allow retirees to maintain ,occurred ing the covered riod. The complaint al s that City d have obtained insurance cove that would extend to reti emp s, but chose not to do so. City made t choice during the riod covered by fendants' insurance. City of Medford v. Argonaut Ins. Group, 2007 WL 4570713, at *4 (D. Or. 2007). const Because ambiguities in t complaint are against the insurer, I adhere to this ruling. at *2. (5) No Damages ~leged As to the Bova liti duty to only, Argonaut argues it had no because t only injunct and de plaintiffs d not seek damages, aratory relief. the Bova complaint claimed ty responds t olations of t Oregon age discrimination statute and section 243.303, 1 remedies, both addit provides the Court sought "Such J, that the law 1 and [equit just and p r.~ Bova complaint could reasonably be interepret I conclude t to seek damages, triggering Argonaut's duty to defend. II. Northland's Motions Against Argonaut Northland seeks parti Northland, which has paid 2011, Argonaut s summary judgment against Argonaut. the City's defense until Ma d pay half of t costs. Northland concedes Argonaut is not than f 7 the defense costs. - OPINION AND ORDER City's de ired to pay more Because of my rul parti on Argonaut's duty to summary judgment to Northland on its , I grant against Argonaut for half of the City's defense costs. CONCLUSION aintiffs' mot amended motion to the Plaintif r partial summary judgment (#50) is granted as y to defend. (#62) and for recons motion for part to amend (#74) is Argonaut's motions for summary judgment ration (#72) are denied. Northland's 1 summary judgment (#57) is granted. ng resolution of the underlying state court litigation, the court s ruling on whether defendants has a y to indemni IT IS SO ORDERED. DATED this day of December, 2011. U.S. DISTRICT JUDGE 8 - OPINION AND ORDER

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