Oregon Supreme Court Clarifies Contribution Rights under the Oregon Environmental Cleanup Assistant Act

By Cameron Zangenehzadeh and Seth Row

Last week, the Oregon Supreme Court issued an important decision interpreting the Oregon Environmental Cleanup Assistance Act (OECAA), clarifying the boundaries of insurer contribution rights and the scope of the statute’s good-faith settlement bar. In Continental Casualty Company v. Argonaut Insurance Company, et al., 373 Or. 389 (2025), the court clarified that the statute’s bar on contribution applies only where the settlement relates to the specific claim paid by the targeted insurer. This ruling protects insurers that comply with OECAA’s “all sums” rule and reinforces policyholders’ rights to a swift and complete defense. However, the decision could discourage early settlements and increase the complexity and duration of post-payment contribution litigation—outcomes that OECAA’s drafters arguably sought to prevent.

Background

Schnitzer Steel Industries was identified by the EPA as a potentially responsible party at the Portland Harbor Superfund Site. Schnitzer tendered its defense to multiple general liability insurers—Continental Casualty, Employers Insurance Company of Wausau, and Century Indemnity. Initially, the insurers agreed to split defense costs, but disputes arose when Schnitzer retained a California law firm to defend it at hourly rates that the insurers contended were too high. The insurers paid for Schnitzer’s defense but at reduced hourly rates.

Schnitzer then invoked OECAA’s “targeting” provision, ORS 465.480(3)(b), and brought a federal lawsuit against Continental seeking full reimbursement of its defense costs. After trial, the court entered a judgment in Schnitzer’s favor for over $15 million, including full defense costs and future defense coverage. By 2018, Continental had satisfied the judgment and continued paying all ongoing defense costs.

In 2016, Continental filed a contribution action in Oregon state court against Wausau and Century. In 2019, while that suit was pending, Wausau entered into a settlement with Schnitzer releasing Wausau from all liabilities related to Portland Harbor. Wausau then argued this “good-faith settlement” barred Continental’s contribution claim under ORS 465.480(4)(a), which prohibits contribution against any insurer that has entered into a good-faith settlement “regarding the environmental claim.”

The trial court rejected that defense, reasoning that the specific claim Continental paid—defense costs—had already been reduced to judgment and paid in full. Therefore, Schnitzer had no remaining defense cost claim to settle with Wausau, and Wausau’s settlement could not extinguish Continental’s contribution rights. The court awarded Continental $3.6 million.

The Oregon Court of Appeals reversed, interpreting the phrase “the environmental claim” in the statute broadly to encompass all aspects of Schnitzer’s claim against Wausau—including indemnity and future defense costs. Since Wausau had settled that broader claim, the Court of Appeals found Continental’s contribution claim barred.

The Supreme Court’s Decision

The Oregon Supreme Court reversed, adopting a narrower and more textually grounded interpretation of ORS 465.480(4)(a). Justice Garrett, writing for a unanimous court, held that the phrase “the environmental claim” refers specifically to the claim that the targeted insurer actually paid. Here, Continental paid Schnitzer’s past defense costs—costs that had already been reduced to judgment and that Continental had satisfied. Wausau’s settlement with Schnitzer, by Wausau’s own admission, did not include those past defense costs.

Because Wausau did not settle “the environmental claim” that Continental paid, the court concluded, ORS 465.480(4)(a)’s bar did not apply. The Court rejected the Court of Appeals’ broader interpretation, which failed to give effect to the statute’s definite article “the,” and instead would allow a settlement of a different claim (e.g., indemnity) to extinguish contribution rights for defense costs already paid.

The court reasoned that OECAA is designed to ensure prompt insurance coverage for environmental claims, with the right of the targeted insurer to seek contribution from co-insurers. Allowing an insurer to avoid contribution by settling unrelated claims would frustrate that purpose.

In reaching its decision, the court emphasized the structure of OECAA, which is intended to provide policyholders with immediate access to insurance funds while giving targeted insurers the ability to seek reimbursement. Under ORS 465.480(3)(a), a targeted insurer must pay “all sums” owed under the policy for defense or indemnity, even if other insurers also provided coverage. The statute then permits the paying insurer to pursue contribution under ORS 465.480(4)(a), unless the co-insurer has already entered into a good-faith settlement for the same claim.

The court explained that allowing contribution to be barred by a later settlement for a different portion of liability would disrupt this scheme. It would undermine targeted insurers’ confidence in their statutory right to reimbursement and discourage prompt payment. Moreover, such a reading would weaken the insured’s right to full and immediate coverage from a single source, which OECAA was designed to protect.

The court also addressed the timing of the settlement. Wausau entered its settlement with Schnitzer years after Continental had already paid the defense costs and filed the contribution action. Although the court did not rule on whether timing alone could bar contribution, it noted that Wausau’s post-payment settlement was irrelevant where the specific claim had already been satisfied by another insurer. Thus, even if ORS 465.480(4)(a) could apply to post-filing settlements in some cases, it could not apply here.

Importantly, the court declined to hold that the existence of a prior judgment alone precludes a settlement from invoking the statutory bar. Instead, it focused on the underlying payment of the specific claim. What mattered was that Schnitzer had no claim left to settle for the already-paid defense costs. Therefore, Wausau’s settlement did not implicate “the environmental claim” within the meaning of the statute.

Implications for Policyholders

This decision confirms that targeted insurers can confidently pay environmental claims knowing they will retain a viable path to contribution. It also gives policyholders clarity: targeting one insurer under OECAA will not release others unless the same claim is fully resolved. Policyholders can still settle other aspects of their claims with co-insurers—such as indemnity or future costs—without affecting the targeted insurer’s contribution rights.

However, the decision is not without potential drawbacks for policyholders. First, by preserving contribution rights even after the insured settles with a co-insurer, the ruling may discourage those co-insurers from entering into early or comprehensive settlements. Insurers may fear that even a substantial payment to resolve part of the environmental liability will not fully protect them from later contribution claims. This uncertainty could reduce the incentive for meaningful, early settlements and lead to more fragmented, delayed resolution of coverage disputes.

Second, the court’s narrow construction of “the environmental claim” may lead to protracted litigation over which specific claims have been paid and what remains subject to contribution. Insurers may contest the scope and timing of prior payments and settlements, raising complex factual and legal questions. Policyholders may find themselves entangled in these disputes, especially when contribution litigation implicates their own settlement agreements.

Third, although policyholders benefit from a strong targeting right and a guaranteed defense, they may experience collateral consequences from contribution litigation. For example, if contribution battles extend over years—as the Continental case illustrates—insurers may be more cautious in accepting targeted status, or they may scrutinize potential settlements more closely before paying disputed costs. Policyholders seeking a seamless and prompt defense already face delays or friction as insurers battle over proper allocation of defense costs, and this decision could make those disputes more frequent.

Finally, the ruling arguably places greater emphasis on the formal characterization of claims and settlement language. Because the enforceability of contribution rights may depend on whether a specific claim has been "settled" or "paid," policyholders may be pushed to be more precise in documenting settlement agreements. Ambiguous or broad settlement language may inadvertently preserve or impair a targeted insurer’s ability to recover, complicating negotiations and potentially exposing the policyholder to renewed pressure or re-litigation. Non-targeted insurers may be more reluctant to settle with the insured if doing so does not fully extinguish their exposure, potentially undermining the value of good-faith settlement provision and extending the lifespan of contribution litigation.

In sum, while the Oregon Supreme Court’s decision in Continental Casualty reaffirms OECAA’s promise of immediate and full insurance coverage for environmental claims, it also reintroduces complexity into the contribution landscape that much of the legislative history indicates the good-faith settlement bar was intended to avoid. Policyholders should remain vigilant in managing settlement strategy, anticipating the downstream effects on insurer contribution claims, and ensuring clear communication across all involved carriers.