KISTLER, J.
This case arises out of a dispute over insurance coverage for plaintiffs' ship dismantling business. Before this court, the parties have raised primarily two issues. The first is whether plaintiffs or defendants had the burden to prove that environmental damages resulting from the operation of plaintiffs' business were neither expected nor intended. On that issue, the Court of Appeals held that, when the insurance policies that defendants issued expressly granted coverage only for unexpected and unintended damages, plaintiffs had the burden of proving that their loss came within that coverage. ZRZ Realty v. Beneficial Fire and Casualty Ins., 222 Or.App. 453, 472-73, 194 P.3d 167 (2008), modified on recons. 225 Or.App. 257, 201 P.3d 912 (2009). However, the court also held that, when the insurance policies granted broad coverage subject to an implied limitation for expected or intended damages, the implied limitation functioned as an exclusion that defendants had the burden to prove. 222 Or.App. at 474-75, 194 P.3d 167.
The second issue that the parties have raised involves protection and indemnity policies in which defendants agreed to indemnify plaintiffs for liability they incurred for "damages to any harbor, dock, * * * buoy, telegraph cable or other fixed or moveable thing whatsoever." The Court of Appeals held that the promise to indemnify plaintiffs for "damages to any * * * other fixed or moveable thing whatsoever" did not include a promise to indemnify plaintiffs for damages to the riverbed. Id. at 488-91, 194 P.3d 167. Rather, according to the Court of Appeals, defendants agreed to indemnify plaintiffs only for damage to artificial structures. Id. We allowed plaintiffs' petition for review and now affirm the Court of Appeals decision allocating the burden of proof but reverse its decision regarding coverage for damage to the riverbed.
Plaintiffs (collectively Zidell) are a group of related companies that began acquiring and dismantling decommissioned navy and
Over the years, Zidell purchased different types of insurance from a variety of insurers. Only two insurers, Certain Underwriters at Lloyd's of London and Certain London Market Insurance Companies, remain in this litigation; the others have settled. The interests of the two remaining insurers are, for the purposes of this appeal, identical, and we refer to them collectively as London. From 1956 to 1983, Zidell purchased three types of insurance policies from London that are at issue in this litigation: comprehensive general liability policies, a form of marine excess coverage known as bumbershoot policies, and another form of marine insurance known as protection and indemnity policies. In setting out the facts, we discuss the comprehensive general liability policies and refer to the other policies where appropriate.
The comprehensive general liability policies consisted of primary and excess policies that provided coverage for damage to property but contained an owned property exclusion. See Schnitzer Investment Corp. v. Certain Underwriters, 341 Or. 128, 138-39, 137 P.3d 1282 (2006) (discussing effect of owned property exclusion on coverage for environmental contamination). From 1956 to 1965, London issued a series of comprehensive general liability policies that the parties refer to as the "implied fortuity policies." By their terms, those policies provided coverage without regard to whether the property damage that resulted from Zidell's business activities was either expected or intended. One policy, for example, provided coverage for "any and all liability imposed by law against the Assured for loss of or damage to or destruction of the property of others * * * arising from any cause whatsoever out of the operation" of Zidell's business.
Despite that broad grant of coverage, the trial court read a limitation into the implied fortuity policies. Specifically, the trial court ruled that "the general principle that only `fortuitous' losses will be covered will be deemed a condition of each such policy, consistent with the holding in A-1 Sandblasting & Steamcleaning Co. v. Baiden, 293 Or. 17, 643 P.2d 1260 (1982)." As the trial court explained, that principle
Both parties accept the limitation that the trial court read into the agreements that they entered into before January 1, 1968.
Starting in 1966, London began issuing comprehensive general liability policies to Zidell that the parties refer to as the "express
In 1994, the Oregon Department of Environmental Quality (DEQ) issued a notice to Zidell stating that it was potentially responsible for cleaning up the environmental contamination resulting from its business at the Moody Avenue site. Zidell chose to participate in a voluntary clean-up program that DEQ offered and also requested that London, pursuant to the various policies that it had issued over the years, defend Zidell and indemnify it for the costs of remediating any environmental damage that had resulted from Zidell's business. When London denied that it had any obligation to defend or indemnify Zidell, Zidell brought this action, alleging breach of contract and also seeking a declaration of London's obligations under its policies.
Before trial, the court ruled on summary judgment that London had a duty to defend Zidell in response to DEQ's notice that Zidell was potentially responsible for cleaning up the environmental damage resulting from its business. The court also ruled, on summary judgment, that London bore the burden of proving that Zidell either expected or intended the environmental damages that resulted from the operation of its business.
With those ground rules in place, the case proceeded to trial on the question of indemnity. Among other things, the parties and the trial court sought to identify the specific contaminants that, as a result of Zidell's business, had damaged the environment over the period of time in which London had insured Zidell. The trial court also sought to determine, regarding each pollutant, whether Zidell had either expected or intended the resulting damage.
As noted, the Court of Appeals affirmed the trial court's ruling regarding the burden of proof on the implied fortuity policies but reversed its ruling regarding the burden of proof on the express fortuity policies. The Court of Appeals reasoned that the express fortuity policies offered coverage only for unexpected and unintended damages and that Zidell had the burden to prove that the damages resulting from its business came within the scope of that coverage. The Court of Appeals also reversed the trial court's ruling that the protection and indemnity policies that London had issued covered damages to the riverbed. We allowed Zidell's petition for review to consider those rulings and begin with the question of the burden of proof.
On appeal, and again on review, the parties debate whether the trial court correctly allocated the burden of proof. Both parties start from the proposition that the insured (Zidell) has the burden to prove coverage while the insurer (London) has the burden to prove an exclusion from coverage. Compare Stanford v. American Guaranty Life Ins. Co., 280 Or. 525, 527, 571 P.2d 909 (1977) (insurer has the burden to prove an exclusion), with Lewis v. Aetna Insurance Co., 264 Or. 314, 316, 505 P.2d 914 (1973) (insured has the burden to prove coverage). They disagree, however, whether the requirement that any damage to the environment be neither intended nor expected is part of a limited grant of coverage to which the insured would have to prove entitlement or an exclusion from a broad grant of coverage for which the insurer would have to prove justification. In analyzing that issue, we begin with the express fortuity policies and then turn to the implied fortuity policies.
The express fortuity policies provide coverage for "[p]roperty damage * * * caused by or arising out of [an] occurrence." They define an occurrence as an "accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in * * * property damage * * * during the policy period." Reading those two provisions together, London reasons that the express fortuity policies provide coverage only for unexpected and unintended property damage. London argues that the parties to an insurance agreement may structure their agreement in different ways. They may choose to grant limited coverage (coverage only for unexpected and unintended losses), or they may choose to grant broad coverage subject to specific exclusions. London contends that, when, as in this case, the parties choose the former course, the insured has the burden to prove that the loss comes within the limited coverage that the policy grants. Conversely, if the parties chose the latter course, London does not dispute that the insurer would have the burden to prove that the exclusion applies.
Zidell takes a different tack. It contends that whether the parties choose to grant limited coverage or broad coverage subject to an exclusion is not dispositive. It contends that some provisions are, in essence, exclusions while others are, in essence, grants of coverage. Zidell reasons that courts should designate provisions according to their essence
Zidell's position is difficult to square with established principles of Oregon contract interpretation. In drafting the express fortuity policies, the parties chose to provide coverage only for unexpected and unintended damages. They did not list expected or intended damages as an exclusion. One of the express fortuity policies, for example, sets out a list of specific exclusions under the heading, "THIS INSURANCE IS SUBJECT TO THE FOLLOWING EXCLUSIONS." (Capitalization in original.) Neither expected nor intended damages is included on that list of exclusions. To accept Zidell's argument, we would have to convert what the parties chose to describe as a limitation on coverage into an exclusion from coverage, even though the parties did not include "expected or intended damages" as one of the listed exclusions. In other words, we would have to rewrite the terms of the parties' agreement, something that courts ordinarily lack authority to do. See Usinger v. Campbell, 280 Or. 751, 755, 572 P.2d 1018 (1977) (courts may not rewrite contracts); Wikstrom v. Davis, 211 Or. 254, 268, 315 P.2d 597 (1957) (same); cf. Frick v. Hoag, 277 Or. 135, 138, 559 P.2d 879 (1977) (noting that courts have equitable authority to reform contracts in limited circumstances).
Zidell identifies no reason why the parties to an insurance contract may not choose either to grant coverage only for unexpected and unintended damages or to grant broad coverage subject to an exclusion for expected or intended damages. Cf. Robert E. Keeton, Insurance Law § 5.2(a) 275 (1971) (describing that decision as a "draft[er's] choice"). Put differently, there is no reason, either logically or semantically, why a limitation on unexpected and unintended damages may not be stated either as a grant of limited coverage or separately as an exclusion from a broad grant of coverage. Nor are we able to identify some neutral principle that would allow us to discern which provisions are essentially grants of limited coverage and which are essentially exclusions from a broad grant of coverage. If the parties structure their agreement to provide limited coverage, as they did here, then our cases place the burden on the insured to prove that the event that triggered the loss came within the scope of that coverage.
Zidell contends, however, that three of this court's cases demonstrate that the limitation on coverage in the express fortuity policies constitutes an exclusion from coverage. Zidell relies initially on Smith v. Ind. Hosp. Assn., 194 Or. 525, 242 P.2d 592 (1952), for the proposition that insurers have the burden to prove policy provisions that are "defensive in character." We agree with Zidell that Smith stands for the proposition that insurers have the burden to prove exclusions from coverage. See Stanford, 280 Or. at 527, 571 P.2d 909 (citing Smith for the proposition that "[t]he insurer has the burden to prove that the loss is excluded"). However, we do not read Smith more broadly than that.
In Smith, the employer's health insurance policy provided coverage to employees for acute sickness and chronic conditions, subject to separate exemptions. The two provisions at issue in Smith were an exemption for pre-existing conditions and one for new employees whose chronic condition "acutely manifest[ed]" itself within the first six months of work.
Zidell also cites two cases in which the policies were similar to the express fortuity policies in this case. See Ledford v. Gutoski, 319 Or. 397, 877 P.2d 80 (1994); Nielsen v. St. Paul Companies, 283 Or. 277, 583 P.2d 545 (1978). In both Ledford and Nielsen, the insurance policies provided coverage for bodily and property damage that resulted from an occurrence, which the policies defined as an "accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended." Ledford, 319 Or. at 399, 877 P.2d 80; Nielsen, 283 Or. at 279, 583 P.2d 545. Neither case, however, addressed who had the burden to prove that the damage was expected or intended; that is, neither case sought to determine whether the requirement that damages be neither expected nor intended was part of a limited grant of coverage or an exclusion from a broad grant of coverage. Rather, in both cases, the question was whether the insurer had a duty to defend the insured, which entailed determining only whether the conduct alleged in the complaint necessarily required an inference that the insured had intended the harm.
It is true that, in Nielsen, the court referred to the definition of occurrence as a "policy provision excluding intentional harm." 283 Or. at 281, 583 P.2d 545. However, we hesitate to read too much into that passing reference, when the issue before the court had nothing to do with the burden of proof but focused instead on the substantive question whether the allegations in the complaint filed against the insured established a duty to defend. The same is true of Ledford. In that case, the court referred to "various policy provisions excluding coverage for intentionally-caused injuries" in the course of explaining that the provision applied only "when the insured intended to cause the particular injury or harm, as opposed to merely intending the act." 319 Or. at 401, 877 P.2d 80. The court made that comment in explaining that, given the allegations in the complaint, the insurer did not have a duty to defend. The court neither addressed nor expressed any opinion on whether the limitation on coverage should be viewed as an exclusion on which the insurer had the burden of proof or a limitation of coverage on which the insured had the burden of proof. In short, this court has neither considered nor resolved the issue that this case presents, and we decline to give off-hand references in our prior cases controlling significance.
The implied fortuity policies present the same question but in a different posture. As noted, the implied fortuity policies contain a broad grant of coverage without any requirement that the damages be unexpected and unintended. For instance, one of the first comprehensive general liability policies that London issued to Zidell provided coverage:
By its terms, the policy covered "[a]ny and all liability imposed by law" without exception. Despite that broad grant of coverage, the trial court read into that policy, and others like it, a limitation that the damages that gave rise to the insured's liability be neither expected nor intended, at least for those policies issued before 1968. (The court read a less restrictive limitation into the implied fortuity policies issued in 1968 and afterwards.)
According to the trial court, the limitation that it read into the implied fortuity policies derived from what this court described in A-1 Sandblasting and earlier in Isenhart v. General Casualty Co., 233 Or. 49, 377 P.2d 26 (1962), as a "public policy" limitation.
It follows, we think, both from the terms of the policies themselves and from the reasoning in Isenhart, that the limitation that the
London, however, advances two reasons for saying that Zidell bears the burden of proving that the damages were unexpected and unintended. London argues initially that a statute in effect until 1967 became part of all the pre-1968 policies and constituted a limitation on coverage. Alternatively, London contends that, in bringing a declaratory judgment claim, Zidell assumed the burden of proving that its damages were unexpected and unintended. We consider each argument in turn.
Until the legislature repealed former ORS 736.005(1) in 1967, that statute defined "insurance" as a:
See Or. Laws 1967, ch. 359, § 704 (repealing former ORS 736.005(1)). London argues that that statute became part of each insurance contract it issued to Zidell before 1968 and that the statute functioned as a limitation on coverage, not as an exclusion. We read the former statute differently.
Former ORS 736.005(1) (1965), the statute on which London relies, was enacted as part of a comprehensive act that the legislature passed in 1917 to regulate the business of insurance. See Or. Laws 1917, ch. 203, § 1 (defining insurance); Lovejoy v. Portland, 95 Or. 459, 460-61, 188 P. 207 (1920) (describing the 1917 act that was later codified as ORS chapter 736). The 1917 act "regulate[d] the conditions under which [the] business [of insurance] may be commenced and the manner in which it may be conducted." Lovejoy, 95 Or. at 461, 188 P. 207. Among other things,
Id. Only companies that were engaged in the business of insurance were regulated and subject to the act's provisions. Former ORS 736.010 (1965).
Former ORS 736.005(1) (1965) was central to that regulatory scheme. It defined "insurance" and, by extension, identified those companies that were in the business of insurance and thus subject to both the act's requirements and the Insurance Department's jurisdiction. See former ORS 736.005(3)(b) (1965) (defining "company," "corporation," and "insurance company," as used in the act, as all individuals and entities engaged "in the business of insurance"); cf Hall v. Metropolitan Life Ins. Co., 146 Or. 32, 28 P.2d 875 (1934) (holding that an annuity did not constitute "insurance" within the meaning of former ORS 736.005(1)(1965) and, for that reason, did not require the Insurance Commissioner to preapprove the annuity).
Former ORS 736.005(1) (1965) provided a basis for determining which agreements and companies were subject to the 1917 insurance act. However, nothing in that definition of insurance, or the larger act of which it was a part, suggested that the legislature intended
London advances a second argument. London reasons that, even if it ordinarily would have the burden to prove that the damages were expected or intended, Zidell assumed that burden when it included a declaratory judgment claim in its action against London. Relying on First National Bank v. Malady, 242 Or. 353, 408 P.2d 724 (1966), and State Farm Fire and Cas. v. Reuter, 299 Or. 155, 700 P.2d 236 (1985), London contends that, when Zidell alleged in its declaratory judgment claim that the damages caused by its business operations were unexpected and unintended, Zidell assumed the burden of proving those facts.
London reads Malady and State Farm too broadly. More specifically, London's argument fails to distinguish two related but separate categories of declaratory judgment actions. In the first category of declaratory judgment actions, the party that ordinarily would have the burden of proof on a claim or defense brings a declaratory judgment action to establish its claim or defense. In that situation, the authorities are unanimous that the plaintiff in the declaratory judgment action has the same burden of production and persuasion that it ordinarily would have. See James W. Moore, 12 Moore's Federal Practice § 57.62[2][c] at 57-134 (3d ed. 2009) (stating proposition); Edwin Borchard, Declaratory Judgments 404 (2d ed. 1941) (same); Developments in the Law—Declaratory Judgments, 62 Harv. L. Rev. 787, 836 (1949) (same).
In the second category of declaratory judgment actions, the party that ordinarily would not have the burden of proof on a claim or affirmative defense brings a declaratory judgment action either to prove nonliability on a claim or to establish that an affirmative defense does not apply. In considering that category of declaratory judgment actions, the authorities have divided over who bears the burden of production and persuasion. See 12 Moore's Federal Practice § 57.62[2][c] at 57-134 (recognizing division of authority). Some authorities have reasoned that the party that ordinarily would have the burden of proof retains it, even though that party is now the defendant in the declaratory judgment action. See, e.g., Borchard, Declaratory Judgments at 404-09 (in a declaratory judgment action, the burden of proving operative and affirmative facts rests upon the party that relies upon them); Travelers Ins. Co. v. Greenough, 88 N.H. 391, 190 A. 129 (1937) (same). Other authorities, including this court, have reasoned that, when the parties are transposed, the plaintiff in the declaratory judgment action has the burden to prove its affirmative allegations, even though it ordinarily would not have the burden of doing so. See Charles Allen Wright, Arthur R. Miller, and Mary Kay Kane, 10B Federal Practice & Procedure § 2770 at 677-80 (discussing cases) (1998); Malady, 242 Or. at 358, 408 P.2d 724 (generally adopting that position but leaving room for some variation when the circumstances warrant it).
London's argument—that, in alleging a claim for declaratory relief, Zidell assumed
Similarly, State Farm, on which London also relies, does not advance its argument. In that case, the insurer brought a declaratory judgment action to establish an affirmative defense (issue preclusion) on which it ordinarily would have had the burden of production and persuasion. 299 Or. at 158-60, 700 P.2d 236. This court recognized that the insurer had the burden of proof on that defense, without regard to whether it either brought an action seeking a declaration that the defense precluded coverage or waited until the insured sued on the policy and raised the defense as a bar to the insured's claim. Id. at 166-67 n. 9, 700 P.2d 236. Put differently, State Farm fell into the first category of declaratory judgment actions in which the use of a declaratory judgment action did not affect the ordinary allocation of the burden of production and persuasion.
It follows from the foregoing discussion that Zidell's addition of a declaratory judgment claim did not alter the ordinary allocation of the burden of proof and production. Zidell retained its usual burden to prove coverage, and London retained its burden to prove exclusions to that coverage, which, for the implied fortuity policies, meant that London had the burden to prove that the damages were expected or intended. Having considered London's arguments, we conclude that the trial court and the Court of Appeals correctly held that, for the implied fortuity policies, London had the burden of proving that Zidell either expected or intended the environmental damages resulting from its business operations.
In 1959, London issued to Zidell the first of several "open cover" marine insurance policies that provided protection and indemnity (P & I) coverage for ships that Zidell purchased for scrap and resale.
The trial court found that Zidell's ship dismantling and ship repair activities contaminated the sediment in the river. It concluded that London's promise, in the standard port risk form, to indemnify Zidell for liability arising from "damage to any * * *
The Court of Appeals reversed the trial court's ruling, holding that the phrase "damage to any * * * other fixed or moveable thing whatsoever" did not include damage to soil or sediment in the river. The court's reasoning consisted of three steps. First, it noted that almost all the specific items that precede the phrase "any * * * other fixed or moveable thing whatsoever" are artificial structures or objects. ZRZ Realty, 222 Or. App. at 490, 194 P.3d 167. Second, it observed that, although "harbour" usually refers to a naturally occurring feature, it also can refer to an artificial structure and concluded that, in this context, the word "most likely refers to something that has been built or constructed." Id. Finally, having determined that all the specific items that precede the general phrase referred to artificial structures, it concluded that the general phrase "any * * * other fixed or moveable thing whatsoever" was similarly limited. Id. at 490-91, 194 P.3d 167. The court reasoned that, at a minimum, river sediment was so dissimilar from the specific listed items that the general phrase "any * * * other fixed or moveable thing whatsoever" did not include it. Id.
On review, Zidell argues that the Court of Appeals read both the specific items and the general phrase too narrowly. London, for its part, urges us to follow the Court of Appeals' interpretation of the P & I policy. It also advances an alternative argument. It contends that, even if Zidell's interpretation is correct, it is still not liable to indemnify Zidell unless Zidell incurred the liability in its capacity as the owner of the vessel and in the course of operating the vessel. In considering those issues, we begin with the question whether "damage to any harbour, dock (graving or otherwise), slipway, way, gridiron, pontoon, pier, quay, jetty, stage, buoy, telegraph cable or other fixed or moveable thing whatsoever" includes damage to the riverbed.
On that question, we start from the proposition that the Court of Appeals' interpretation of the provision is plausible. That is, the word "harbour" can refer to both natural and artificial features, and it is plausible to read the term "harbour," in context, to refer to artificial features and to read a similar limitation into the general phrase "any * * * other fixed or moveable thing whatsoever." The question, however, that Zidell's argument raises is whether its reading of the provision is also plausible and, if it is, whether the remainder of the policy resolves the resulting ambiguity. See Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 470, 836 P.2d 703 (1992) (describing methodology for interpreting provisions in insurance policies). If, after considering the remainder of the policy, two plausible interpretations remain, then we construe the phrase against the drafter and in favor of the insured. Id.
Ordinarily, we assume that a nonspecific term in a series, such as "any * * * other fixed or moveable thing whatsoever," shares the same qualities as the specific terms that precede it. See Baker v. City of Lakeside, 343 Or. 70, 76, 164 P.3d 259 (2007) (discussing ejusdem generis rule).
We note that, one year before London issued the first P & I policy involved in this case, the United States District Court for the Southern District of Texas held that essentially the same provision in a P & I policy required the insurer to indemnify a barge owner for damage to "a number of shore-side properties" caused by oil spilled from the barge. See Gulf States Marine & M. Co. v. Norwich Union F. Ins. Soc., 168 F.Supp. 863, 865 (S.D.Tex.1958) (discussed in Alex L. Parks, 2 The Law and Practice of Marine Insurance and Average 957-58 (1987), as an example of the coverage under this clause). The Fifth Circuit reversed but not because it disagreed with the district court's holding. United States F. Ins. Co. v. Gulf States Marine & Min. Co., 262 F.2d 565 (5th Cir. 1959). Rather, the Fifth Circuit noted that, according to the terms of the policy, the P & I coverage would apply only if there were no other coverage for the loss. Id. at 568. In that case, however, there was coverage for the damages under a policy that covered the tug towing the barge. Id. That opinion provides further support for Zidell's reading of the policy.
In sum, we think each party's interpretation of the insurance provision is plausible, and we look to the remainder of the P & I policy that London issued Zidell to attempt to resolve that ambiguity. In the remainder of the policy, London undertook to indemnify Zidell for liability that it incurred for a series of different types of property loss and harm to persons. The port risks form provides that the underwriters agreed to indemnify Zidell, subject to certain exceptions, for liability that it incurred for: damage to other persons' vessels and cargo, whether caused directly by a collision or indirectly; damage to other vessels and cargo owned by Zidell; the cost of raising or removing the insured vessel and its cargo should it sink; and damages resulting from the loss of life and personal injury. Nothing in those additional covered risks sheds any light on the nature of the specific risk that the parties chose to cover in the provision at issue here. Cf. St. Paul Fire & Marine Ins. v. Vest Transp., 666 F.2d 932, 940-44 (5th Cir.1982) (explaining that the P & I policy in that case covered a series of discrete risks). Because the remainder of the policy does not remove any ambiguity in the meaning of the provision, we interpret the phrase "any * * * other fixed or moveable thing whatsoever" in favor of the insured Zidell to include damage to the sediment in the river.
London advances an alternative argument. It contends that, even if the phrase "any * * * other fixed or moveable thing whatsoever" includes damage to the riverbed, the terms of the policy and general principles of marine insurance make clear that London agreed to indemnify Zidell only for liabilities that Zidell incurred (1) as the owner of the insured vessel and (2) in the course of operating the vessel. The argument that London advances raises two issues, and we consider them separately.
London contends that, under the terms of the policy, it agreed to indemnify Zidell only to the extent that Zidell incurred liability as the owner of the insured vessel. London argues, however, that "Zidell's liability in this case does not arise by reason of its interest in any vessel; it arises by reason of its interest in the Moody Avenue site." As we
The third paragraph of the port risk form provides that London has a duty to indemnify Zidell "if by reason of interest in the [insured] Vessel the Assured shall become liable to pay and shall pay any sum or sums in respect of any liability * * * arising from or occasioned by" a series of specified "matters or things," one of which is "damage to any harbour, dock, * * * or other fixed or moveable thing whatsoever." In discussing London's obligation under that provision, the trial court explained that "[t]he condition that liability arise "by reason of interest' in a vessel to establish coverage under Zidell's ship dismantling coverage is satisfied where materials are released from a covered vessel onto the river such that they end up in the sediments." The trial court also explained that, once the materials were "disassociated" from a vessel being dismantled, different insurance policies covered the damages.
London has not explained why the trial court erred in drawing the distinction that it did or why Zidell's liability for materials released onto the river from its vessels would not constitute liability that arose by reason of its interest in those vessels. Nothing that London has offered in its briefs or at oral argument persuades us that the trial court imposed greater liability on London under the P & I policies than the terms of those policies warranted.
London raises a related but separate argument. It contends that, "[w]ith respect to P & I insurance, a well-established and uniform rule of maritime law disposes of Zidell's claim-a rule that requires a causal nexus between a vessel's operation and the liability for which coverage is sought." London reasons that, because Zidell was not operating vessels but was instead scrapping them, Zidell did not incur liability by reason of its operation of a vessel and therefore cannot come within the terms of the P & I coverage.
London's argument construes P & I coverage too narrowly, both generally and in this case. P & I coverage is essentially marine liability coverage. It arose initially to provide coverage for liability that an insured vessel incurred as a result of a collision with another vessel. Parks, 2 Marine Insurance and Average at 832-33. Since then, coverage has been extended to liability incurred as a result of a variety of different risks, including liability resulting from ship building and ship repair. Id. at 839. As Parks notes in his treatise on marine insurance:
Id. (footnote omitted.) Contrary to London's argument, P & I policies are not limited to liability arising from the operation of a vessel; rather, they can provide coverage for such things as liability arising from building and repairing ships.
In this case, the P & I policy that London issued Zidell covers liability arising from scrapping ships. That policy provides: "Vessels for scrapping insured subject to— Hull F.P.A. Cover conditions as attached." (Emphasis in original.) The attached Hull F.P.A. cover conditions incorporate an attached
Although London argues that two cases support its position, they go to the first issue that London raises, not the second. In the first case, a crane operator on a fixed offshore platform negligently raised a piece of machinery from a vessel, injuring one of the vessel's crew members. Lanasse v. Travelers Insurance Company, 450 F.2d 580, 582 (5th Cir.1971). The crane operator was negligent; the vessel was not. Id. at 583. Although the same entity (Chevron) owned both the platform and the vessel, it was liable for the crew member's injuries as the owner of the platform, not as the owner of the vessel. Id. at 584. The P & I insurance in that case, however, provided that the insurer would pay only those sums that the assured, as owner of the vessel, was liable to pay. Id. at 583 n. 7 & 584. Because Chevron did not incur any liability as the owner of the vessel, the insurer had no obligation to indemnify Chevron under the P & I policy in that case.
The second case is a variation on the first. In that case, a vessel towing a barge negligently caused the barge to hit a bridge and sink. St. Paul Fire & Marine Ins., 666 F.2d at 935. The federal government removed the sunken barge and was entitled to recover the cost of doing so from the entity that negligently caused the barge to sink. Id. at 940. Only the towing vessel's owner was liable to the government for the cost of removing the barge. Id. The barge's owner incurred no liability to the government. Id. The court assumed that the same entity (Vest Transportation) owned the towing vessel and the barge. Id. at 941. When Vest sought to recover under a P & I policy, the court held that the insurer had agreed to indemnify only the owner of the barge for the liability it had incurred for the cost of the barge's removal. Id. Vest, however, had incurred no liability as the owner of the barge and accordingly could not recover under the P & I policy. Id. at 941, 945.
Neither of the cases on which London relies stands for the proposition that an insurer is obligated to indemnify the assured under P & I coverage only if the assured incurred liability in the course of operating an insured vessel. Each case does stand for the proposition that the insurer's obligation in those cases was limited to indemnifying the assured only to the extent that the assured incurred liability as the owner of the insured vessel. In this case, the P & I policy provides that London has a duty to indemnify Zidell to the extent that Zidell is liable by reason of its interest in the insured vessels. As explained above, the trial court's findings do not impose any greater obligation on London than the terms of the policy permit. We find no error in the trial court's ruling.
Having found that the trial court erred in allocating the burden of proof to London on the express fortuity policies, the Court of Appeals reversed the trial court's judgment, vacated the supplemental judgment awarding Zidell attorney fees, and remanded the case for a new trial. ZRZ Realty, 222 Or.App. at 457-58, 194 P.3d 167. On review, Zidell argues that, even if we uphold the Court of Appeals' allocation of the burden of proof, the Court of Appeals erred in remanding for a new trial on both the express and implied fortuity polices.
We do not read Maxwell as broadly as London does. The court explained in Brown v. Bonesteele, 218 Or. 312, 335, 344 P.2d 928 (1959), that "[u]nder appropriate circumstances this court may remand a case for a new trial on a part only of the issues raised in the original proceeding." The court consistently has followed that principle. See Estate of Michelle Schwarz v. Philip Morris Inc., 348 Or. 442, 460, 235 P.3d 668 (2010) (remanding for a retrial only on punitive damages); Western Feed Co. v. Heidloff, 230 Or. 324, 349, 370 P.2d 612 (1962) (remanding for a retrial only on the defendant's counterclaim); Dunn v. Henderson, 122 Or. 331, 336, 258 P. 183 (1927) (upholding determination of liability and remanding for a trial on damages only).
In Maxwell, this court recognized an exception to that general rule. The court explained that, "[i]n the ordinary two-party personal injury case, * * * evidence of fault can influence the jury's measurement of damages; and the kind and degree of injuries may influence some jurors in their evaluation of the evidence on liability." Maxwell, 253 Or. at 577, 456 P.2d 484. Accordingly, the court held that a "new trial in a personal-injury case ordinarily should be a new trial on all contested factual issues." Id.
This case differs from Maxwell in two respects. Not only was the court careful to limit its holding in Maxwell to cases tried to a jury, id. at 575, 456 P.2d 484, but the court's reasoning in Maxwell turned on the relationship between liability and damages in personal injury cases, id. at 577, 456 P.2d 484. This case, by contrast, was tried to the court, and nothing that London has identified persuades us that the trial court cannot, on remand, fairly limit any retrial to the express fortuity policies; that is, we see no reason why the trial court needs to retry London's responsibility to indemnify Zidell under the implied fortuity policies to determine whether London is also required to indemnify Zidell under the express fortuity policies. The remand should have been limited, at least initially, to the question whether, for the purposes of the express fortuity policies, Zidell either expected or intended that a series of contaminants resulting from the operation of its business would damage the environment.
In retrying that issue, the trial court must determine initially whether it is necessary to supplement the record; that is, if neither party can establish a specific basis for saying that the record would have been different if the trial court had placed the burden of production and persuasion initially on Zidell, then the trial court may find, based on the existing record, what Zidell expected or intended for the purposes of the relevant express fortuity policies.
Zidell also argues that the Court of Appeals erred in reversing the fee award in the judgment and in vacating the fee award in the supplemental judgment. As we understand the trial court's rulings on attorney fees, it found that London had a duty to defend Zidell in response to DEQ's 1994 notice.
In the Court of Appeals, London assigned error to four of the trial court's rulings regarding attorney fees. The Court of Appeals considered and rejected London's first assignment of error—that the 1994 letter was not a sufficient proof of loss. ZRZ Realty, 222 Or.App. at 493-95, 194 P.3d 167. The Court of Appeals, however, did not consider the other three assignments of error that London raised regarding the attorney fees or the two assignments of error concerning attorney fees that Zidell raised on cross-appeal. Id. at 495, 497, 194 P.3d 167. The Court of Appeals reasoned that it was not necessary to reach those issues. It explained that, "[b]ecause we reverse and remand for trial on the breach of contract and declaratory judgment claims, we necessarily reverse the award of attorney fees in favor of Zidell. ORS 20.220(3)." Id.
On review, Zidell argues that the Court of Appeals erred in reversing the attorney fee award in the judgment and in vacating the attorney fee award in the supplemental judgment. It contends that the Court of Appeals' ruling reversing the trial court's allocation of the burden of proof on the express fortuity policies had no effect on the trial court's award of attorney fees. We agree with Zidell. According to the trial court, it awarded Zidell only those fees and costs that were attributable to London's breach of its duty to defend.
This court has long recognized that "[t]he duty to indemnify is independent of the duty to defend." Ledford, 319 Or. at 403, 877 P.2d 80. An insurer may have a duty to defend its insured, as the trial court found
That said, we note that London's eighth assignment of error, which the Court of Appeals did not reach, contended that trial court erroneously had "awarded Zidell fees its attorneys incurred on issues other than LPGL Underwriters' duty to defend."
The decision of the Court of Appeals is affirmed in part and reversed in part. The case is remanded to the Court of Appeals.
The trial court did not have occasion to consider how this clause affected, if at all, London's obligation to indemnify the assured for liability occasioned "by reason of interest in the Vessel."
