Firemans Fund Insurance Compan v. North Pacific Insurance Company

FILED
NOT FOR PUBLICATION AUG 11 2011

MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS

FOR THE NINTH CIRCUIT

FIREMAN’S FUND INSURANCE No. 10-35414
COMPANY, a California company;
NATIONAL SURETY CORPORATION, D.C. No. 3:03-cv-00025-MO
an Illinois company,

Plaintiffs - Appellees, MEMORANDUM *

v.

NORTH PACIFIC INSURANCE
COMPANY, an Oregon company; Does 1-
100 inclusive & Does 101-200 inclusive;
OREGON AUTOMOBILE INSURANCE
COMPANY, an Oregon company,

Defendants - Appellants.

FIREMAN’S FUND INSURANCE No. 10-35814
COMPANY, a California company;
NATIONAL SURETY CORPORATION, D.C. No. 3:03-cv-00025-MO
an Illinois company,

Plaintiffs - Appellants,

v.

NORTH PACIFIC INSURANCE

*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
COMPANY, an Oregon company; Does 1-
100 inclusive & Does 101-200 inclusive;
OREGON AUTOMOBILE INSURANCE
COMPANY, an Oregon company,

Defendants - Appellees.

FIREMAN’S FUND INSURANCE No. 10-35908
COMPANY, a California company;
NATIONAL SURETY CORPORATION, D.C. No. 3:03-cv-00025-MO
an Illinois company,

Plaintiffs - Appellees,

v.

OREGON AUTOMOBILE INSURANCE
COMPANY, an Oregon company;
NORTH PACIFIC INSURANCE
COMPANY, an Oregon company; Does 1-
100 inclusive & Does 101-200 inclusive,

Defendants - Appellants.

Appeal from the United States District Court
for the District of Oregon
Michael W. Mosman, District Judge, Presiding

Argued and Submitted July 14, 2011
Portland, Oregon

Before: PREGERSON, WARDLAW, and M. SMITH, Circuit Judges.

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 In case number 10-35414, Defendants-Appellants/Cross-Appellees North

Pacific Insurance Company and Oregon Automobile Insurance Company

(collectively, North Pacific), appeal the district court’s judgment, entered after a

bench trial, holding that North Pacific owes Plaintiffs-Appellees/Cross-Appellants

Fireman’s Fund Insurance Company and National Surety Company (collectively,

Fireman’s Fund) approximately $2.1 million in equitable contribution toward

defense costs incurred by Ed Niemi Oil Company and related entities with respect

to environmental cleanup actions brought by the Oregon Department of

Environmental Quality. As the facts and procedural history are familiar to the

parties, we do not recite them here except as necessary to explain our disposition.

We have jurisdiction over the district court’s grant of summary judgment,

which rejected North Pacific’s untimely notice affirmative defense. 28 U.S.C.

§ 1291; see, e.g., Banuelos v. Constr. Laborers’ Trust Funds for S. Cal., 382 F.3d

897, 902–03 (9th Cir. 2004). Because Ortiz v. Jordan, 131 S. Ct. 884, 892 (2011),

expressly declined to consider whether such “purely legal issue[s]” are appealable

after a full trial on the merits, prior circuit precedents such as Banuelos remain

binding on this panel. See Miller v. Gammie, 335 F.3d 889, 900 (9th Cir. 2003)

(en banc). In addition, North Pacific sufficiently raised this issue before the district

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court by challenging the conduct of both Fireman’s Fund and the Ed Niemi Oil

Company.

With respect to the merits, Oregon law imposes an independent duty on

insurers to “inquire[] into the possibility of other insurance” whenever they seek

equitable contribution from other insurers. Am. Star Ins. Co. v. Allstate Ins. Co.,

508 P.2d 244, 247 (Or. Ct. App. 1973). If the defendant insurer “was prejudiced

by the delay in notice” of the underlying claim, Hartford Accident & Indem. Co. v.

Premier Ins. Co., 556 P.2d 960, 961 (Or. 1976), and if the plaintiff insurer failed to

“exercise ‘reasonable diligence’” in giving such notice to the defendant, then the

plaintiff may not obtain equitable contribution from the defendant, Am. Star Ins.

Co., 508 P.2d at 247.

Because the district court considered only whether the insured acted

unreasonably, it erred as a matter of law by failing to determine instead whether

Fireman’s Fund was reasonably diligent in giving notice to North Pacific and

whether the timing of that notice was prejudicial to North Pacific. As “a federal

appellate court does not consider an issue not passed upon below,” we remand this

issue so that the district court may consider it in the first instance. Golden Gate

Hotel Ass’n v. City & Cnty. of S.F., 18 F.3d 1482, 1487 (9th Cir. 1994) (internal

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quotation marks omitted). In doing so, the district court should consider

reasonable diligence and prejudice with respect to all six cleanup sites.

On remand, the district court should also “consider, under equitable

principles” and the specific facts and circumstances of this dispute, N. Ins. Co. of

N.Y. v. Allied Mut. Ins. Co., 955 F.2d 1353, 1361 (9th Cir. 1992), whether

Fireman’s Fund is entitled to contribution toward defense costs incurred prior to

the time that it informed North Pacific about the underlying claims. Contrary to

Fireman’s Fund’s argument, North Pacific did not waive this contention by

challenging “pre-tender costs” rather than “pre-notice costs” in the district court.

Even if North Pacific now uses different terminology than it used in the district

court, this is a purely legal question and Fireman’s Fund has not been “prejudiced

by the failure to raise the issue at the district court,” as the separate legal theories

are governed by substantially identical facts. Ariz. Cattle Growers’ Ass’n v. U.S.

Fish & Wildlife, 273 F.3d 1229, 1241 (9th Cir. 2001).

Because the district court’s resolution of these questions could conceivably

preclude Fireman’s Fund from obtaining any recovery at all, we reluctantly vacate

the district court’s amended judgment entered on April 19, 2010, and remand for

further proceedings consistent with this disposition. Although we are inclined to

agree with Fireman’s Fund on the bulk of the remaining issues presented to us in

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North Pacific’s appeal, we refrain from issuing a non-binding advisory opinion to

that effect.

With respect to case number 10-35814, which involves Fireman’s Fund’s

separate appeal of the district court’s September 2, 2010, denial of attorneys’ fees

under Oregon Revised Statutes § 742.061(1), the district court correctly concluded

that the reasoning in the intermediate state-court decision Certain Underwriters at

Lloyd’s London v. Massachusetts Bonding & Insurance Co., 230 P.3d 103, 114–15

(Or. Ct. App. 2010), supersedes our prior reasoning in Webb v. National Union

Fire Insurance Co., 207 F.3d 579, 583–84 (9th Cir. 2000). As there are no

“convincing” reasons for disagreeing with the intermediate state court, that

decision is a conclusive interpretation of the statute. See Watts v. Watts (In re

Watts), 298 F.3d 1077, 1082–83 (9th Cir. 2002). Thus, regardless of whether or

not Fireman’s Fund is the prevailing party with respect to the merits judgment, the

district court properly denied the motion for attorneys’ fees as a matter of law.

In case number 10-35908, the district court’s award of costs is vacated and

remanded. See Fed. R. Civ. P. 54(d)(1).

The judgment in 10-35414 is VACATED and REMANDED for further

proceedings; the order in 10-35814 is AFFIRMED; and the cross-appeal in 10-

35908 is VACATED and REMANDED. Each party shall bear its own costs.

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