Ninth Circuit affirms $15M award after insurer refuses to pay for counsel hired by policyholder

The Ninth Circuit Court of Appeals affirmed a $15 million award for defense expenses to Schnitzer Steel Industries Inc. from Continental Casualty Co. and Transportation Insurance Co. (“Continental”) for breach of contract in refusing to pay the reasonable and necessary defense costs related to litigation involving the Portland Harbor Superfund site.

Continental had been providing a defense to Schnitzer under a reservation of rights, but the lawyers defending it had a conflict of interest and withdrew.   Schnitzer asserted it couldn’t find appropriate attorneys from the Portland area to represent it because they were all already working on the Portland Harbor contamination issues.  Continental disagreed and proposed two other law firms. Schnitzer instead hired a California firm that billed more than the prevailing Portland rate.  Continental refused to pay all of the firm’s bills.

A jury trial was held on the issue and in 2014 the jury agreed with Schnitzer that the counsel proposed by Continental were not qualified and thus returned a verdict of $8.6M for unpaid fees.  The trial judge also awarded pre-judgment interest and attorneys’ fees increasing the award to nearly $15M.

In a short unpublished decision, the Ninth Circuit affirmed the award, finding the jury’s decision reasonable.  It approved of the pre-judgment interest because the jury found Continental owed “sums certain at dates certain.”  It also affirmed the award of attorney fees because Oregon statutes permit an award of fees when “recovery exceeds the amount of any tender made by the defendant.”  Schnitzer Steel Indus. Inc. v. Continental Casualty Co., No. 14-35793, D.C. No. 3:10-cv-01174-MO (9th Cir. May 31, 2016).