Opinion
3:21-cv-00059-JR
06-15-2022
ATLANTIC SPECIALTY INSURANCE COMPANY; STATE FARM FIRE AND CASUALTY COMPANY, Plaintiffs, v. OREGON SCHOOL BOARDS ASSOCIATION PROPERTY AND CASUALTY COVERAGE FOR EDUCATION TRUST, Defendant.
FINDINGS AND RECOMMENDATION
Jolie A. Russo United States Magistrate Judge
Plaintiff State Farm Fire and Casualty Company (“State Farm”) moves for summary judgment pursuant to Fed.R.Civ.P. 56, and plaintiff Atlantic Specialty Insurance Company (“ASIC”) joins in that motion. Defendant Oregon School Boards Association Property and Casualty Coverage for Education Trust (“PACE”) filed a partial motion for summary judgment as to the applicability of the limitations of liability set forth in the Oregon Tort Claims Act (“OTCA”). PACE also filed a partial cross-motion for summary judgment. For the reasons set forth below, the parties' motions should be granted in part and denied in part.
The Court cites to plaintiffs' evidence except when referring to the non-duplicative information produced by PACE, and to the docket numbers of the parties' exhibits except where individually labeled and numericized. To the extent plaintiffs and PACE attack each other's recitation of facts, this Court is not bound by either party's characterization of the evidence and instead independently reviews the record to determine whether summary judgment is appropriate. Only the facts sustained by the record are recounted herein.
This case emanates from plaintiffs' efforts to recover a portion of their settlement costs associated with two underlying negligence actions asserted against Quency Fahlgren, who, at all relevant times, worked as a certified volunteer ski coach for Sam Barlow High School (“School”), which is located within the Gresham-Barlow School District (“District”).
I. School Athletics
The School has two types of athletic programs: those that fall under the Oregon School Activities Association's (“OSAA”) umbrella and those that do not. OSAA-sanctioned sports are managed by the School's athletic director. Dalzell Dep. 5 (doc. 52-12). Non-OSAA sports are considered “club sports” and managed by the School's activities director. Id. at 4-5. Some OSAA-sanctioned sports receive money from the School to fund the head coach (such as basketball and football) and certain equipment; others (like swimming and golf) do not. Id. at 6-7, 24-25, 32, 37. Similarly, some OSAA-sanctioned sports practice exclusively on-site at the School; others do not. Id. at 30-31.
The OSAA-sanctioned teams that do not receive School funding, along with all club sports, must raise their own money. Id. at 7, 10, 32-33. “[L]ess than half” of the coaches for OSAA-sanctioned teams are School employees; the majority are volunteers. Id. at 31. Outside of funding, there is no material difference between how the School treats OSAA-sanctioned and non-OSAA sports. Id. at 41.
II. The Ski Team
The School's ski team is considered a non-OSAA sport. Id. at 5. To that end, the School and Mr. Fahlgren are both members of the Oregon Interscholastic Ski Racing Association (“OISRA”), which operates as the School's agent in relation to mountain events. Id. at 39, 42-43, 45. OISRA was established “to mirror the OSAA.” Sellens Dep. 7 (doc. 52-14).
OISRA's “Membership Application for Member Schools” states: “OISRA provides indemnification to member schools, OISRA coaches, volunteers, and racers.” Dalzell Dep. 54 (doc. 52-12). Consistent therewith, OISRA's policies specify that “OISRA carries a multimillion dollar liability policy that indemnifies” member schools, registered racers, registered coaches, and registered volunteers. Hager Decl. Ex. 1, at 6 (doc. 66-1).
The School and OISRA have dual oversight over Mr. Fahlgren in his capacity as volunteer ski coach. Dalzell Dep. 19, 42-43 (doc. 52-12). Specifically, the School posts for the position of “ski coach” on its website and then interviews and hires the successful candidate. Id. at 13-14, 4041; Fahlgren Dep. 9 (doc. 52-13). That process entails completing a background check, contacting references, and issuing an ID badge and School email address. Dalzell Dep. 41, 52, 54 (doc. 5212); Fahlgren Dep. 9 (doc. 52-13); see also Hager Decl. Ex. 1, at 3 (doc. 66-1) (OISRA's membership policies require a criminal background check by “OISRA or the organization sponsoring the team”). Volunteer coaches are required to attend monthly advisors' meetings at the School, and report any safety incidents along with practice and competition schedules. Dalzell Dep. 20-21 (doc. 52-12). The School posts a weekly schedule of ski team trainings and races, but the particulars of each training are determined by the coach and weather conditions. Id. at 27; Fahlgren Dep. 25 (doc. 52-13); Sellens Dep. 15-16 (doc. 52-14).
The School provides transportation to the ski team via a passenger bus when needed, along with equipment such as gates, timers, and ski bibs (but not uniforms or skis). Dalzell Dep. 11, 1819, 22, 37-38 (doc. 52-12); Fahlgren Dep. 28 (doc. 52-13). Additionally, ski team trainings are held on-site at the School. Id. at 28-29; Fahlgren Dep. 19-20 (doc. 52-13). The amount of dryland training is “weather-dependent” and varies from year-to-year due to mountain conditions; about half of all trainings occur at the School when there is “low snow.” Dalzell Dep. 28-29 (doc. 5212).
OISRA dispenses ski team rules that head coaches must follow, such as developing and enforcing participation and academic requirements for student skiers, along with a code of ethics. Id. at 10; Fahlgren Dep. 56-58 (doc. 52-13); Sellens Dep. 9-10 (doc. 52-14); Hager Decl. Ex. 1, at 4-5, 24 (doc. 66-1). Amongst other things, those rules require coaches to ski in accordance with Or. Rev. Stat. § 30.985 and file an incident report for any on-hill accident. Sellens Dep. 12, 20 (doc. 52-14); Hager Decl. Ex. 1, at 5, 19 (doc. 66-1). OISRA also requires coaches to comply with all School and District rules and policies; where there is a conflict, OISRA's rules “shall prevail.” Sellens Dep. 11, 36 (doc. 52-14); Hager Decl. Ex. 1, at 3 (doc. 66-1). OISRA sets the hours of races and facilitates coaches' meetings. Fahlgren Dep. 20-21, 23 (doc. 52-13); see, e.g., Hager Decl. Ex. 1, at 10-11 (doc. 66-1).
At the time of the underlying events, OISRA did not provide any guidance regarding the use, transportation, or placement of ski gates during or after trainings. Fahlgren Dep. 21, 31, 38-39, 60, 82 (doc. 52-13); Sellens Dep. 17-18, 23 (doc. 52-14).
This statute imposes general safety duties on all skiers - e.g., to assume the risks of skiing outside of a permitted area, “maintain reasonable control of speed and course,” “abide by the directions and instructions of the ski area operator,” “familiarize themselves with posted information on location and degree of difficulty of trails and slopes to the extent reasonably possible before skiing on any slope or trail,” etc. Or. Rev. Stat. § 30.985(1). “Violation of any of [these duties] entitles the ski area operator to withdraw the violator's privilege of skiing.” Or. Rev. Stat. § 30.985(2).
Both the School and OISRA require coaches to complete general trainings on working with children, safety protocols, and communication guidelines. Dalzell Dep. 14-15 (doc. 52-12); Fahlgren Dep. 18-19 (doc. 52-13); Sellens Dep. 9-10 (doc. 52-14); Hager Decl. Ex. 1, at 3-4 (doc. 66-1).
III. The Accident and Underlying Lawsuits
On February 14, 2017, Mr. Fahlgren collided with DV, a minor, following a practice session at Mt. Hood Ski Bowl. DV's father, Joel Vermillion, witnessed the accident. DV sustained serious injuries. Mr. Fahlgren immediately reported the accident to both OISRA and the School. Dalzell Dep. Ex. 11 (doc. 52-12); Fahlgren Dep. 77 (doc. 52-13).
On June 20, 2017, DV, through his guardian ad litem, filed suit against Mr. Fahlgren, OISRA, and the District, alleging that, at all material times, Mr. Fahlgren “was working and volunteering in the scope and course of his employment with OISRA and Gresham-Barlow School District and was acting as an actual and apparent agent of OISRA and Gresham-Barlow School District.” Walker Decl. Ex. 7, at 2 (doc. 52-7). DV alleged further that Mr. Fahlgren's negligence - i.e., “going too fast for conditions” and skiing with “impaired visibility while carrying the gates” - caused the accident and DV's corresponding injuries, including “a traumatic brain injury, multifocal intra-parenchymal hemorrhages, right subarachnoid hemorrhage, extensive diffuse axonal injury, left femur fracture, left clavicular fracture, left hemiparesis, displaced nasal bone fracture, tooth trauma, [and] impaired cognition.” Id. at 2-3. DV sought $6,000,000 in noneconomic damages and $10,000,000 in economic damages. Id. at 3.
On February 7, 2019, Mr. Vermillion filed a separate lawsuit against Mr. Fahlgren, OISRA, and the District, seeking $1,500,000 in non-economic damages due to the emotional distress he experienced witnessing his son's accident and injury. Walker Decl. Ex. 8, at 3 (doc. 52-8). Mr. Vermillion's lawsuit was also premised on Mr. Fahlgren's negligence while “working and volunteering in the scope and course of his employment with OISRA and Gresham-Barlow School District” and “acting as an actual and apparent agent of OISRA and Gresham-Barlow School District.” Id. at 2.
IV. Insurance and Defense of Mr. Fahlgren
At the time of the accident, State Farm insured Mr. Fahlgren under homeowner's insurance and umbrella policies. See generally Walker Decl. Exs. 1-2 (doc. 52). The homeowner's policy had a $100,000 liability limit, and the umbrella policy had a $1,000,000 liability limit.
ASIC insured OISRA pursuant to commercial general liability and excess policies. See generally Walker Decl. Exs. 3-4 (doc. 52). ASIC's policies had a $1,000,000 primary coverage limit and a $4,000,000 excess coverage limit.
PACE only provides coverage to public education organizations in Oregon and issued liability declarations listing the District as a “Named Participant.” Jensen Decl. ¶¶ 3, 5 (doc. 56); see generally Walker Decl. Ex. 5 (doc. 52-5). PACE's coverage document had a $500,000 peroccurrence “Primary Limit of Liability” and a $9,500,000 “Increased Limit of Liability,” for a “Total Limit of Liability” of $10,000,000.
On July 2, 2017, the District “was served with the initial complaint.” ASIC's Resp. to Interrog. 6 (doc. 66-2). The District provided notice to PACE of DV's lawsuit on July 11, 2017. Def.'s Resp. to Interrog. 3 (doc. 52-11). The District retained counsel and tendered the defense to ASIC, which ASIC accepted. Id. at 5; Jensen Decl. Ex. 1 (doc. 65-1). Based on OISRA's indemnity obligation and ASIC's acceptance, “PACE did not expect that it would need to participate in payment of any settlement or judgment,” but was nonetheless willing “to contribute a reasonable and appropriate amount toward a global settlement.” Jensen Decl. ¶¶ 4-5 (doc. 65).
Plaintiffs defended Mr. Fahlgren against the underlying lawsuits, ultimately settling DV and Mr. Vermillion's claims for $5,500,000 in May 2019. McAlister Decl. pg. 1 (doc. 52-10); Lopez Decl. pg. 2 (doc. 57-1). Although PACE participated in the District's defense and settlement negotiations, it ultimately decided that the amount plaintiffs offered was too high, such that plaintiffs paid the entire settlement amount with no contribution from PACE. Id. at 2; Def.'s Resp. to Interrog. 3, 5 (doc. 52-11); Jensen Decl. ¶ 8 (doc. 56).
V. Proceedings Before This Court
ASIC initiated this lawsuit on January 14, 2021, alleging claims for: (1) declaratory judgment as to PACE's duty to defend and indemnify, and the parties' priority of coverage, (2) contractual subrogation; (3) equitable subrogation; and (4) equitable contribution. See generally ASIC's Compl. (doc. 1). On March 15, 2021, State Farm intervened in this lawsuit, asserting substantively identical claims. See generally State Farm's Compl. (doc. 19).
The parties unsuccessfully attempted to settle this lawsuit on March 18, 2022. In March and April 2022, the present summary judgment motions were filed. Briefing was completed in regard to those motions on May 20, 2022.
STANDARD OF REVIEW
Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, affidavits, and admissions on file, if any, show “that there is no genuine dispute as to any material fact and the [moving party] is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Substantive law on an issue determines the materiality of a fact. T.W. Elec. Servs., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). Whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party determines the authenticity of the dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party shows the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings and identify facts which show a genuine issue for trial. Id. at 324.
Special rules of construction apply when evaluating a summary judgment motion: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. T.W. Elec., 809 F.2d at 630.
DISCUSSION
Plaintiffs assert summary judgment is warranted in regard to PACE's duties to defend and indemnify, and PACE's allocation of damages (i.e., $3,054,500 of the total $5,500,000 settlement, plus defense costs). PACE, in turn, raises myriad arguments, allegations, and theories in opposing plaintiffs' motion and cross-moves for summary judgement as to all of plaintiffs' claims.
In its reply brief, State Farm clarified that it “seeks summary judgment only on the claims for declaratory relief and equitable contribution” and “does not seek summary judgment on any other claims.” State Farm's Reply to Mot. Summ. J. 2 (doc. 73).
The parties' litigation tactics make elusive and impractical any comprehensive attempt to resolve the merits of this case in spite of the unusually extensive briefing. Cf.Juliana v. United States, 339 F.Supp.3d 1062, 1075 (D. Or. 2018), rev'd on other grounds by 947 F.3d 1159 (9th Cir. 2020) (“even if the standards of Rule 56 are met, a court has discretion to deny a motion for summary judgment if it believes that the better course would be to proceed to a full trial”) (citing Anderson, 477 U.S. at 255). Accordingly, the Court's analysis is limited to issues that are both dispositive and properly raised/briefed.
I. Relevant Policy Terms
PACE's Liability Coverage Document states:
[T]he Trust will pay on behalf of the Participant those sums which the Participant shall be legally obligated to pay as Damages because of Bodily Injury, Personal Injury, Property Damage and Wrongful Acts to which the following applies:
Coverage A: Liability for Damages caused by a Tort arising under and governed by the Oregon Tort Actions Against Public Bodies Act, including the limits of liabilities set forth therein, Oregon Revised Statutes 30.260 to 30.300. This coverage applies to liability caused by an Occurrence or Wrongful Act as defined in this Coverage Document.
Coverage B: Liability for Damages arising out of Federal Claims, as defined herein, including Wrongful Acts arising from Employment Practices and from the Administration of Employee Benefit Programs. This coverage for Employment Practices liability and Employee Benefits Programs liability applies to any damage sustained by an Employee. This coverage applies to liability caused by an Occurrence or Wrongful Act as defined in this Coverage Document.
Coverage C: Liability for Damages arising out of Bodily Injury, Property Damage, or Personal Injury, arising out of an Occurrence and which is subject to the laws and jurisdiction of any State of the United States of America or other jurisdiction within the Coverage Territory to which this Coverage Document applies other than the State of Oregon. Walker Decl. Ex. 5, at 24 (doc. 52-5).
A “Participant” is defined as: “The Named Participant and each of the following while acting within the course and scope of their duties[:] Employees [and] Volunteers and Agents.” Id. at 57-58. Neither “volunteer” nor “agent” is contractually defined; however, “employee” means “a current, former, prospective employee, or one who claims to be, or is deemed by law to be, an employee of the Named Participant.” Id. at 52. And “Tort” is “defined by ORS 30.260(8) and means the breach of a legal duty that is imposed by law, other than a duty arising from contract or quasi-contract, the breach of which results in injury to a specific person or persons for which the law provides a civil right of action for Damages or for a protective remedy.” Id. at 60.
The “Defense” provision goes on to specify: “The Trust shall have the right and duty to defend any Suit or Action against a Participant seeking Damages on account of liability covered by Coverages A, B and C even if any of the allegations of the Suit or Action are groundless, false or fraudulent, and to make any such investigation and settlement of any Suit or Action it deems expedient.” Id. at 25. And the “Limits of Liability” provision specifies that the “Per Occurrence Limit (Total Limits of Liability) shown in the Declarations” - i.e., $10,000,000 - “is the most the Trust will pay for the sum of all Damages under Coverage A, Coverage B, and Coverage C, whether one or more of these Coverages are involved in a single covered Occurrence and/or Wrongful Act.” Id. at 16, 44, 54. Finally, PACE's “Other Coverage or Insurance” provision indicates:
If the Participant has other applicable, collectible coverage of any kind, including insurance, that applies to the Claim, the coverage for Damages provided by this Coverage Document shall be excess, and in no event, contributing coverage, and then only for the amount for Damages which would be payable on behalf of the Participant under such forms of coverage. In no event, however, shall the liability hereunder exceed the Limits of Liability set forth herein.Id. at 47-48.
Plaintiffs' policies also have “other insurance” provisions. In particular, State Farm's homeowners and umbrella policies indicate that any coverage must be in “excess over all other insurance and self insurance.” Walker Decl. Ex. 1, at 26 (doc. 52-1); Walker Decl. Ex. 2, at 16 (doc. 52-2). ASIC's policy has a more complex “other insurance” provision that reads:
a. Primary Insurance
This insurance is primary except when Paragraph b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in Paragraph c. below.
b. Excess Insurance
(1) This insurance is excess over:
(a) Any other insurance, whether primary, excess, contingent or on any other basis: (i) That is Fire, Extended Coverage Builder's Risk, Installation Risk or other similar coverage for “your work”: (ii) That is Fire Insurance for premises rented to you or temporarily occupied by you with the permission of the owner; (iii) That is insurance purchased by you to cover your liability as a tenant for “property damage” to premises rented to you or temporarily occupied by you with the permission of the owner; (iv) If the loss arises out of the maintenance or use of aircraft, “autos” or watercraft to the extent not subject to Exclusion g. of Section I- Coverage A - Bodily Injury And Property Damage Liability.
(b) Any other primary coverage to you covering your liability for damages arising out of the premises or operations, or the products and completed operations, for which you have been added as an additional insured . . .
c. Method Of Sharing
If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first. If any of the other insurance does not permit contribution by equal shares we will contribute by limits. Under this method, each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.Walker Decl. Ex. 3, at 40 (doc. 52-1). In other words, ASIC has primary coverage for any loss involving a common insured unless one of several specific exceptions are triggered (none of which are implicated by the underlying lawsuits). Thus, when read together, the aforementioned policies reflect that ASIC's insurance is primary, whereas State Farm and PACE owed excess coverage.
II. Contractual Subrogation Claims
“Where the assignment of a valid contract occurs, ‘an assignee stands in the shoes of the assignor and acquires no greater interest than the assignor possessed.'” U.S. ex rel. Nw. Cascade Inc. v. Colamette Const. Co., 2014 WL 5092253, *6 (D. Or. Oct. 8, 2014) (quoting Commonwealth Elec. Co. v. Fireman's Fund Ins. Co., 93 Or.App. 435, 438, 762 P.2d 1041 (1988)); see also Certain Underwriters at Lloyd's London & Excess Ins. Co. Ltd. v. Mass. Bonding & Ins. Co., 235 Or.App. 99, 112-13, 230 P.3d 103 (2010), rev. denied, 349 Or. 173, 243 P.3d 468 (“the right to equitable contribution among insurers is not based on a subrogation or contract theory, whereby an insurer stands in the shoes of its insured”).
Here, PACE asserts that plaintiffs' assignment-based claims fail as a matter of law for lack of damages. In particular, PACE contends that Mr. Fahlgren has no direct claim against PACE since plaintiffs “confirm that they paid [his] defense costs and funded the settlement of the Underlying Actions.” Def.'s Resp. to Mot. Summ. J. 15 (doc. 64). State Farm's response is wholly silent as to this theory of liability and ASIC's opposition simply denotes that “PACE cites to no legal authority to support its position that because Plaintiffs paid to defend and settle on Fahlgren's behalf [he] was not damaged.” ASIC's Reply to Mot. Summ. J. 8 (doc. 69); but see Slover v. Or. State Bd. of Clinical Soc. Workers, 144 Or.App. 565, 570, 927 P.2d 1098 (1996) (articulating the elements of a breach of contract claim, including “damages to the plaintiff”); Celotex, 477 U.S. at 322 (summary judgment should be entered against “a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden on proof at trial”). Given the lack of material opposition, coupled with well-settled precedent dictating that Mr. Fahlgren must have a valid claim for damages in order to effectuate a meaningful assignment, PACE's motion should be granted as to plaintiffs' contractual subrogation claims.
PACE also moves against plaintiffs' declaratory judgment claims because they are purportedly based on the assignment of Mr. Fahlgren's rights. However, “[i]n the context of private party contract dispute, the dispositive inquiry for determining the existence of a declaratory judgment claim is whether there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Metke v. Bank of N.Y. Mellon, 2018 WL 7131956, *4 (D. Or. Dec. 4, 2018), adopted by 2019 WL 1590574 (D. Or. Apr. 11, 2019) (citation and internal quotations omitted). As addressed in greater detail below, determinations regarding PACE's duty to defend and indemnify are instrumental to plaintiffs' equitable contribution claims, such that the Court finds no basis to grant summary judgment in PACE's favor as to plaintiffs' declaratory judgment claims.
III. Equitable Subrogation Claims
Equitable subrogation “enables a secondarily liable party who has been compelled to pay a debt to be made whole by collecting that debt from the primarily liable party who, in good conscience, should be required to pay.” Koch v. Spann, 193 Or.App. 608, 612, 92 P.3d 146, rev. denied, 337 Or. 547, 100 P.3d 217 (2004). Further, “equitable subrogation will not be enforced where it will work injustice to those having equal equities.” Ochoco Lumber Co. v. Fibrex & Shipping Co., Inc., 164 Or.App. 769, 775, 994 P.2d 793 (2000) (citation and internal quotations omitted).
Although PACE explicitly moves against plaintiffs' equitable subrogation claims, neither party proffers any response. See Justice v. Rockwell Collins. Inc., 117 F.Supp.3d 1119, 1134 (D. Or. 2015), aff'd, 720 Fed.Appx. 365 (9th Cir. 2017) (“if a party fails to counter an argument that the opposing party makes in a motion, the court may treat that argument as conceded”) (citation and internal quotations and brackets omitted). Regardless, ASIC does not dispute, nor can it, that OISRA's policy is primary. And because State Farm and PACE are both excess insurers covering parties subject to OISRA's indemnification, they are on equal footing. As a result, PACE's motion should be granted as to plaintiffs' equitable subrogation claims.
IV. Equitable Contribution Claims
The “equitable doctrine [of contribution] holds that one who pays money for the benefit of another is entitled to be reimbursed.” Carolina Cas. v. Or. Auto., 242 Or. 407, 417, 408 P.2d 198 (1965). Such “claims by one insurer against co-insurers are not uncommon” and are “based on the terms of the insurance policies that establish common obligations of different insurers for covered claims against the same insured.” Allianz Global Risks U.S. Ins. Co. v. Ace Prop. & Cas. Ins. Co., 367 Or. 711, 739, 483 P.3d 1124 (2021).
As such, the right to equitable contribution in this context turns on whether the defendant insurer had a duty to defend or indemnify. An insurer's duty to defend an insured is dictated by the insurance policy and the complaint. Ledford v. Gutoski, 319 Or. 397, 399, 877 P.2d 80 (1994). “[I]f the complaint contains allegations of covered conduct[,] then the insurer has a duty to defend, even if the complaint also includes allegations of excluded conduct.” Abrams v. Gen. Star Indem. Co., 335 Or. 392, 400, 67 P.3d 971 (2003); see also Oakridge Cmty. Ambulance Serv. v. U.S. Fidelity & Guar. Co., 278 Or. 21, 24, 563 P.2d 164 (1977) (“[t]he insurer's knowledge of facts not alleged in the complaint is irrelevant in determining the existence of the duty to defend”). Essentially, “[t]he insurer has a duty to defend if the complaint provides any basis for which the insurer provides coverage,” such that the insurer may permissibly abdicate this duty only where the underlying lawsuits “clearly fall . . . outside the coverage of the policy.” Ledford, 319 Or. at 400-03 (emphasis in original). “Any ambiguity in the complaint with respect to whether the allegations could be covered is resolved in favor of the insured.” Id. at 400.
An insurer's breach of the duty to defend does not, however, create “liab[ility] for settlement costs unless the underlying claim is covered.” Nw. Pump & Equip. Co. v. Am. States Ins. Co., 144 Or.App. 222, 226-27, 925 P.2d 1241 (1996) (as modified). That is, “the duty to indemnify is established by proof of actual facts demonstrating a right to coverage” and the “scope of an insurer's risk is determined by the terms of the policy.” Id. “To allow coverage beyond those terms - for example, to require an insurer to cover a loss that is otherwise subject to an exclusion - would be to allow the insured to obtain more than it bargained for: coverage for a noncovered claim.” Id. at 227.
A. Whether Mr. Fahlgren Qualifies as a “Participant” Under PACE's Policy
As set out above, PACE's coverage document insured employees, volunteers, and agents of the “Named Participant” - i.e., the District - against damages for tort injuries that fall under the OTCA. Walker Decl. Ex. 5, at 57-58 (doc. 52-5). The underlying complaints expressly allege that Mr. Fahlgren was the District's volunteer coach and employee/agent, acting within “the scope and course of his employment with [the District]” at the time he negligently caused physical injury to DV. Walker Decl. Ex. 7, at 2-3 (doc. 52-7); Walker Decl. Ex. 8, at 2-3 (doc. 52-8). And DV and Mr. Vermillion both sought monetary damages associated with Mr. Fahlgren's negligence. Walker Decl. Ex. 7, at 3 (doc. 52-7); Walker Decl. Ex. 8, at 3 (doc. 52-8). While PACE asserts there are open questions concerning whether Mr. Fahlgren “fits under one of the Participant categories under the Coverage Document,” it acknowledges that Mr. Fahlgren was the “volunteer ski coach . . . for students of [the District].” Def.'s Resp. to Mot. Summ. J. 2 (doc. 64).
As a result, there is no need for the Court to go beyond the “eight corners” of the complaint and policy; even if there were, extrinsic evidence clearly establishes Mr. Fahlgren as a “Participant.” Although whether Mr. Fahlgren can be characterized as an “employee” under PACE's policy is neither clear from the record nor adequately briefed by the parties, it is beyond meaningful dispute that he qualified, at a minimum, as a District volunteer (as that term is commonly defined and understood). See Black's Law Dictionary (11th ed. 2019) (defining “volunteer” as “[s]omeone who gratuitously and freely confers a benefit on another”).
As addressed in greater detail below, the fact that Mr. Fahlgren may have also been a volunteer and/or agent of OISRA does not, as a matter of law, negate his status as such with the District. See Abrams, 335 Or. at 397-400 (duty to defend exists even if there are claims or conduct alleged that fall outside of the policy). Moreover, PACE's assertions concerning issues of material fact “regarding the duty to defend [because there] is no evidence Fahlgren tendered the defense of the lawsuits to PACE” is unavailing. Def.'s Resp. to Mot. Summ. J. 18 (doc. 64). DV effectuated service of the complaint on the District, who then tendered notice to PACE (PACE, in turn, obtained counsel). Def.'s Resp. to Interrog. 3 (doc. 52-11); ASIC's Resp. to Interrog. 6 (doc. 662). Oregon law requires nothing more. Or. Ins. Guar. Ass'n v. Thompson, 93 Or.App. 5, 11, 760 P.2d 890 (1988), rev. denied, 307 Or. 303, 767 P.2d 443 (1989).
Mr. Fahlgren qualified as a covered “Participant” under PACE's policy. Plaintiffs' motion should be granted as to this issue.
B. Limitations on the Extent of PACE's Liability
It is undisputed that the underlying lawsuits did not involve a federal claim or a claim emanating from outside the State of Oregon, such that any liability arises under PACE's “Coverage A” provision. It is also undisputed that the underlying lawsuits emanate from a “Tort” as defined by both PACE's policy and the OTCA. And, as addressed in Section IV(A), Mr. Fahlgren is a covered “Participant.” Accordingly, PACE's contribution limit hinges on the plain language of PACE's coverage document and whether Mr. Fahlgren can be characterized as the actual agent of a public body under Oregon law.
i. Interpretation of PACE's Coverage Document
In interpreting an insurance contract under Oregon law, the court first determines whether the provision at issue is ambiguous. Allianz, 367 Or. at 734. A contractual term is ambiguous “if it has no definite significance or if it is capable of more than one sensible and reasonable interpretation.” Batzer Const., Inc. v. Boyer, 204 Or.App. 309, 313, 129 P.3d 773, rev. denied, 341 Or. 366, 143 P.3d 239 (2006) (citation and internal quotations omitted). For potentially ambiguous or flexible terms, “the court considers the context in which the term appears and then the context of the policy as a whole.” Allianz, 367 Or. at 734. “[I]f ambiguity remains, the term is construed against the drafter - here, the insurer.” Id.
The Court finds PACE's “Coverage A” provision unambiguous. Indeed, it clearly specifies that PACE will pay “on behalf of the Participant” - i.e., Mr. Fahlgren - only “those sums which [he] shall be legally obligated to pay as . . . Damages caused by a Tort arising under and governed by the Oregon Tort Actions Against Public Bodies Act, including the limits of liabilities set forth therein, Oregon Revised Statutes 30.260 to 30.300” Walker Decl. Ex. 5, at 24 (doc. 52-5) (emphasis added). Thus, PACE's coverage document specifically names the governing statutory scheme, as well as the applicable (and discrete) statutory provisions. As addressed in greater detail below, Or. Rev. Stat. § 30.272, entitled “Limitations in liability of local public bodies for personal injury and death,” specifies the dollar amount of damages available, adjusted for inflation.
No other term or clause in PACE's coverage document alters or amends the “Coverage A” provision's clear limit on liability for claims derived from “Torts.” Moreover, no word or phrase in the “Coverage A” provision is inherently flexible, open to more than one reasonable interpretation, or otherwise drafted so broadly so as to be “obscure to the point of being incomprehensible.” N.Pac. Ins. Co. v. Hamilton, 332 Or. 20, 27-29, 22 P.3d 739 (2001). As such, the precedent on which State Farm relies - i.e., Hamilton - is distinguishable, especially because the policy holder in this case is not an individual simply seeking automobile insurance but rather a sophisticated entity that is accustomed to contracting and litigating. For PACE, there is simply no coverage under the present circumstances unless damages associated with the breach of legal duty resulting in injury are subject to Or. Rev. Stat. § 30.272.
Plaintiffs' attempts to interject ambiguity into PACE's coverage document are unpersuasive for two reasons. First, it is axiomatic that unequivocal terms must be read in accordance with their plain meaning. The fact that plaintiffs proffer an interpretation of “the Coverage A” provision that is antithetical to its express language does not necessitate construing the policy “against PACE and in favor of extending coverage for the insured” for up to the “Total Limits of Liability.” State Farm's Mot. Summ. J. 23 (doc. 52); see also Hoffman Constr. Co. of Ala. v. Fred S. James & Co., 313 Or. 464, 469-71, 836 P.2d 703 (1992) (“[f]or a term to be ambiguous in a sense that justifies [construing the policy against the insurer] there needs to be more than a showing of two plausible interpretations; given the breadth and flexibility of the English language, the task of suggesting plausible alternative meanings is no challenge to capable counsel”).
Second, plaintiffs' reliance on the “Limits of Liability” provision is immaterial where, as here, no word or phrase in the “Coverage A” provision is open to more than one reasonable interpretation. See Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 237 Or.App. 468, 476, 240 P.3d 67 (2010), rev. denied, 349 Or. 602, 249 P.3d 123 (2011) (court's first inquiry surrounds the term or provision in question, “applying any definitions contained in the policy and otherwise giving words their plain, ordinary meanings” - if “that examination yields only one plausible interpretation of the disputed terms, our analysis goes no further”) (citing Hoffman, 313 Or. at 46971); see also State v. Heisser, 350 Or. 12, 25, 249 P.3d 113 (2011) (courts “first examine the text of the disputed provision . . . [if] clear, the analysis ends”) (citation and internal quotations and brackets omitted).
Regardless, even when the “Coverage A” provision is read in conjunction with the “Limits of Liability” provision, PACE's policy remains clear. Nor does the “Limits of Liability” provision support plaintiffs' interpretation of the contract, which is essentially “that Coverage A payments are limited to $10 million.” ASIC's Resp. to Mot. Partial Summ. J. 6 (doc. 63); State Farm's Mot. Summ. J. 23 (doc. 52). Rather, the “Limits of Liability” provision - which states the “Per Occurrence Limit (Total Limits of Liability) shown in the Declarations is the most the Trust will pay for the sum of all Damages under Coverage A, Coverage B, and Coverage C, whether one or more of these Coverages are involved in a single covered Occurrence and/or Wrongful Act” - sets an overall limit for any one suit, even one involving state law torts subject to the OTCA, federal claims, and claims that do not arise under the laws of this jurisdiction. Walker Decl. Ex. 5, at 5, 44 (doc. 52-5). It does not somehow undo Or. Rev. Stat. § 30.272 or expand the amount of damages available under the “Coverage A” provision.
This is consistent with other provisions of PACE's policy, which set individual per occurrence limits, along with a larger aggregate loss limit of $10,000,000. See, e.g., Id. at 1, 10; see also id. at 47-48 (PACE's “Other Coverage or Insurance” provision stipulating that excess coverage is “only for the amount for Damages which would be payable on behalf of the Participant under such forms of coverage” but “[i]n no event . . . shall the liability hereunder exceed the Limits of Liability set forth herein”) (emphasis added).
Furthermore, the fact that there is “no provision specifically dealing with an insured who has liability in excess of the [O]TCA” does not obviate the “Coverage A” provision's express limit on liability. State Farm's Resp. to Partial Mot. Summ. J. 3-4 (doc. 62). Accepting State Farm's argument would render other language within PACE's coverage document meaningless - namely, that which distinguishes between “Coverage A” for “Torts” (and which explicitly incorporates the OTCA's limits on liability), and “Coverages B and C” for federal claims and claims otherwise not subject to the laws of the State of Oregon, respectively (neither of which are subject to the OTCA or reference any damages cap). Walker Decl. Ex. 5, at 24 (doc. 52-5); see also Williams v. RJ Reynolds Tobacco Co., 351 Or. 368, 379, 271 P.3d 103 (2011) (“[t]he court must, if possible, construe the contract so as to give effect to all of its provisions”).
The OTCA statutory cap applies to limit PACE's liability for claims that arise pursuant to the “Coverage A” provision. For causes of action transpiring on or after July 1, 2016, and before July 1, 2017, a school district's damages are capped at $1,382,300 for multiple claimants. Or. Rev. Stat. § 30.272; Hager Decl. Exs. 1-2 (doc. 55); see also Heng-Nguyen v. Tigard-Tualatin Sch. Dist.23J, 275 Or.App. 724, 726, 365 P.3d 1173 (2015) (school districts are “public bodies” subject to the OTCA). PACE's motion should be granted, and plaintiffs' motion should be denied, in this regard.
ii. Whether Mr. Fahlgren Qualifies as an Actual Agent Under Oregon Law
The OTCA “waives the state's sovereign immunity and [in exchange] imposes, as a matter of Oregon law, a legal limit on the amount of damages that a plaintiff may recover.” Horton v. Oregon Health & Sci. Univ., 359 Or. 168, 173, 376 P.3d 998 (2016). In particular, “[t]he sole cause of action for a tort committed by officers, employees or agents of a public body acting within the scope of their employment or duties . . . is an action under ORS 30.260 to 30.300.” Or. Rev. Stat. § 30.265(2). As a corollary, the OTCA requires public bodies to defend and indemnify their employees and agents “against any tort claim or demand, whether groundless or otherwise, arising out of an alleged act or omission occurring in the performance of duty.” Or. Rev. Stat. § 30.285(1).
This statutory scheme has been construed to exclude from its protection a person who acts merely as an ostensible, or apparent, agent of the public body. Giese v. Bay Area Health Dist., 101 Or.App. 410, 415, 790 P.2d 1198, rev. denied, 310 Or. 281, 796 P.2d 1206 (1990). Actual agency, in turn, “depends on whether the functions performed are on behalf of the public body and whether the public body has the right to control the agent.” Bridge By & Through Severson v. Carver, 148 Or.App. 503, 941 P.2d 1039, rev. denied, 326 Or. 57, 944 P.2d 947 (1997).
PACE asserts that, under Vaughn v. First Transit, Inc., 346 Or. 128, 206 P.3d 181 (2009) -holding the OTCA makes a public body liable for “only those [torts] for which the agent's principal would be liable under common-law standards” - the District cannot be vicariously liable for Mr. Fahlgren's acts. Vaughn concerned the negligent driving of an employee for a transportation company that provided shuttle bus services for the public body that owned and operated the airport. Id. at 131. Although Vaughn provides an extensive analysis of the law of agency, the court's ruling was dictated by the nature of the relationship between the parties in light of the particular injury that occurred. Other cases, which remain good law, have formulated the concept of agency somewhat differently where, as here, a direct volunteer relationship exists with the public body. For instance, in Samuel v. Frohnmayer, 82 Or.App. 375, 728 P.2d 97 (1986) (as modified), rev. denied, 303 Or. 261, 735 P.2d 1224 (1987), the court stated “control is not necessary to establish an agency relationship in the context of the OTCA, at least with respect to those who volunteer their services to the state at its request . . . The state receives an invaluable service from persons who are willing to volunteer their time and energy to the community. Public policy dictates that they be encouraged, rather than discouraged, to volunteer by holding them harmless from personal liability arising out of services performed on behalf of the state.” Id. at 380. Accordingly, under Samuel's formulation, a volunteer is deemed an actual agent of the public body if either “that person performs a function or responsibility of the public body on behalf of the public body” or “that person meets the usual ‘control' tests with respect to the manner of performance of duties.” Id. (citation and internal quotations omitted; emphasis in original). The Court need not resolve the precise confines of a public body's potential liability for its direct volunteers and putative agents because, even under Vaughn's formulation, Mr. Fahlgren falls within the purview of the OTCA. Indeed, Vaughn made clear that, for a public body “to be vicariously liable for the negligent driving of [a non-employee agent, the public body] would have to have the same right to control that driving as it would have over the driving of its own employees.” Vaughn, 346 Or. at 141-42. In other words, the dispositive inquiry is whether the School had an analogous amount of control over Mr. Fahlgren's day-to-day performance of the activity that caused the injury - i.e., volunteer coaching - as it did over its employees. As addressed herein, a reasonable jury could answer that question in the affirmative.
Initially, the fact that Mr. Fahlgren is a covered “Participant” undermines PACE's subsequent arguments. To wit, PACE's first motion asserted that any duty to defend or indemnify arises under the “Coverage A” provision, which insures, amongst other “Participants,” the District's volunteers from damages caused by “Torts” that fall within the OTCA and are subject to the “limits of liability” set forth therein. Yet PACE's second motion contends that Mr. Fahlgren is not entitled to coverage at all - not under the express and unambiguous terms of the “Coverage A” provision or any policy exclusion, but rather by operation of Oregon law.
The OTCA itself does not define “employee” or “agent.” See, e.g., Or. Rev. Stat. § 30.260. Under these circumstances, Oregon law dictates that those terms “should be understood in light of the general common law of agency” - i.e. a separate body of law that is not incorporated by reference into PACE's coverage document. Medina v. City of Portland, 2015 WL 4425876, *7 (D. Or. July 17, 2015) (citations and internal quotations omitted). Obscuring matters further is the fact that PACE's policy provides a more expansive definition of “employee” than Oregon common law, and also purports to cover individuals or entities that would otherwise not fall within the OTCA. See Walker Decl. Ex. 5, at 52 (doc. 52-5) (“employee” means “a current, former, prospective employee, or one who claims to be, or is deemed by law to be, an employee of the Named Participant”). Essentially, PACE maintains that the “Coverage A” provision does not apply to any qualified “Participant” but only to the District's employees or agents, as those terms are defined by Oregon common law. Yet this is not what PACE's policy actually says. PACE could have limited its definition of “Participants” or more clearly drafted the “Coverage A” provision to apply exclusively to the District's officers, employees, or actual agents, but chose not to. And, of course, any internal inconsistency or ambiguity related to the extent of PACE's coverage for “Participants” under the “Coverage A” provision would be construed against PACE.
In any event, it is undisputed Mr. Fahlgren was performing coaching services for the benefit of the School at the time of DV's accident. See Fahlgren Dep. 98 (doc. 52-13) (Mr. Fahlgren identifying himself as the “Barlow High Ski Coach” on the incident report related to DV's accident). Indeed, the uncontroverted testimony of the School's activities director reflects that Mr. Fahlgren was representing the School every time he set foot on the mountain in his capacity as volunteer ski coach. Dalzell Dep. 40-43 (doc. 52-12).
Additionally, the School exercised considerable control over the time, place, and circumstances of Mr. Fahlgren's coaching. Although the School did not set the hours of practices and meets, Mr. Fahlgren was necessarily required to conduct all such events within certain School-sanctioned time-frames (i.e., outside of classroom hours) and at certain School-sanctioned locations (i.e., on campus or at the mountain). He was interviewed, hired, vetted, and credentialed by the School, and was accountable to its activities director. Dalzell Dep. 13-14, 40-41, 52, 54 (doc. 52-12); Fahlgren Dep. 9 (doc. 52-13). While Mr. Fahlgren retained discretion in terms of the manner in which he trained, supported, and selected his students, he was required to report his schedule to the School (so that it could be made publicly available through the School's website) and attend monthly School meetings. Dalzell Dep. 20-21, 27 (doc. 52-12); Fahlgren Dep. 25 (doc. 52-13). The School, in conjunction with OISRA, mandated certain trainings related to safety and student engagement. Dalzell Dep. 14-15 (doc. 52-12); Fahlgren Dep. 18-19 (doc. 52-13); Sellens Dep. 9-10 (doc. 52-14); Hager Decl. Ex. 1, at 3-4 (doc. 66-1). The School made equipment, transportation, and facilities available to Mr. Fahlgren and allowed him to fundraise. Dalzell Dep. 11, 18-19, 22, 28-29, 37-38, 42-44 (doc. 52-12); Fahlgren Dep. 19-20, 28 (doc. 52-13).
Finally, the School's activities director testified that the only material difference between how the School treats OSAA-sanctioned and non-OSAA teams is funding (i.e., some, but not all, OSAA-sanctioned teams are partially School funded). Dalzell Dep. 41 (doc. 52-12). The School's activities director confirmed that the majority of the coaches of its OSAA-sanctioned sports are also non-employee volunteers and subject to similar oversight, albeit by the School's athletics director. Id. at 5, 30-33.
Thus, while PACE strenuously maintains that “OISRA has the primary control over the coaches' performance on the ski slopes,” there is evidence in the record from which the jury could find that Mr. Fahlgren was acting as the actual agent of the School for the purposes of the OTCA at the time of DV's injury. Def.'s Resp. to Mot. Summ. J. 14 (doc. 64); see alsoMoxness v. City of Newport, 89 Or.App. 265, 268-69, 748 P.2d 1014, rev. denied, 306 Or. 79, 757 P.2d 853 (1988) (affirming the trial court's finding that the state was required to indemnify the city for its negligence related to a state road sign, where the state did not install the sign but had the right to inspect and control its re-erection, even if that control was never exercised). PACE's motion should be denied as to this issue.
PACE emphasizes OISRA's purported control over the manner of Mr. Fahlgren's skiing and on-mountain activities. Yet had the injury occurred following a dryland training at the School while Mr. Fahlgren was moving equipment, it is doubtful that PACE would argue over the manner of Mr. Fahlgren's equipment movement or the location of his negligence. And in either training circumstance (whether dryland or mountain), the School had the same level of control over Mr. Fahlgren's coaching activities. Skiing is particular to snow and the District should not be able to escape liability given the express terms of PACE's policy simply because the School does not have on-site mountain facilities. Furthermore, an independent review of OISRA's policies reveals that OISRA did not exercise a significantly greater amount of control over Mr. Fahlgren's on-mountain activities than the School. Critically, OISRA's policies provide broad information about coaching and ethics - there is nothing in the record before the Court indicating that OISRA required Mr. Fahlgren to ski or coach in any particular manner not already prescribed by the School or common sense (except to the extent OISRA's rules required Mr. Fahlgren to verify his students' academic performances and attend member meetings). See generally Hager Decl. Ex. 1 (doc. 66-1); see also Sellens Dep. 17-20, 23 (doc. 52-14) (OISRA's representative testifying that the only limitation imposed on coaches' actual skiing is that it be done in accordance with Oregon's general safety rules, such that there were no requirements relating to the use or transportation of gates at practices).
C. PACE's Remaining Arguments
PACE makes three additional arguments in support of its assertion that plaintiffs have no right to equitable contribution. First, PACE maintains that the settlement was unreasonable in light of the exclusivity of the OTCA's remedy. Second, PACE asserts that no right to contribution exists because OISRA, via its membership application and policies, agreed to indemnify Mr. Fahlgren and the School. Finally, PACE asserts that plaintiffs' “inequitable conduct” of “fund[ing] the settlement of all claims without PACE's contribution, before they even heard PACE's most recent offer at the mediation,” should preclude any contribution obligation. Def.'s Resp. to Mot. Summ. J. 24 (doc. 64).
i. Reasonableness of the Settlement
As addressed herein, the OTCA is the exclusive remedy for claims against public bodies, such as school districts and their agents or employees. But, by its express terms, the OTCA does not limit liability for claims against non-public bodies, or agents or employees acting outside of the scope of their professional relationship with the public entity. Further, Oregon law recognizes dual agency for liability purposes - i.e., that a single individual can be acting on behalf of two principals at the same time. Shepard v. Sisters of Providence in Or., 89 Or.App. 579, 585, 750 P.2d 500 (1988); see also Holger v. Irish, 113 Or.App. 290, 834 P.2d 1028 (1992), aff'd, 316 Or. 402, 851 P.2d 1122 (1993) (“[a]n agent may, of course, serve two principals simultaneously”).
PACE appears to recognize that Mr. Fahlgren was acting as OISRA's agent at the time of DV's injury. See, e.g., Def.'s Resp. to Mot. Summ. J. 14 (doc. 64). If Mr. Fahlgren is a dual agent, as is alleged in DV and Mr. Vermillion's complaints and borne out by the record, then he owes a legal duty to both OISRA and the School when coaching. Consequently, OISRA may be vicariously liable to DV and Mr. Vermillion for Mr. Fahlgren's negligence even if committed within the scope of his role as an actual agent for the School, and vice versa. Where, as here, a single individual possesses dual agency status for a public and non-public body, damages may exceed the OTCA's limits, although the public body's liability would be capped as set forth in Or. Rev. Stat. § 30.272. Cf. Berry v. Dep't of Gen. Servs., 141 Or.App. 225, 229 n.4, 917 P.2d 1070 (1996) (recovery for a public employee's conduct that falls outside of the OTCA can occur “without regard to the [OTCA's] limitations on compensatory damages or its prohibition against punitive damages”).
The OTCA was amended in 2011 to not require substitution of a government body as the sole defendant where the amount of alleged damages exceeds the statutory cap. See, e.g., Or. Rev. Stat. § 30.265(4). These revisions came in response to Clarke v. Or. Health Sci. Univ., 343 Or. 581, 585, 175 P.3d 418 (2007), and Ackerman v. OHSU Med. Grp., 233 Or.App. 511, 533, 227 P.3d 744 (2010), which held that such substitution violated the Oregon Constitution's Remedy Clause by entirely eliminating a cause of action against the individual and depriving the plaintiff of an adequate remedy. Plaintiffs make much of this amendment, asserting that allowing the OTCA cap to dictate the extent of DV and Mr. Vermillion's recovery would violate the Remedy Clause. However, case law subsequent to Clarke and Ackerman belies plaintiffs' argument. See, e.g., Horton, 359 Or. at 195-97; see also Flores-Haro v. Slade, 2019 WL 93507, *3, 6 (D. Or. 2019) (Remedy Clause is not violated where “[t]he ratio between the OTCA limit and the [damages award falls] within the range of values that the Oregon Supreme Court has determined to be ‘significant'” - i.e., from 17% to 39% - and finding the $1,133,400 OTCA cap on damages “substantial” in light of the original jury award of $5,110,000).
Given these circumstances, PACE's attempt to extend the OTCA's limits of liability to collectively apply to all three insurers (and, by extension, render the settlement unreasonable) is unpersuasive. PACE's reliance on Carver in support of the proposition that the OTCA is the exclusive remedy irrespective of the institutional status of the other defendants is equally unpersuasive. Carver did not consider dual agency and instead only evaluated the direct liability of the defendant doctor based on his status as the public body's actual agent in relation to a former version of the OTCA. Significantly, the Carver court held that, at all relevant times, the defendant doctor “was acting as the actual agent of the county and not as the actual agent of [the hospital],” such that neither the hospital nor the defendant doctor's private medical practice could be responsible “on a direct liability theory or . . . on a vicarious liability theory.” Carver, 148 Or.App. at 507-08.
Although PACE faults plaintiffs for not apportioning damages amongst Mr. Fahlgren, the District, and OISRA, the record before the Court evinces that the entire settlement related to Mr. Fahlgren's negligence alone. The District and OISRA were named in the underlying lawsuits exclusively in their capacities as potentially vicariously liable principals/employers. Walker Decl. Ex. 7, at 2 (doc. 52-7); Walker Decl. Ex. 8, at 2 (doc. 52-8); see also ASIC's Resp. to Interrog. 3 (doc. 66-2) (“ASIC's position remains that there is no method of ‘allocation' of the Settlement Amount between the District, Fahlgren and OISRA, because the District and OISRA's joint liability is entirely derivative of their mutual agent, Fahlgren”). Critically, there are no allegations related to the District or OISRA's own negligence or otherwise wrongful acts. Cf. Hzolger, 316 Or. at 408 (denoting that an employment or agency relationship “need not be proved to establish defendant's direct liability”).
In other words, PACE's risk is determined by the terms of its policy, which merely limited coverage for the District's “Tort” damages caused by a “Participant” to $1,382,300. The fact that plaintiffs resolved DV and Mr. Vermillion's claims for greater than that amount, especially considering DV's age and the extent of his injuries, does not render the settlement unreasonable. See Main Bonding & Cas. Co. v. Centennial Ins. Co., 298 Or. 514, 518-19, 693 P.2d 1296 (1985) (“[i]n conducting the defense of a claim against an insured[,] the insurer must use such care as would have been used by an ordinarily prudent insurer with no policy limit applicable to the claim,” such that the “insurer is negligent in failing to settle, where an opportunity to settle exists, if in choosing not to settle it would be taking an unreasonable risk - that is, a risk that would involve chances of unfavorable results out of reasonable proportion to the chances of favorable results”).
ii. Impact of OISRA's Membership Agreement and Policies
As a preliminary matter, the documents cited by PACE in support of its indemnification argument merely establish that OISRA will obtain insurance coverage for member districts and their coaches. ASIC is not a party to OISRA's membership agreement, and neither OISRA, the District, nor Mr. Fahlgren are parties to this lawsuit. And the precedent on which PACE relies merely concerns whether contractual indemnity clauses are themselves enforceable. See, e.g., Def.'s Resp. to Mot. Summ. J. 19-20 (doc. 64).
In any event, OISRA's membership agreement and policies do not define ASIC as the primary insurer in all circumstances, or otherwise specify that the District's own carriers are absolved from any and all liability. Crucially, the obligations underlying a separate agreement that purports to indemnify an insured party and an equitable contribution claim are distinct.
The Oregon Supreme Court recently addressed an analogous issue. In Allianz, the defendant insurance companies argued that they could not be liable to the plaintiff co-insurer under a theory of equitable contribution because they entered into “side agreements [in which the underlying entity] had agreed to indemnify the insurers against all liability for claims made under the policies.” Allianz, 367 Or. at 739. The Allianz court explained:
If the insurance policies included no “duty to defend or indemnify” at all, a coinsurer could never recover contribution from other insurers. Here, however, the insurance policies themselves do include a duty to defend and a duty to indemnify for covered claims, even though [the insured] separately agreed to indemnify each insurer for damages and defense costs that it might incur under the policies it issued. A court sitting in equity and considering an inter-insurer contribution claim will be guided by the goal of preventing unjust enrichment. It will thus be required to consider damages and settlement amounts that a defendant insurer has paid or is obligated to pay to its insured or to claimants under the policy. And if, under a side agreement, the insured has repaid or agreed to repay its insurance company for claims or defense costs, those amounts will be considered in determining the extent of any required contribution from co-insurers. But an insurance company that issues a policy that, by its terms, covers a particular claim cannot simply walk away from an injured third party - or a co-insurer seeking contribution - and claim that, because of a private side agreement with its insured, it has no obligation whatsoever.Id. at 740 (emphasis in original).
By extension, the fact that OISRA, via its membership application and policies, agreed to indemnify member coaches and districts does not foreclose plaintiffs' equitable contribution claims. Dalzell Dep. 54 (doc. 52-12). Rather, the Court must determine whether the underlying lawsuits are covered by PACE's policy and, if so, consider the equity of the settlement amounts paid by plaintiffs in light of PACE's liability limits.
iii. Inequitable Conduct
Based on a thorough review of the record, the Court does not find the fact that plaintiffs found PACE's settlement offer inadequate and instead chose to go forward with a different amount, in-and-of-itself, evidence of improper conduct. In fact, contrary to PACE's characterization of plaintiffs' actions as “an attempt to shake PACE down for more money through this subsequent coverage litigation,” plaintiffs' efforts instead appear aimed at successfully resolving the underlying dispute and making DV and Mr. Vermillion whole. Def.'s Resp. to Mot. Summ. J. 8 (doc. 64).
The Court notes that PACE objects to the evidence plaintiffs submit in opposition to its motion. See, e.g., Def.'s Reply to Cross-Mot. Partial Summ. J. 2 (doc. 75). Yet Fed.R.Civ.P. 56 necessitates this type of response. See, e.g., Celotex, 477 U.S. at 322-24; see also Hernandez v. Spacelabs Med. Inc., 343 F.3d 1107, 1116 (9th Cir. 2003) (“conclusory allegations, unsupported by facts, are insufficient to survive a motion for summary judgment”). In any event, while the Court certainly reviewed plaintiffs' evidence, it does not alter the outcome of this case. See Perez-Denison v. Kaiser Found. Health Plan of the Nw., 868 F.Supp.2d 1065, 1088-89 (D. Or. 2012) (denying an evidentiary objection as moot where “the evidence moved against does not change the [court's] recommendation” regarding summary judgment).
That is, allowing a disagreement between plaintiffs and PACE concerning the proper amount to derail the settlement with DV and Mr. Vermillion would not have served any party, such that it was not inherently suspect for plaintiffs to go forward with resolving the underlying litigation and subsequently filing this action. See Mass. Bonding, 235 Or.App. at 112-13 (“no indemnitor should have any incentive to avoid paying a just claim in the hope the claimant will obtain full payment from another coindemnitor” such that “one insurer's settlement with the insured is not a bar to a separate action” for equitable contribution) (citation and internal quotations omitted); see also Cascade Corp. v. Am. Home Assur. Co., 206 Or.App. 1, 12, 135 P.3d 450 (2006), rev. allowed & subsequently dismissed, 342 Or. 645, 165 P.3d 1176 (2007) (“one insurer's reasonable settlement with the insured also does not reduce another insurer's obligation”).
And while PACE alludes to other evidence that “may be subject to the mediation communication privilege,” those facts are simply not before the Court. Def.'s Resp. to Mot. Summ. J. 8 (doc. 64). However, nothing prevents PACE from formally seeking in camera review of those materials after the pending motions are finally resolved in a separately stated motion. See LR 7-1(b) (“[m]otions may not be combined with any response, reply, or other pleading”). In the meantime, PACE's remaining arguments do not provide a basis to avoid contribution.
In sum, PACE breached its duty to defend and indemnify the District against the underlying negligence actions, and plaintiffs have a right to contribution. Nevertheless, PACE's coverage document unambiguously limits its liability for DV and Mr. Vermillion's claims to the damages cap imposed by the OTCA. Based on the date of DV and Mr. Vermillion's injuries, PACE's indemnification responsibility associated with the underlying claims and corresponding settlement is capped at $1,382,300, inclusive of defense costs. See Burley v. Clackamas Cty., 313 Or.App. 287, 292, 496 P.3d 652, rev. denied, 369 Or. 69, 499 P.3d 1281 (2021) (OTCA's statutory caps encompass damages, attorney fees, and costs, explaining that “the legislative history showed that the limitation on liability under the OTCA was enacted to protect the financial stability of public bodies and to enable them to obtain insurance”) (citing Griffin v. Tri-Cty. Metro. Transp. Dist. ofOr., 318 Or. 500, 513-15, 870 P.2d 808 (1994)); see also Nw. Pump & Equip. Co., 144 Or.App. at 230 (settlement costs “include[e] both the costs of providing the defense and the cost of the liability itself”).
Because the parties have not adequately briefed the allocation of settlement costs in light of the plain language of the “Coverage A” provision and the OTCA's statutory cap, the Court declines to attempt apportionment under Lamb-Weston or any other method. Cf. Cascade Corp., 206 Or.App. at 12 (“under Lamb-Weston, an insurer's liability to its insured is based on the insurer's direct obligation to its insured, not on what other insurers may owe or pay”).
RECOMMENDATION
For the reasons stated herein, State Farm's Motion for Summary Judgment (doc. 52) should be granted as to the breach of PACE's duty to defend and indemnify under the “Coverage A” provision, and denied in all other respects. PACE's Motion for Partial Summary Judgment (doc. 54) should be granted to the extent it asserts the District's liability cannot exceed the OTCA's statutory cap of $1,382,300, and denied in all other respects. PACE's Cross-Motion for Partial Summary Judgment (doc. 67) should be granted as to plaintiffs' subrogation claims, and denied in all other respects. The parties' requests for oral argument are denied as unnecessary.
As a result, liability is established in regard to plaintiffs' equitable contribution and declaratory judgment claims, but the precise amount of PACE's damages remains unresolved. The parties shall confer and provide the Court with a Joint Status Report concerning the remaining issues in this case, including whether a further judicial settlement conference or briefing schedule is necessary, within 30 days of the District Judge's ruling.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.