Webb v. National Union Fire Insurance Co. of Pittsburgh, PA

Citations: 207 F.3d 579; 2000 Daily Journal DAR 3151; 2000 Cal. Daily Op. Serv. 2332; 2000 U.S. App. LEXIS 4654Docket: Nos. 99-35303, 99-35645

Court: Court of Appeals for the Ninth Circuit; March 23, 2000; Federal Appellate Court

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National Union Fire Insurance Company appeals a district court's summary judgment favoring Jack Webb, Special Deputy Receiver for American Eagle Insurance Company. National Union argues that the court erred by not considering extrinsic evidence intended to show that American Eagle’s insurance policy was the sole coverage for a plane crash involving a Beech Baron aircraft piloted by Walter Graham, which resulted in fatalities. Graham, who had rented the aircraft from Southern Oregon Skyways, Inc. (SOS), was required to maintain separate liability coverage, leading him to purchase a policy from American Eagle. The dispute centers on whether this coverage was exclusive or in addition to National Union's policy. American Eagle claims both policies covered the incident and seeks contribution from National Union, citing the pro rata sharing of liability in both policies' "Other Insurance" clauses. The district court agreed, holding National Union liable for approximately $1,000,000 in settlement claims.

National Union contends that the court should have considered extrinsic evidence, including statements from SOS's president and testimony from an insurance agent, suggesting that Graham intended for American Eagle’s policy to be the only coverage. National Union argues this evidence indicates inequity in holding it liable for contributions it did not agree to. It asserts that Oregon courts allow consideration of extrinsic evidence to ascertain contract intent, even if the terms seem unambiguous. Additionally, National Union challenges the district court's attorneys’ fees award to American Eagle, arguing that Or.Rev.Stat. 742.061 was intended to protect insureds, not insurers. The court affirmed the district court’s decision.

American Eagle asserts that Oregon law prohibits the consideration of extrinsic evidence for unambiguous contracts, citing Yogman v. Parrott (1997). The term “any rental agreement” is interpreted literally, and National Union cannot avoid liability based on differing interpretations of its insurance policy. American Eagle contends that the district court thoroughly evaluated and rejected National Union's extrinsic evidence, supporting some of its claims for contribution and denying others. Additionally, it claims that the award of attorneys’ fees was warranted under Or.Rev.Stat. 742.061, as it sought to enforce compliance with National Union’s insurance policy, aligning with the statute's intent to promote claim settlements and discourage unreasonable insurer rejections. 

The parol evidence rule prohibits the admission of extrinsic evidence to clarify unambiguous contracts, which includes insurance policies. The language of the policy is to be interpreted using its plain meaning unless a different intent is clearly indicated. National Union argues that Oregon and Ninth Circuit law permit the consideration of extrinsic evidence even for unambiguous contracts, referencing Abercrombie v. Hayden Corp. (1994). However, subsequent cases have not upheld this view, affirming that extrinsic evidence is only admissible if an ambiguity is evident from the contract itself. The prevailing stance among Oregon courts is that extrinsic evidence is not permitted to ascertain intent unless an ambiguity is apparent, as established in cases like Yogman and Roe v. Doe. Yogman explicitly reinforces that the parol evidence rule prohibits extrinsic evidence when a contract is unambiguous.

Carolina Casualty is distinguished from the current case as it involved a contract designed to evade Interstate Commerce Commission regulations, while the present matter concerns overlapping insurance coverage among three parties. Oregon law dictates that in cases of overlapping insurance policies, liability should be prorated based on the policy limits relative to the total limits of all applicable policies. Allowing extrinsic evidence to challenge National Union's underwriting obligation would disrupt established Oregon insurance law on liability proration among co-insurers and create uncertainty. The exclusion of extrinsic evidence is supported by public policy, as it preserves the integrity of written contracts over prior negotiations or agreements. The district court's decision not to consider extrinsic evidence was correct, affirming that National Union is liable for contributing to American Eagle's settlement expenses.

Regarding attorneys' fees, Or.Rev.Stat. 742.061 stipulates that if a settlement is not reached within six months of filing proof of loss, and the plaintiff's recovery exceeds any tender by the insurer, reasonable attorney fees may be awarded. The district court awarded fees to American Eagle for enforcing National Union's contribution obligation post-accident. National Union contends this award was erroneous, arguing that the statute's intent is to protect insureds, not insurers, implying that it should not extend to entities like American Eagle.

National Union's reliance on Interstate Fire v. Underwriters at Lloyd’s London argues that an insurer is not entitled to attorney fees merely due to litigation stemming from a good-faith dispute with another insurer. However, American Eagle is not seeking a reallocation of a settlement fund, but rather aims to compel National Union to adhere to its own insurance policy, which aligns with the public policy objectives outlined in Or.Rev.Stat. 742.061. This statute promotes the resolution of claims and discourages insurers from unjustly denying them. If an insurer is mistaken about its legal obligations, the plaintiff is entitled to reasonable attorney fees, as supported by Heis v. Allstate Ins. Co.

The district court's award of attorney fees to American Eagle supports the public policy aims of Or.Rev.Stat. 742.061, as the claim was filed to ensure National Union honored its contractual obligations. Moreover, the statute does not prohibit insurers from receiving attorney fees or limit recoveries to insured parties. The precedent set in Portland Gen. Elec. Co. v. Pacific Indem. Co. confirms that an excess insurer can recover fees from a primary carrier under a subrogation theory. The language of Or.Rev.Stat. 742.061 is passive and does not restrict fee recovery to actions initiated solely by insured parties; even judgment creditors have been awarded fees under this statute, as seen in Northwest Marine Iron Works v. Western Cas. Sur. Co.

The court concluded by affirming its prohibition on introducing extrinsic evidence unless a contract ambiguity is present, and upheld the award of attorney fees to American Eagle, indicating that insurers can indeed receive such awards and that American Eagle's motives align with the protective intent of the statute. The court's ruling is affirmed, with costs and attorney fees awarded to the appellee. Additionally, while Oregon courts consider the context of contract formation per Or.Rev.Stat. 42.220, this statute does not apply here since National Union's proposed extrinsic evidence pertains to later interpretations rather than the contract's formation context.