24 Trial Lawyer • Spring 2023 By Kyle Sturm By Nick Thede We’ve all been there. You’ve spent hours working with your client to build the case: gathering documents, interviewing witnesses, and drafting and filing the complaint. Now, you are waiting for the defendant to appear and get the litigation moving. But nothing happens. The defendant doesn’t appear. You’re forced to seek a default judgment or negotiate with the defendant’s insurer. Eventually, you learn the defendant’s insurance company will not be appointing lawyers to represent the defendant and will not be contributing any money to settle. What rights do you and your client have to challenge the coverage denial or failure to adequately pay? Fortunately, Oregon law provides several methods to take the fight directly to the defendant’s insurance company and Kyle Sturm Nick Thede recover what your client is owed. Insurance companies undisputedly owe a duty to their policyholders to provide the coverage promised, including the duty to defend and the duty to indemnify. In many cases, there is no question the insurance company must defend. In other cases, however, the answer is not so clear and insurance companies often deny their obligation. The duties to defend and indemnify are critically important to understand before making any decision to tackle an insurance coverage dispute with a defendant’s insurance company. Oregon law makes it clear that an insurance company’s duty to defend is exceptionally broad. The question of whether an insurance company must provide a defense is a decidedly pro-policyholder inquiry that broadly resolves any ambiguities in favor of finding coverage. If the allegations against the defendant present any possibility the defendant could be liable for potentially covered conduct, the insurance company must provide a defense. This means all doubts and inferences must be resolved in favor of coverage. So long as the complaint contains allegations of potentially covered conduct, the insurance company owes a duty to defend the claim even if the complaint also contains allegations of excluded conduct. With these principles in mind, Oregon courts have not made it easy for an insurance company to avoid its duty to defend. From a plaintiff’s perspective, the duty to defend is critical because once the insurance company takes on the duty to defend, it is required to execute that duty in good faith. Included within this duty is an affirmative obligation to attempt to resolve potentially covered claims within the policy limits. This is a distinct obligation and is independent from the insurance company’s duty to indemnify. Whereas the duty to defend (and settle) is forward looking and is based upon the possibilities there is coverage, the duty to indemnify looks at the facts established in the case that result in the defendant’s liability. The assistance of insurance coverage counsel is typically important at two junctures: (1) when plaintiff’s counsel learns that the insurance company has denied the duty to defend; or (2) where the insurance company is defending but refuses to reasonably settle. In either Exploring a plaintiff’s rights Insurance Got You Down?
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