Allianz Global Risks v. ACE Property & Casualty Ins. Co.

711

Argued and submitted September 16, 2020; decision of Court of Appeals

reversed, limited judgments of trial court affirmed in part and reversed in part,

and case remanded to trial court for further proceedings March 25, 2021

ALLIANZ GLOBAL RISKS

US INSURANCE COMPANY

and Allianz Underwriters Insurance Company,

Petitioners on Review,

v.

ACE PROPERTY & CASUALTY

INSURANCE COMPANY,

as Successor to Aetna Insurance Company;

Certain Underwriters at Lloyd’s London;

Certain London Market Insurance Companies;

General Insurance Company; and

Westport Insurance Corporation,

as Successor to Puritan Insurance Company,

Respondents on Review,

and

CON-WAY, INC.,

as Successor to Consolidated Freightways, Inc.,

Respondent on Review,

and

ALLSTATE INSURANCE COMPANY,

as Successor to Northbrook Excess and Surplus

Insurance Company, fka Northbrook

Insurance Company; et al.,

Defendants.

Court of Appeals

A159758 (Control)

ALLIANZ GLOBAL RISKS

US INSURANCE COMPANY

and Allianz Underwriters Insurance Company,

Petitioners on Review,

v.

ACE PROPERTY & CASUALTY

INSURANCE COMPANY,

as Successor to Aetna Insurance Company;

General Insurance Company; and

712 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

Westport Insurance Corporation,

as Successor to Puritan Insurance Company,

Respondents on Review,

and

AMERICAN HOME ASSURANCE COMPANY;

Certain Underwriters at Lloyd’s London;

Certain London Market Insurance Companies;

Continental Casualty Company;

Lexington Insurance Company;

Northern Assurance Company of America,

Respondents on Review,

and

CON-WAY, INC.,

as Successor to Consolidated Freightways, Inc.,

Respondent on Review,

and

ALLSTATE INSURANCE COMPANY,

as Successor to Northbrook Excess and Surplus

Insurance Company, fka Northbrook

Insurance Company; et al.,

Defendants.

Court of Appeals

A159858

(CC 120404552)

(CA A159758 (Control), A159858)

(SC S067017)

483 P3d 1124

Plaintiff insurance company Allianz paid damages and defense costs for

its insured, Daimler, and sought contribution under the common law and the

Oregon Environmental Cleanup Assistance Act from defendants, who are his-

torical liability insurers of Freightliner, a now-defunct corporation purchased

by Daimler from intervenor Con-Way in the 1980s. The trial court entered

two limited judgments, dismissing with prejudice various of plaintiff’s claims

against defendants ACE, Westport, General, and London, based on indemnifi-

cation agreements between certain defendants and Con-Way and policy provi-

sions that excluded coverage of “pollution” claims. The trial court also denied

defendants’ and Con-Way’s motion for a directed verdict, in which defendants and

Con-Way argued that Allianz had no claim for contribution because Daimler had

never assumed Freightliner’s liabilities. The Court of Appeals held that Daimler

had not assumed Freightliner’s contingent liabilities, that Allianz cannot seek

contribution from Freightliner’s historical liability insurers, and that the trial

court had erred in denying motions for directed verdicts as to all defendants.

Cite as 367 Or 711 (2021) 713

Held: (1) Because evidence in the record supported the jury’s verdict that Daimler

expressly or impliedly assumed Freightliner’s liabilities, the trial court did not

err in denying defendants’ and Con-Way’s motion for a directed verdict. (2) The

issue of whether ACE, General, and Westport have a duty to defend or indem-

nify Freightliner against the claims here should have been decided by the trial

court based on the terms of the agreements in the insurance policies and without

regard to the side agreements or other extrinsic evidence. (3) The phrase “sud-

den, unintended[,] and unexpected” to describe pollution claims excluded from

insurance coverage was ambiguous and, thus, it was error for the trial court not

to interpret it for the jury.

The decision of the Court of Appeals is reversed. The limited judgments of the

trial court are affirmed in part and reversed in part, and the case is remanded to

the trial court for further proceedings.

On review from the Court of Appeals.*

C. Robert Steringer, Harrang Long Gary Rudnick P.C.,

Portland, argued the cause and filed the briefs for petitioners

on review. Also on the briefs were James E. Mountain, Jr.,

and Erica R. Tatoian, and, on the reply brief, Margaret H.

Warner and Ryan S. Smethurst, McDermott Will & Emery

LLP, Washington DC.

Robert Koch, Tonkon Torp, Portland, argued the cause

and filed the brief for respondent on review Con-Way, Inc.

Also on the brief were Frank J. Weiss and Anna K. Sortun.

Carl E. Forsberg, Forsberg & Umlauf, P.S., Seattle,

Washington, argued the cause and filed the brief for respon-

dents on review Certain Underwriters at Lloyd’s London

and Certain London Market Insurance Companies. Also

on the brief were Matthew S. Adams and Charles Henty,

Forsberg & Umlauf, P.S., Timothy R. Volpert, Tim Volpert,

P.C., Portland, and Matthew B. Anderson and William B.

Seo, Mendes & Mount, LLP, New York.

Thomas M. Christ, Sussman Shank LLP, Portland,

filed the brief for respondent on review General Insurance

Company.

Beverly Pearman, Assistant General Counsel, Portland,

and Seth H. Row, Portland, filed the brief for amici curiae

Port of Portland and United Policyholders.

______________

* On appeal from Multnomah County Circuit Court, Christopher J. Marshall,

Judge. 297 Or App 434, 442 P3d 212 (2019).

714 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

Nadia H. Dahab, Stoll Stoll Berne Lokting & Shlachter,

Portland, filed the brief in support of the petition for review

and Lydia Anderson-Dana, Stoll Stoll Berne Lokting &

Shlachter, filed the brief on the merits for amicus curiae

Daimler Trucks North America LLC. Also on the brief on

the merits was Steven C. Berman.

Michael E. Farnell, Parsons Farnell & Grein, LLP,

Portland, filed the brief for amicus curiae Former Governor

Ted Kulongoski.

Before Walters, Chief Justice, and Balmer, Nakamoto,

Duncan, Nelson, and Garrett, Justices, and Rives Kistler,

Senior Judge, Justice pro tempore.**

BALMER, J.

The decision of the Court of Appeals is reversed. The lim-

ited judgments of the trial court are affirmed in part and

reversed in part, and the case is remanded to the trial court

for further proceedings.

______________

** Flynn, J., did not participate in the consideration or decision of this case.

Cite as 367 Or 711 (2021) 715

BALMER, J.

This case arises out of an insurance company’s civil

action seeking equitable and statutory contribution from

other insurers for claims and defense costs that it paid on

behalf of its insured. We describe the factual background

of the case and the claims in general terms before address-

ing the legal arguments in detail. For the reasons explained

below, we reverse the decision of the Court of Appeals, affirm

in part and reverse in part the trial court’s limited judg-

ments, and remand to the trial court for further proceedings.

I. BACKGROUND AND PROCEEDINGS BELOW

Daimler-Benz AG acquired Freightliner Corpora-

tion (Freightliner) from Consolidated Freightways (now

Con-Way) in 1981. As part of the transaction, it liquidated

Freightliner’s assets and liabilities into a subsidiary,

Daimler Trucks North America LLC (Daimler). Between

1952 and 1982, Freightliner and then Daimler had engaged

in business activities, primarily the manufacture of trucks,

that subsequently led to several environmental remedia-

tion proceedings, including claims related to the Portland

Harbor Superfund cleanup, and to some 1,500 asbestos

personal injury claims. Plaintiffs Allianz Global Risk US

Insurance and Allianz Underwriters Insurance Company

(Allianz) insured Freightliner in 1981 and Daimler from

1981 to 1986 through a general commercial liability insur-

ance policy. Daimler also purchased from Allianz another

policy to provide coverage for future claims that might be

made against Freightliner based on its past operations that

were “incurred but not yet reported.” By the time it filed the

operative complaint in this action in 2014, Allianz had spent

more than $24 million defending and paying environmental

and asbestos claims against Daimler and the now-dissolved

Freightliner arising from Freightliner’s business operations

between 1952 and 1982.

In this litigation, Allianz seeks contribution for the

payments it has made and will make in the future based

on those environmental and asbestos claims from insur-

ance companies that insured Freightliner—either directly

or through its parent, Con-Way—from 1976 to 1982. Those

include defendants ACE Property & Casualty Insurance

716 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

Company (ACE), General Insurance Company (General), and

Westport Insurance Corporation (Westport). Allianz also

seeks contribution from Certain Underwriters at Lloyd’s,

London and Certain London Market Insurance Companies

(London), which had issued excess insurance policies to

Freightliner from 1977 to 1981.1 Defendant insurance com-

panies declined to defend Daimler or pay claims under the

relevant policies or to pay any contribution to Allianz for

the amounts that it has paid. Daimler assigned its claims

against defendants under the insurance policies to Allianz.

Allianz alleges that it is entitled to common-law

equitable contribution because of the “equitable doctrine

which holds that one who pays money for the benefit of

another is entitled to be reimbursed.” Carolina Casualty v.

Oregon Auto., 242 Or 407, 417, 408 P2d 198 (1965). It also

relies on ORS 465.475 to 465.484, the Oregon Environmental

Cleanup Assistance Act (OECAA), which provides that an

“insurer that has paid all or part of an environmental claim

may seek contribution from any other insurer that is liable

or potentially liable to the insured and that has not entered

into a good-faith settlement agreement with the insured

regarding the environmental claim.” ORS 465.480(4)(a).

The insurance companies’ threshold defense is

that they are not responsible for any payments by Allianz

because the liabilities that they insured for Freightliner

and Con-Way were not transferred to Daimler as part of the

acquisition and dissolution of Freightliner in 1981. For that

reason, they argue, they have no obligation at all to Daimler

directly or in its capacity as the assignee of Freightliner’s

liabilities, and Allianz therefore may not recover any contri-

bution from them.

A second line of defense for General, Westport, and

ACE is that, even if Daimler did assume the liabilities of

Freightliner, including the environmental and asbestos

liabilities at issue here, their policies require no payment

by them to Daimler (and thus no contribution payment to

1

We sometimes refer to General, ACE, Westport, and the London defendants

as “defendants” or “defendant insurance companies.” Other insurance companies

also insured Freightliner and are parties to the litigation, but their liability is

not at issue in this appeal.

Cite as 367 Or 711 (2021) 717

Allianz) because of side agreements, sometimes referred

to as “fronting agreements,” between themselves and

Freightliner’s parent, Con-Way. Under the side agreements,

Con-Way agreed to indemnify the insurers for all claims,

defense costs, and other expenses arising out of occurrences

subject to the policies. Con-Way intervened in support of

the insurers because, under the side agreements, “Con-Way

ultimately will be responsible for any damages assessed

against” them.

A third defense raised by the insurers is based on

“qualified pollution exclusion” provisions in the policies.

Policies issued by London and General excluded coverage for

pollution liability unless the pollution was “sudden, unin-

tended[,] and unexpected” (London) or was “sudden, unex-

pected, [and] unintentional” (General), which the parties

refer to as the “London” pollution exclusion.2 Policies issued

by Westport and ACE excluded pollution coverage unless

the pollution was caused by a “discharge” that was “sudden

and accidental” (the “Domestic” pollution exclusion).

At trial, the jury found that Daimler had assumed

the contingent liabilities of Freightliner and, thus, that the

insurers could be liable to Daimler for the claims at issue

here. However, based on the side agreements and other evi-

dence admitted at trial, the jury also found that, notwith-

standing the insurance policies issued by Westport, ACE,

and General, those insurers and Con-Way did not intend

that the insurers would have a duty to defend or indemnify

Freightliner. As to the pollution exclusion provisions, the

jury agreed with Allianz that the Domestic exclusion pro-

visions in the ACE and Westport policies did not exclude

the environmental claims at issue here, but also found that

the London exclusion provisions in the London and General

policies did exclude coverage of those environmental claims.

Based on the jury verdict, the trial court entered

the two limited judgments that are at issue here. In one,

the trial court declared, because the jury had found that

2

The pollution exclusions in the London and General policies have the minor

textual differences that appear in the quoted provisions, as well as other differ-

ences, which we discuss below. Nevertheless, as noted, the parties generally refer

to them both as the “London” pollution exclusion, and we do as well.

718 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

Con-Way and the fronting insurers—General, ACE, and

Westport—did not intend that those insurers would have

a duty to defend Freightliner as to the claims at issue, that

Allianz was not entitled to contribution from those defen-

dants for the amounts that it paid with respect to the claims.

It therefore dismissed with prejudice all of Allianz’s claims

against ACE and claims against General and Westport that

related to some of the policies that they had issued. In the

second limited judgment, the court declared that London

was not required to defend Daimler and that Allianz was not

entitled to contribution from it because the London pollution

exclusion excluded such claims; it dismissed with prejudice

the claims related to certain policies issued by London.3

Allianz appealed, assigning error to various trial

court rulings related to the ACE, General, and Westport

policies, the side agreements, and the London pollution

exclusion. The thrust of its argument was that the trial

court had erred in submitting to the jury issues regarding

the effect of the side agreements and the interpretation of

the insurance policies, which, Allianz asserted, should have

been decided by the court as a matter of law. Con-Way and

defendant insurance companies cross-assigned error to the

trial court’s denial of their motion for a directed verdict

in their favor, arguing that Daimler had never assumed

Freightliner’s contingent liabilities in the first place and

therefore was not entitled to make any claims under the

policies. For that reason, Con-Way and the defendant insur-

ance companies contended, Allianz had no viable claim for

contribution.

The Court of Appeals determined that the cross-

assignment of error was dispositive and, accordingly, did not

address any of Allianz’s assignments of error. Allianz Global

Risks v. ACE Property & Casualty Ins. Co., 297 Or App 434,

439, 442 P3d 212 (2019). The court held that Daimler had not

assumed Freightliner’s contingent liabilities, that Allianz

3

The dismissal of claims against General based on the pollution exclusion

verdict was included with the other declarations as to General in the first lim-

ited judgment. Also, certain other claims and counterclaims in the case were

resolved by trial court rulings and settlements that are not before us. This appeal

is limited to the two limited judgments entered by the trial court and the claims

resolved by those judgments.

Cite as 367 Or 711 (2021) 719

cannot seek contribution from Freightliner’s historical pri-

mary and excess liability insurers, and that the trial court

had erred in denying motions for directed verdicts as to all

defendants. Id. at 445. It affirmed the limited judgments

on that alternative ground. Id. Allianz filed a petition for

review, which we allowed.

II. DAIMLER’S ASSUMPTION OF FREIGHTLINER’S

CONTINGENT LIABILITIES

We begin with the issue that the Court of Appeals

found dispositive: whether Daimler acquired Freightliner’s

contingent liabilities in 1981. As set out in the verdict, the

jury found that Daimler was “the successor to the liabilities

of Freightliner Corporation * * * by reason of * * * [e]xpress or

implied assumption of all liabilities.” On appeal, defendants

and Con-Way argued that the trial court erred in submit-

ting the issue to the jury because documents related to the

acquisition unambiguously show that Freightliner did not

transfer, and Daimler did not assume, Freightliner’s con-

tingent liabilities. The Court of Appeals accepted that argu-

ment, and for that reason held that the trial court should

have granted a directed verdict. Id. We disagree with the

Court of Appeals.

A. The Daimler-Freightliner Agreements Regarding the

Acquisition

On July 31, 1981, Daimler acquired all the stock

of Freightliner. Through three agreements executed on

August 14, 1981, Freightliner was liquidated and certain

of its assets and liabilities were transferred to the Daimler

subsidiary.4 (Freightliner was later dissolved and all of its

remaining assets transferred to Daimler.) The question is

whether Freightliner’s contingent liabilities were trans-

ferred to Daimler in the August 14, 1981, agreements. In the

“Agreement and Plan of Liquidation,” Daimler “expressly

assumes and agrees unconditionally to pay and discharge

4

The two parties to each of the agreements are the Daimler subsidiary

known as Freightliner Acquisition Corporation and Freightliner Corporation,

the entity that Daimler acquired from Con-Way. To avoid confusion, we refer

to Freightliner Acquisition Corporation by the name of its parent company,

Daimler.

720 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

any and all liabilities and debts” of Freightliner. That docu-

ment also provides that Daimler

“shall deliver to [Freightliner] an instrument of assump-

tion, under the terms of which [Daimler] shall expressly

assume and undertake to pay, perform, fulfill and dis-

charge all such liabilities and obligations of [Freightliner],

accrued to or existing at the time of transfer, whether abso-

lute or contingent, and of whatever nature, except as other-

wise provided for therein.”

(Emphases added.) Executed the same day was the refer-

enced “instrument of assumption,” titled the “Assumption.”

In the “Assumption,” Daimler

“expressly assumes and undertakes to pay, perform, ful-

fill and discharge all liabilities and debts of [Freightliner],

including, without limitation, all obligations, covenants

and duties under any and all leases of real and personal

property, obligations under licenses of United States and

foreign patents, trademarks, service marks and copyrights,

dealer agreements, pension and health plans, financial

and credit arrangements, contracts, indentures, mort-

gages, pledges, warrants, subscriptions, loan agreements,

export agreements, employment agreements, insurance

agreements and plans, sales and repurchase agreements,

indemnity agreements and plans of composition, and all

other liabilities and obligations whether accrued, absolute

or contingent, as of the date hereof.”

(Emphases added.) Daimler and Freightliner also executed

a “Transfer and Assignment” at the same time, in which

Freightliner

“hereby assigns and transfers to [Daimler] * * * all of the

properties and assets of [Freightliner], both real and per-

sonal, tangible and intangible, of every kind and nature,

and wheresoever located, except as set forth in Schedule A

hereto * * *[.]”

“Schedule A,” attached to the “Transfer and Assignment,”

excludes from the transfer agreement

“[a]ll contingent liabilities, and sufficient cash amounts as

are estimated to be necessary to satisfy such liabilities,

for which reserves have previously been established. This

includes, but may not be limited to, reserves for warranty

and insurance claims.”

Cite as 367 Or 711 (2021) 721

About two weeks later, on September 1, 1981, the

parties signed a letter agreement clarifying their intent

regarding Freightliner’s liquidation, primarily as to the

disposition of certain leases. The letter expressly excludes

from the “Transfer and Assignment” a list of 31 “real and

personal property leases for which the prior written con-

sent of the lessors is required.” It otherwise confirms that

the “Transfer and Assignment” was “intended to transfer

all properties and assets of Freightliner of every kind and

nature other than the liabilities of Freightliner referred to

in Schedule A and an amount of assets retained sufficient to

satisfy such liabilities * * *.”

As noted, the factual question of whether Daimler

had “express[ly] or implied[ly] assum[ed] * * * all liabilities”

of Freightliner, based on those agreements and other evi-

dence presented at trial, was presented to the jury. The jury

found that Daimler had assumed those liabilities.

B. The Court of Appeals Ruling on Defendants’ Cross-

Assignment of Error

The Court of Appeals concluded otherwise. That

court viewed the August 14, 1981, agreements as being

“ambiguous” as to “Daimler’s assumption of Freightliner’s

contingent liabilities.”

“The ‘Agreement and Plan of Liquidation’ and the

‘Assumption’ agreement state that Daimler assumes all

liabilities, ‘whether absolute or contingent, and of what-

ever nature,’ but the ‘Transfer and Assignment Agreement’

explicitly states that the transfer does not include

Freightliner’s contingent liabilities.”

Allianz, 297 Or App at 444. To resolve that ambiguity, the

court then looked to the September 1, 1981, letter agree-

ment, which it construed to be either part of the August 14

agreement or an addendum to the August 14 documents:

“The letter states explicitly that its purpose is to clarify the

terms of the August 14, 1981, agreement. It is signed by

the parties and unequivocally and unambiguously states

that Freightliner has not transferred, and Daimler has

not assumed, Freightliner’s contingent liabilities. Thus,

722 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

because the letter is properly viewed as part of the parties’

agreement, and because the text and context of the letter

resolve the issue, we do not consider extrinsic evidence of

the parties’ intent or maxims of construction.”

Id. at 444-45. The court concluded that, as a matter of law,

the agreement between the parties was unambiguous and

that Daimler had not assumed Freightliner’s contingent lia-

bilities. Id. at 444. Accordingly, it held that the trial court

“erred in denying the motion for a directed verdict as to all

defendants” and allowing the issue to go to the jury. Id. at

445.

On review, Allianz argues that the Court of Appeals

misinterpreted the contractual documents between Daimler

and Freightliner which, when read together, are not contra-

dictory. The transaction, Allianz maintains, was structured

to allow the defunct Freightliner to retain some assets so that

it could pay certain contingent liabilities after its liquidation

into Daimler but before it was formally dissolved. Doing so

would allow the entities to obtain favorable tax treatment on

their consolidated returns over a three-year period.5 Allianz

emphasizes that under the agreement Daimler expressly

assumed all contingent liabilities of Freightliner, although

Freightliner also remained obligated on some of its liabili-

ties; that is, both Freightliner and Daimler were responsible

for that subset of liabilities. Freightliner also retained “pre-

viously established” monetary reserves that would allow it

(rather than the new owner Daimler) to satisfy those liabil-

ities, which would provide tax benefits to the consolidated

entities. In Allianz’s view, the documents as a whole unam-

biguously reflect the intent just described; but, to the extent

that the August 14 agreements and the September 1 let-

ter might be ambiguous or internally inconsistent, Allianz

5

Two aspects of the August 14, 1981, agreements were based on tax con-

siderations. First, all of the Freightliner assets, except those identified in

Schedule A, were transferred to Daimler as of that date so that Daimler would

have a stepped-up basis in those assets. See 26 USC § 334(b)(2) (1976) (providing

step-up basis for assets of acquired corporation if liquidated within two years

after acquisition). Second, Schedule A provided that certain contingent liabili-

ties and assets reserved to pay those liabilities would continue to be liabilities of

Freightliner, because amounts paid to satisfy those liabilities could be deducted

as business expenses under 26 USC § 162(a) only if the payments were made by

Freightliner. No one appears to dispute those basic aspects of tax law.

Cite as 367 Or 711 (2021) 723

asserts, the trial court did not err in allowing the issue to

go to the jury, which heard extensive evidence and unan-

imously agreed that Daimler had explicitly or implicitly

assumed all Freightliner’s liabilities.6

The contractual documents support Allianz’s posi-

tion and the jury’s verdict. The text of the “Agreement

and Plan of Liquidation” could hardly be clearer: Daimler

“expressly assumes and agrees unconditionally to pay and

discharge any and all liabilities and debts” of Freightliner.

(Emphasis added.) It then provides that Daimler will deliver

to Freightliner “an instrument of assumption” under which

Daimler will “expressly assume and undertake to pay, per-

form, fulfill and discharge all such liabilities and obligations

of [Freightliner], accrued to or existing at the time of transfer,

whether absolute or contingent, and of whatever nature * * *.”

(Emphases added.) The unsurprisingly titled “Assumption,”

executed the same day, repeats the same language, again

setting out Daimler’s agreement to assume, pay, and dis-

charge “all liabilities and debts” of Freightliner, listing dif-

ferent categories of obligations not at issue here, and “includ-

ing * * * all other liabilities and obligations whether accrued,

absolute or contingent * * *.” (Emphases added.)

The Court of Appeals perceived a conflict between the

“Agreement and Plan of Liquidation” and the “Assumption,”

on the one hand, and the “Transfer and Assignment” on the

other, because the latter “explicitly states that the trans-

fer does not include Freightliner’s contingent liabilities.”

Allianz, 297 Or App at 444. For that conclusion, the court

relied on Schedule A of the “Transfer and Assignment.”

See id. at 442 (“Schedule A * * * explicitly excluded from

Daimler’s assumption Freightliner’s contingent liabilities.”).

To resolve that inconsistency or “ambiguity,” id. at 444, the

court looked to the September 1, 1981, letter agreement.

6

Allianz asserts that the three August 14, 1981, documents and the

September 1, 1981, letter unambiguously establish that Daimler assumed all

liabilities of Freightliner, including those at issue here, and that the trial court

therefore should have ruled in its favor as a matter of law, rather than permit

the consideration of extrinsic evidence and submit the question to the jury. See

Yogman v. Parrott, 325 Or 358, 361, 937 P2d 1019 (1997) (in the absence of ambi-

guity, court construes the words of a contract as a matter of law). Because the

jury found in Allianz’s favor on this issue in any event, we need not address that

aspect of its argument.

724 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

It concluded that the letter “eliminate[d] any ambiguity

* * * that Freightliner’s contingent liabilities had not been

transferred to Daimler” and that it “unambiguously states

that Freightliner has not transferred, and Daimler has not

assumed, Freightliner’s contingent liabilities.” Id. at 444-45.

To consider whether the Court of Appeals erred in

holding that the contracts outlined above demonstrate that

Daimler did not assume Freightliner’s contingent liabilities,

we take a step back and look at the agreement as a whole,

as set out in the four documents. The “Agreement and Plan

of Liquidation,” as its name indicates, sets out the central

terms of the “agreement” between Daimler and Freightliner

and the “plan” for the liquidation and later dissolution of

Freightliner. The other documents implement that plan.

The “Agreement and Plan of Liquidation” provides that

Daimler will deliver to Freightliner “an instrument of

assumption” expressly assuming all of Freightliner’s liabil-

ities, “whether absolute or contingent.” That instrument is

the “Assumption.” As discussed above, in the “Assumption,”

Daimler expressly assumes all contingent and other liabil-

ities. Moreover, it does so explicitly “in consideration of the

transfer and assignment” of all of Freightliner’s assets to

Daimler.

The “Agreement and Plan of Liquidation” also pro-

vides for the liquidation of Freightliner through the distri-

bution of its assets to Daimler. Under that document, the

assets of Freightliner are transferred to Daimler, beginning

with a “first distribution” and ending with a final distribu-

tion not more than “three (3) years from the close of the tax-

able year in which the first distribution * * * occurs.” That

step is accomplished by a third document, the “Transfer

and Assignment.” The “Transfer and Assignment” does

exactly what its name indicates: it “assigns and transfers

to [Daimler] as of the close of business on [August 14, 1981,]

all the property and assets of [Freightliner], both real and

personal, tangible and intangible * * * except as set forth

on Schedule A hereto * * *.” The remaining “property and

assets” are to be—and were—transferred to Daimler within

three years, after the consolidated entities had realized the

favorable tax consequences that accrued to them because

Freightliner paid certain liabilities from its remaining

Cite as 367 Or 711 (2021) 725

assets—the “previously established” reserves—over those

years.

As noted, the Court of Appeals relied on a fourth

document—the September 1, 1981, letter—to conclude that

Daimler had not assumed Freightliner’s contingent liabil-

ities. That document, however, had a different focus than

“eliminating any ambiguity” about whether “all” contingent

liabilities, including liabilities such as those at issue in this

case, had been transferred to Daimler. As the text of the

letter states, it was intended to

“clarify [the parties’] mutual intent with respect to the liq-

uidating distribution by [Freightliner to Daimler] effected

by the Transfer and Assignment * * * [and to] confirm that

such instrument was intended to transfer all properties

and assets * * * other than the liabilities of Freightliner

referred to in Schedule A and an amount of assets retained

sufficient to satisfy such liabilities and other than the fol-

lowing real and personal property leases for which the prior

written consent of the lessor is required.”

(Emphases added.) The September 1, 1981, letter then

specifies the 31 real and personal property leases to which

Freightliner was a party and provides details as to the dol-

lar amount of assets to be retained by Freightliner and the

handling of intra-corporate accounting matters between

Daimler and Freightliner.

We first consider and reject the Court of Appeals’

determination that the September 1, 1981, letter was

intended to clarify the “August 14, 1981, agreement” and

that it “unequivocally and unambiguously states that

Freightliner has not transferred, and Daimler has not

assumed, Freightliner’s contingent liabilities.” Allianz, 297

Or App at 444-45. To the contrary, as quoted above, the

letter explicitly states that it was intended to clarify the

parties’ intent regarding the “liquidating distribution * * *

effected by the Transfer and Assignment” of “all properties

and assets”—which was only one of the August 14, 1981,

documents. The document in which Daimler explicitly and

without any exceptions assumed all of Freightliner’s liabil-

ities, contingent and otherwise, was not the “Transfer and

Assignment,” but the “Assumption.” The September 1, 1981,

726 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

letter did not purport to clarify or modify the “Assumption”

or that document’s unequivocal assumption of “all liabilities

and obligations whether accrued, absolute or contingent[.]”

Rather, aside from repeating some of the terms of earlier doc-

uments, specifically the “Transfer and Assignment,” it sim-

ply sets out the leases for which Freightliner continues to be

liable because their assumption by Daimler would require

“the prior written consent of the lessors.” Additionally, the

letter, like the “Transfer and Assignment” that it “confirm[s]

and clarif[ies],” contains no legally binding obligation at all

as to the assumption by Daimler of the contingent liabilities

at issue in this case.

The September 1, 1981, letter and the “Transfer and

Assignment” did not “effect” any assumption of liabilities

by Daimler; rather, they “effected” the transfer and assign-

ment of Freightliner’s assets to Daimler. The assumption of

liabilities was “effected” by the “Assumption.”7 The letter,

like the “Transfer and Assignment,” refers to the “liabilities

of Freightliner referred to in Schedule A,” but adds no addi-

tional legal or factual support to the arguments of Con-Way

and defendants regarding the liabilities that Daimler did or

did not assume.

We turn to the dispute about the meaning of

Schedule A to the “Transfer and Assignment.” The Court

of Appeals read the “Transfer and Assignment” as “assign-

[ing] to Daimler all of its assets, except for its contingent

liabilities.” Id. at 441. That interpretation misconstrues the

plain meaning of the document. First, as quoted above, and

consistent with its title, the document “assigns and trans-

fers to [Daimler] * * * all of the properties and assets of

[Freightliner.]” (Emphasis added.) A party with assets may

“assign” or “transfer” those assets to another.8 However,

7

To the extent that the September 1, 1981, letter clarified or modified the

Transfer and Assignment as it related to “contingent liabilities,” it excepted from

the transfer to Daimler only the real and personal property leases listed in the

letter, for which the parties apparently had not yet secured the required approval

of the lessors.

8

See Black’s Law Dictionary 146-47 (11th ed 2019) (defining “assign” as “[t]o

convey in full; to transfer,” and “assignment” as “the transfer of rights or prop-

erty”). See id. at 1803 (defining “transfer” as “[t]o convey or remove from one place

or one person to another; to pass or hand over from one to another, esp. to change

over the possession or control of * * *[; t]o sell or give”).

Cite as 367 Or 711 (2021) 727

a party with obligations or liabilities ordinarily does not

“assign” or “transfer” those liabilities to another party.

Rather, the other party assumes those obligations and lia-

bilities, just as Daimler did here in the “Assumption.”9

The “Transfer and Assignment” employs words of common

and legal usage—“assign” and “transfer”—that connote a

change in ownership of assets and property, but does not

use the word “assumption,” a word that, again, in both

common and legal usage, connotes something quite differ-

ent, viz., the taking on by one party of another’s liability or

obligation.

The “Transfer and Assignment” implements the

comprehensive “passing” or “handing over” from Freightliner

to Daimler of “all the properties and assets of [Freightliner],

both real and personal, tangible and intangible, of every kind

and nature, and wheresoever located, except as set forth on

Schedule A * * *.” Schedule A then excludes from that trans-

fer of “all the properties and assets” of Freightliner a specific

subset of liabilities and associated assets:

“All contingent liabilities, and sufficient cash amounts as

are estimated to be necessary to satisfy such liabilities,

for which reserves have previously been established. This

includes, but may not be limited to, reserves for warranty

and insurance claims.”

(Emphases added.) The reference to this subset of liabilities

in Schedule A does not purport to alter Daimler’s assumption

of “all” of Freightliner’s liabilities “whether accrued, abso-

lute or contingent,” as set out in the “Assumption.” Rather,

it is included there to describe the Freightliner reserves that

had been set aside to pay that subset of liabilities and that

would therefore be excluded from the otherwise compre-

hensive transfer of all Freightliner’s assets to Daimler and

remain with Freightliner.

Contrary to the Court of Appeals’ holding and Con-

Way’s argument, the words of Schedule A do not unambigu-

ously exclude “Freightliner’s contingent liabilities” from the

9

See Black’s Law Dictionary at 154 (defining “assumption” as “[t]he act of

taking (esp. someone else’s debt or other obligation) for or on oneself; the agree-

ment to so take * * *”).

728 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

liabilities that Daimler assumed. Rather, they can be read

to exclude “contingent liabilities * * * for which reserves have

previously been established.”10 The range of potential liabil-

ities of a manufacturing company such as Freightliner can

be broad indeed. As individuals, other corporations, and gov-

ernment entities assert legal claims of one kind or another,

businesses often recognize and set aside reserves for the

purpose of later paying claims and related legal costs. That

is what Freightliner had done in the years leading up to the

sale to Daimler. Some $16 million in reserves were retained

by Freightliner and paid out during the three years after

the transaction closed.

In sum, although the Court of Appeals agreed with

Con-Way that the August 14, 1981, documents were “ambig-

uous” as to whether Daimler had assumed the contingent

liabilities of Freightliner, it nevertheless concluded that

the September 1, 1981, letter “unequivocally and unam-

biguously states that Freightliner has not transferred, and

Daimler has not assumed, Freightliner’s contingent liabil-

ities.” Allianz, 297 Or App at 444-45. It held that the trial

court erred in not granting the defendants’ motion for a

directed verdict in their favor.

Under the “Agreement and Plan of Liquidation”

and the “Assumption,” Daimler expressly assumed all

of Freightliner’s liabilities, contingent and otherwise. It

appears that certain leases and other specific liabilities for

which Freightliner had established reserves may have been

excluded from the otherwise comprehensive assumption of

liabilities because required approvals from lessors had not

yet been obtained or for tax purposes.11 But, for the reasons

10

Con-Way thus is incorrect in arguing that Freightliner “retained two things:

all of its contingent liabilities, and reserves to pay those liabilities.” (Emphasis

added.) Rather, the wording of Schedule A makes clear that Freightliner retained

(1) contingent liabilities for which reserves had been established, and (2) those

reserves. And to the extent there might be any ambiguity in that wording in

Schedule A, the jury resolved the issue in Allianz’s favor.

11

Con-Way argues that Daimler did not assume the contingent liabilities of

Freightliner, because it could not have obtained the favorable tax treatment it

sought unless Freightliner’s contingent liabilities remained with that corporate

entity. It cites Pacific Transport Company v. C.I.R., 483 F2d 209 (9th Cir 1973),

for the proposition that an acquiring company may not deduct amounts that it

paid to satisfy liabilities of an entity that it had acquired. In that case, however,

the acquiring company was denied the deduction not because it had assumed

Cite as 367 Or 711 (2021) 729

set out above, we disagree with the Court of Appeals and con-

clude that the contractual documents do not unambiguously

demonstrate that Daimler did not assume Freightliner’s lia-

bility for the contingent liabilities at issue here.

C. Disposition

Allianz also contends that the agreement between

Freightliner and Daimler was unambiguous, arguing that the

“Agreement and Plan of Liquidation” and the “Assumption”

unequivocally demonstrate that Daimler did assume all of

Freightliner’s liabilities, contingent and otherwise. Allianz

argues that, because the only reasonable interpretation of

the contractual documents is that Daimler assumed all of

Freightliner’s contingent liabilities, the trial court erred in

not granting Allianz’s motion for a directed verdict on that

issue.

As discussed at length above, a close reading of the

three agreements executed on August 14, 1981, and the let-

ter of September 1, 1981, provides substantial support for

Allianz’s position. But Con-Way is correct that some provi-

sions of the documents arguably are in tension with others.

For example, notwithstanding Daimler’s blanket assump-

tion of “all liabilities and obligations whether accrued, abso-

lute or contingent” in the “Assumption,” Schedule A can be

read to exclude from the transfer to Daimler, “[a]ll contin-

gent liabilities, and sufficient cash amounts as are esti-

mated to be necessary to satisfy such liabilities, for which

reserves have previously been established.” Even if the

commas setting off the adjectival phrase regarding “suffi-

cient cash amounts” limit the scope of the liabilities that are

excluded by Schedule A, that document undercuts Allianz’s

broad assertion that Daimler assumed all of Freightliner’s

liabilities. And the September 1, 1981, letter reiterates that

excluded from the Freightliner to Daimler transfer are “the

liabilities of Freightliner referred to in Schedule A and an

amount of assets retained sufficient to satisfy such liabili-

ties * * *.”

the liability, but because it was the entity that had paid the money to satisfy the

obligation. Id. at 212. Here, Daimler left certain funds in the Freightliner shell

that were used to pay certain Freightliner obligations. Freightliner, not Daimler,

paid those obligations and took those deductions.

730 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

We have explained above why those minor tensions

between different phrases in the documents do not substan-

tially undermine Allianz’s view that Daimler assumed all of

Freightliner’s liabilities, or at least all of its liabilities other

than the 31 leases referred to in Schedule A and several

specific categories of other liabilities for which Freightliner

already had established reserves. Allianz has the better

reading of the contractual documents as a whole. But we

need not decide whether that is the only way to read the par-

ties’ written agreements and thus whether the trial court

erred in denying Allianz’s motion for a directed verdict. To

the extent that the agreements contain any ambiguity as

to what liabilities were assumed by Daimler, extrinsic evi-

dence of the parties’ intent was relevant to interpreting the

contract. That evidence was presented to the jury, which

found that Daimler had “express[ly] or implied[ly]” assumed

those liabilities. Moreover, as the special verdict makes

clear, the verdict also could have been based on a finding

of Daimler’s “implied assumption” of Freightliner’s liabili-

ties. See Erickson v. Grande Ronde Lbr. Co., 162 Or 556, 568,

92 P2d 170, reh’g den, 162 Or 579, 94 P2d 139 (1939) (pur-

chaser may impliedly assume debts and obligations of trans-

feror). On review, then, the remaining and dispositive ques-

tion is whether the jury’s verdict that Daimler expressly or

impliedly assumed all of Freightliner’s liabilities must be

set aside.

“This court cannot set aside a jury’s verdict unless

there was no evidence from which the jury could have found

the facts necessary to establish the elements of plaintiff’s

cause of action.” Woodbury v. CH2M Hill, Inc., 335 Or 154,

159, 61 P3d 918 (2003). We briefly summarize the evidence

in the record that the parties intended that Daimler assume

all of Freightliner’s liabilities.

As discussed above, Con-Way argues that Schedule

A of the “Transfer and Assignment” excluded “all contin-

gent liabilities” from that which was being transferred

from Freightliner to Daimler. Allianz responded with a

different and much narrower interpretation of Schedule A,

arguing that the “exception” there did not encompass all of

Freightliner’s liabilities, contingent or otherwise, but only

those “contingent liabilities * * * for which reserves have

Cite as 367 Or 711 (2021) 731

previously been established.” Evidence at trial showed

that as of 1981 Freightliner had established five different

reserve funds for contingent liabilities: “warranty expense,”

“Department of Transportation recall expense,” “policy

adjustment expense,” “self-insurance expense for product

liabilities,” and “vacation/holiday pay.” Freightliner had

established no reserves for environmental or asbestos

claims. The jury’s verdict that Daimler assumed the lia-

bilities of Freightliner at issue here is consistent with that

evidence.

Evidence at trial also showed that the specific

environmental remediation and asbestos claims for which

Allianz seeks contribution were unknown and unanticipated

in 1981. The first asbestos lawsuit against Daimler was

filed in 1994, and its potential liability for the three environ-

mental remediation proceedings was not known until 1983,

1991, and 2000, respectively. Based on evidence that the

claims at issue here were not known at the time of Daimler’s

acquisition of Freightliner in 1981, the jury could have found

that the parties did not intend to exclude those unknown

and contingent claims as part of the liabilities “for which

reserves had previously been established” in Schedule A,

but rather that they were included as part of Daimler’s

unqualified assumption of “all * * * liabilities and obligations

of [Freightliner], accrued to or existing at the time of trans-

fer, whether absolute or contingent, and of whatever nature

* * *.”

The jury also heard evidence that, in the years

after 1981, Daimler never disputed its responsibility for

Freightliner’s liabilities, including liabilities that had not

been identified or known at the time of the acquisition.

Former Daimler executives and a corporate tax expert tes-

tified that Daimler (or its insurers) had paid and continue

to pay all of Freightliner’s liabilities and obligations based

on its pre-1981 operations. Evidence of such subsequent

conduct is admissible to determine whether one party has

impliedly assumed the debts of another. Erickson, 162 Or at

569. Based on that evidence, a jury could find that Daimler

impliedly assumed the liabilities of Freightliner at issue

here.

732 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

Because evidence in the record supported the jury’s

verdict that Daimler expressly or impliedly assumed

Freightliner’s liabilities, the trial court did not err in deny-

ing defendants’ and Con-Way’s motion for a directed verdict

in favor of defendants.

III. THE INSURANCE POLICIES AND

THE SIDE AGREEMENTS

Because the Court of Appeals ruled in favor of Con-

Way and defendant insurance companies on their cross-

assignment of error, it did not reach Allianz’s challenges

to the limited judgments entered by the trial court. Con-

Way and defendants made a contingent request that, if we

were to reverse the Court of Appeals, we remand the case to

that court to consider Allianz’s assignments of error in the

first instance. We decline to do so. Most of the issues were

extensively litigated at trial, are well-briefed on appeal, and

a decision from this court will expedite further proceed-

ings in the trial court and the ultimate resolution of the

case.

Allianz challenges the jury’s verdict that Con-Way

and ACE, General, and Westport did not “intend” that

those insurance companies, despite the policies they issued

to Freightliner, “would have a duty to defend or indem-

nify Freightliner” against the environmental and asbestos

claims at issue here. As discussed above, the centerpiece of

defendants’ position is that the side agreements between

the insurance companies and Con-Way eliminated any obli-

gation on the part of the insurance companies under the

policies. Allianz argues, first, that the question should not

have been submitted to the jury because insurance policies

are interpreted by the court as a matter of law, Hoffman

Construction Co. v. Fred S. James & Co., 313 Or 464, 469,

836 P2d 703 (1992), and, second, that any ambiguities in the

interpretation of an insurance policy are resolved in favor

of coverage, also as a matter of law, North Pacific Ins. Co. v.

Hamilton, 332 Or 20, 25, 22 P3d 793 (2001). For those and

other reasons discussed below, Allianz asserts that the trial

court erred in not granting its motion for a directed verdict

to the effect that the insurers had “duties to defend, all envi-

ronmental and all asbestos case claims at issue” according

Cite as 367 Or 711 (2021) 733

to the terms of the policies they had issued.12 Alternatively,

Allianz argues that errors in jury instructions given and

not given, evidentiary rulings, the verdict form, and the

denial of its post-trial motion to set aside the jury verdict

require the reversal of the limited judgment declaring that

the defendant insurers had no duty to defend or indemnify

Con-Way.

Con-Way and defendants counter that the trial

court did not require the jury to interpret the policies them-

selves, but only the side contracts or “fronting agreements,”

and that parties to an insurance policy are permitted to

negotiate such agreements about coverage. They argue that

Hoffman stands for the proposition that, even in the insur-

ance context, “ ‘[t]he primary and governing rule of the con-

struction of insurance contracts is to ascertain the intention

of the parties,’ ” 313 Or at 469 (alteration in original), and

that Allianz’s suggestion that the side agreements be disre-

garded is inconsistent with accepted principles of contract

interpretation.13

A. The Trial Court’s Submission of the “Policies” to the Jury

We first consider the threshold issue of whether

the trial court erred in submitting to the jury the follow-

ing question: “Did Con-Way and [the insurers] intend that

[the insurers] would have a duty to defend or indemnify

Freightliner against the claims at issue?” We conclude that

the trial court erred.

In this case, Allianz alleged that, in the insurance

policies that they issued, the insurers promised to defend

and indemnify Freightliner against the claims at issue.

When we consider whether an insurer has a duty under a

policy to defend a lawsuit brought against its insured, we

look at only the insurance policy and the complaint that the

12

Con-Way and General argue that plaintiffs failed properly to assign error

in their Court of Appeals’ brief to the trial court rulings regarding the insurance

policies and related agreements. We have reviewed those arguments and con-

clude that plaintiffs sufficiently preserved their objections in the trial court and

identified their assignments of error in the Court of Appeals for us to consider

them.

13

In a related argument, the parties dispute the effect of “endorsements” to

the ACE and Westport policies. We discuss that argument below.

734 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

insurer is being asked to defend. Ledford v. Gutoski, 319 Or

397, 399, 877 P2d 80 (1994). Oregon’s longstanding statutes

and case law make it clear that the interpretation of insur-

ance policies is a question of law to be decided by the court.

The Insurance Code provides: “[E]very contract of insurance

shall be construed according to the terms and conditions of

the policy.” ORS 742.016(1). And “policy” is defined as “the

written contract or written agreement for effecting insur-

ance * * * and includes all clauses, riders, indorsements and

papers which are a part thereof.” ORS 731.122 (emphases

added). This court’s cases are consistent with those statutes.

See, e.g., St. Paul Fire v. McCormick & Baxter Creosoting,

324 Or 184, 192, 923 P2d 1200 (1996) (“The interpretation

of the terms of an insurance policy is a question of law.”).

The court is to consider the plain meaning of the relevant

policy terms; if a term is ambiguous, the court considers the

context in which the term appears and then the context of

the policy as a whole; if ambiguity remains, the term is con-

strued against the drafter—here, the insurer. McCormick

& Baxter Creosoting, 324 Or at 192; Hoffman, 313 Or at

469-71.

Because ORS 742.016(1) and our cases treat the

interpretation of insurance policies as legal questions,

decided based on the “terms and conditions of the policy,”

our approach is sometimes referred to as a “four-corners”

rule, excluding the consideration of evidence outside the

“four corners” of the policy itself. See West Hills Development

Co. v. Chartis Claims, 360 Or 650, 653, 385 P3d 1053 (2016).

Similarly, our determination of whether an insurer has a

duty to defend a particular claim depends on the allegations

in the complaint. If “the allegations in the complaint assert

a claim covered by the policy, then the insurer has a duty to

defend.” Id. By “limiting the analysis to the complaint and

the insurance policy,” we generally do not consider extrinsic

evidence, an approach sometimes called the “eight-corners”

rule. Id.

The insurance policies issued here are primary,

standard-form general liability policies, each providing cov-

erage, with a $1,000,000 limit, for claims for bodily injury

or property damages against Freightliner, including defense

costs. The premise underlying Con-Way’s and the insurers’

Cite as 367 Or 711 (2021) 735

position that the insurance issues were properly submitted

to the jury is that the jury was not asked to “interpret the

policies,” but rather, as General puts it, to “interpret * * *

the ‘fronting agreement’ that accompanied the policies.”14

But that characterization is incomplete at best. The head-

ings of the three questions on this issue that were submitted

to the jury explicitly stated that the questions were about

insurance policies: “General Policies,” “ACE P&C Policy,”

and “Westport Policy.” (Emphases added.)15 And the jury

instructions—many of which Allianz objected to because

they went beyond the terms of the insurance policies

themselves—demonstrate that the jury was being asked to

interpret the terms of the insurance policies as part of the

overall “agreement” between Con-Way and each insurer.

Instruction 21, for example, told the jury that, when “deter-

mining the intent of ACE P&C and Con-Way,” the jury must

consider the “terms of the January 24, 1975[,] agreement

[(the side agreement)] and of the insurance policy issued by

ACE P&C,” as well as the “situation of [the parties] at the

time they agreed to the agreement,” “[s]tatements [the par-

ties] made, and things they did, that related to the agree-

ment,” and other evidence that is plainly outside the four

corners of the policy. And, of course, the side agreements

themselves have no relevance or context other than in con-

nection with the insurance policies.

The jury thus was asked to consider the policies

themselves, the side agreements, the statements and con-

duct of the parties, and other evidence to answer the question

whether the parties “intend[ed]” that the insurers “would

have a duty to defend or indemnify Freightliner against

the claims at issue.” Allianz repeatedly objected to the trial

court’s decision to involve the jury in deciding the meaning

14

Although Con-Way and the insurance companies refer to the agreements

as “fronting agreements,” the ACE and Westport agreements are each titled

“Indemnification Agreement,” and the General agreement is titled “Agreement.”

We generally refer to them as “side agreements,” but nothing turns on the partic-

ular nomenclature.

15

Con-Way argues that Allianz failed to object to the word “policies” being

used in the headings of the verdict questions. But Allianz objected to the sub-

mission of the questions to the jury in the first place and to the related jury

instructions. We refer to the headings simply to indicate that the trial judge and

the parties all understood that the questions turned, at least in part, on the

insurance policies.

736 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

of the insurance policies. It filed a motion in limine to exclude

extrinsic evidence as to the interpretation of the policies,

moved for a directed verdict and a peremptory instruction

on that issue, and objected to instructions requiring the jury

to consider extrinsic evidence. It based its arguments on the

statutes and cases discussed above, and also on the fact that

its contribution claims against the insurers turn entirely on

their obligations under the insurance policies that they had

issued to Freightliner, Con-Way, or both—and not on the

side agreements that Con-Way had made with the insurers.

Allianz asserts that its claims against the insurance com-

panies “turn on whether their policies cover the underlying

claims against Daimler, not whether [the insurance compa-

nies] have indemnity rights against Con-Way under the side

agreements if plaintiffs prevail.”

We agree with Allianz that the trial court erred in

asking the jury to interpret the insurance policies. What

the policies did or did not mean—that is, the correct legal

interpretation of the policies—is an issue for the court to

decide as a matter of law. The question whether the insurer

is required to defend against particular claims depends on

the policy and allegations in the complaint asserting the

claims—the “four-corners” and “eight-corners” rules dis-

cussed above. The question of whether an insurer must pay

or indemnify its insured for particular claims is a question

of fact for the jury, if the facts are disputed, and depends

on whether the circumstances established the insured’s

liability.

Con-Way seeks to distinguish our past decisions

regarding the interpretation of insurance policies, but we

find none of its arguments persuasive. It first argues that

even cases involving the interpretation of insurance pol-

icies, such as Hoffman, ultimately turn on the parties’

intent. However, Hoffman itself declares that “[w]e deter-

mine the intention of the parties based on the terms and

conditions of the insurance policy.” 313 Or at 469 (empha-

sis added). Contrary to Con-Way’s implication, nothing in

Hoffman suggests that extrinsic evidence of the parties’ con-

duct or other side agreements is appropriate to consider in

determining the intent of parties as to the obligations set

Cite as 367 Or 711 (2021) 737

out in an insurance policy. That is a question of law for the

court.16

Con-Way also argues that Oregon’s rules for inter-

preting insurance policies apply only to “form” insurance

policies, and the side agreements were negotiated contracts,

not “form” insurance policies. That ignores the undisputed

fact that the actual insurance policies that were issued

by General, ACE, and Westport are standard-form pri-

mary general liability policies approved for use by Oregon

insurance regulators. Although the jury also was asked to

consider other evidence, including the side agreements, in

determining whether Con-Way and the insurance compa-

nies had agreed that the insurance companies would “have

a duty to defend or indemnify” Freightliner, that determina-

tion necessarily required the jury to interpret the terms of

the insurance policies, contrary to well-established Oregon

law. And while, as between Con-Way and the insurance com-

panies, the side agreements are plainly intended to require

Con-Way to indemnify the insurance companies for claims

those companies paid to injured parties and attorney fees

incurred in defending those claims, those terms do not mod-

ify the obligations set out in the policies themselves and,

thus, are irrelevant in this inter-insurer contribution case.

Con-Way argues that the side agreements sub-

stantially altered the allocation of risk between it and the

insurers, that Con-Way’s agreement to indemnify the insur-

ers for claims payments and litigation costs severely lim-

ited the insurers’ liability, and that, as result, the premi-

ums that it paid for the policies were “nominal.” That is all

undoubtedly true. Although Allianz argues at some points

that side agreements are illegal, the record and multiple

outside sources make it plain that agreements like those

here are a common practice and that they can serve legit-

imate business purposes for both the insured and insurer.

16

Oregon statutes reinforce that longstanding rule. To repeat, insurance

policies “shall be construed according to [their] terms and conditions,” ORS

742.016(1), which are found in “the written contract or written agreement for or

effecting insurance * * * and includes all clauses, riders, indorsements and papers

which are a part thereof[.]” ORS 731.122 (emphases added). However one char-

acterizes the side agreements, they are not “clauses, riders, indorsements [or]

papers” that are “a part” of the policy.

738 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

But the complaint in this case is based on the policies them-

selves and the insurers’ obligations under them. In these

circumstances, the trial court’s fusion of the two different

agreements—a standard form insurance policy and a nego-

tiated side agreement—and the resulting submission to the

jury of the single, overarching question based on both doc-

uments whether the parties “intend[ed]” that the insurer

would “have a duty to defend and indemnify” the insured

was error.

If the case before us were a dispute between Con-

Way and the insurance companies over the meaning of the

side agreements, then the terms and business purposes of

those agreements and, perhaps, extrinsic evidence of the

parties’ intent in entering into them, would be relevant.

And the terms of the insurance policies also would likely

be considered in such a dispute, although, even in those cir-

cumstances, our case law and statutes regarding insurance

policies indicate that the policy terms would be construed by

the court as a matter of law. But that is not the case before

us. For the reasons discussed above, the interpretation of

the insurance policies at issue here to determine whether

the insurers had a “duty to defend or indemnify Freightliner

against the claims at issue” should not have been submitted

to the jury.

B. Plaintiffs’ Contribution Claim and the Role of the Side

Agreements

The complaint in this case is by an insurer that

has paid claims and attorney fees on behalf of its insured,

Daimler, and now seeks contribution from other insurers

of Daimler’s predecessor, Freightliner, whose contingent

liabilities Daimler assumed. Equitable contribution claims

by one insurer against co-insurers are not uncommon, and

this court has recognized them for many years. In Carolina

Casualty, we emphasized that the right to such contribution

arises “out of the equitable doctrine which holds that one

who pays money for the benefit of another is entitled to be

reimbursed,” and not as a result of contractual “subroga-

tion.” 242 Or at 417. And, as discussed below, that tradi-

tional equitable remedy has been supplemented in Oregon

by the OECAA.

Cite as 367 Or 711 (2021) 739

1. The Common-Law Contribution Claim

The Court of Appeals addressed a similar co-insurer

contribution issue in Certain Underwriters v. Mass. Bonding

and Ins. Co., 235 Or App 99, 230 P3d 103, rev den, 349 Or

173 (2010), adh’d to as modified on recons, 245 Or App 101,

260 P3d 830 (2011). There, an insurer sought contribution

from co-insurers that had entered into a settlement agree-

ment with the insured that released them from the insured’s

claims. The co-insurers argued that the release that was

part of their settlement agreement with the insured barred

the contribution claim. The Court of Appeals rejected that

claim, holding that “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.

Rather, the right is grounded in principles of equity and

is a right that inures to the benefit of the insurer”—not the

insured. 235 Or App at 113 (emphasis added). We find the

Court of Appeals’ reasoning in Mass. Bonding persuasive.

For the same reason that the settlement agreement in that

case did not bar the plaintiff insurance company’s contribu-

tion claim based on the common obligation it shared with

the settling insurers of the same insured, id., the side agree-

ments here do not bar Allianz’s claim against the defendant

insurance companies.

Con-Way argues that Mass. Bonding is distin-

guishable because, there, the court held only that the set-

tlement agreements did not prevent the settling insurers

from having to contribute to defense costs incurred before

they settled and, in fact, declined to express an opinion as

to the co-insurers’ contribution liability for defense costs

incurred after the settlement. Id. at 116 n 8. But Con-Way

does not explain why the equitable doctrine of co-insurer

contribution—which, after all, is based on the terms of

the insurance policies that establish common obligations

of different insurers for covered claims against the same

insured—should depend on the timing of any side agree-

ment. Rather, Con-Way tries to contrast its indemnifica-

tion agreements with the settlement agreements in Mass.

Bonding that included releases of the insurance companies

by their insureds by suggesting that, in its agreements, “the

740 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

duty to defend was released even before it was incurred.”

Con-Way asserts that none of the insurance companies can

be liable to Allianz because they never had any obligation

to Freightliner in the first place—essentially arguing that

the “insurance policies” were meaningless because, under

the side agreements, Freightliner had agreed to indemnify

the insurers against all liability for claims made under the

policies.

But that argument proves too much. If the insur-

ance policies included no “duty to defend or indemnify” at

all, a co-insurer 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 cov-

ered claims, even though Freightliner 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.17 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 because its “duty to

defend was released even before it was incurred.”

Neither party has cited a case that is directly on

point regarding the effect of an insured/insurer side agree-

ment on a co-insurer’s contribution claim against the insurer,

but several cases from other jurisdictions strongly suggest

17

The OECAA addresses the issue of settlements by a “liable or potentially

liable” insurer by providing that an insurer that has paid an environmental

claim may not seek contribution from another insurer that has “entered into a

good-faith settlement agreement with the insured regarding the environmental

claim.” ORS 465.480(4)(a). None of the insurers or Con-Way argue that they have

entered into good-faith settlement agreements regarding these claims.

Cite as 367 Or 711 (2021) 741

that a side agreement in which an insured party agrees to

indemnify its insurer does not, standing alone, bar a contri-

bution claim by a co-insurer that has paid claims for or to

its insured for the same covered obligations. In Continental

Cas. v. National Union Fire Ins. Co., 812 F3d 1147, 1150 (8th

Cir 2016), the insurer against whom contribution was being

sought argued that it was not liable for contribution because,

under a side agreement, the insured had agreed to indem-

nify it for all claims and, therefore, it had no “duty to defend”

the insured. The Eighth Circuit rejected that defense, hold-

ing that,

“although [the insured] was ultimately financially respon-

sible for certain defense costs under its agreements with

[the insurer], it did not have to pay for its defense in the

first instance. Rather, in different ways, various agree-

ments obliged [the insured] to indemnify, reimburse, or

advance money to [the insurer] * * * which, by implication,

actually paid for the defense. By the terms of the agree-

ments, the basic arrangement was that [the insurer] would

pay the expenses and [the insured] would pay [the insurer].

Far from being free from any obligation to pay for [the

insured’s] defense, * * * [the insurer] was on the hook unless

and until [the insured] performed or [the insurer] exercised

its rights.”

812 F3d at 1150-51 (footnote omitted). The court affirmed

the trial court’s summary judgment requiring the insur-

ance company to contribute to the damages and defense

costs paid by a co-insurer: the defendant insurer “had a

duty to defend [its insured] and therefore ha[d] an equitable

obligation to contribute to paying the costs of the defense”;

the insured’s separate “agreement to pay” the insurer’s costs

did not defeat the co-insurer’s “right to contribution.” Id. at

1153. Rather, the court stated, “Th[ose] are distinct obliga-

tions.” Id.

Similarly, the terms of the insurance policies at

issue here made the defendant insurance companies respon-

sible for claims covered by the policies, for the benefit of

claimants and of Freightliner. Although Freightliner agreed

to indemnify the insurance companies for expenses they

incurred under the policies, the insurance companies were

“on the hook unless and until [Freightliner] performed.”

742 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

Other cases emphasize the critical role of equita-

ble contribution in ensuring that liability is appropriately

shared when multiple insurance policies cover the same

claims. As the California Court of Appeal has stated:

“[T]he right to equitable contribution exists independently

of the rights of the insured. It is predicated on the common

sense principle that where multiple insurers or indemni-

tors share equal contractual liability for the primary

indemnification of a loss or the discharge of an obligation,

the selection of which indemnitor is to bear the loss should

not be left to the often arbitrary choice of the loss claimant,

and no indemnitor should have any incentive to avoid pay-

ing a just claim in the hope the claimant will obtain full

payment from another coindemnitor.”

Fireman’s Fund Ins. Co. v. Maryland Cas. Co., 65 Cal App

4th 1279, 1295, 77 Cal Rptr 2d 296, 304-05 (1998) (empha-

sis in original). In a dispute over multi-insurer coverage in

an environmental clean-up case, Judge Posner identified

the problem with allowing an insurer and its insured to dis-

claim liability for contribution:

“The right is not the insured’s to disclaim. It is a right of

other insurers, who are not parties to the insurance policy,

and it is a right founded not on the concept of third-party

beneficiaries of contracts and hence not on ‘the wishes of

the insured’ but rather on notions of equity and unjust

enrichment.”

Rhone-Poulenc Inc. v. International Ins. Co., 71 F3d 1299,

1305 (7th Cir 1995) (citing Illinois cases). Here, too, “notions

of equity and unjust enrichment” bar the defendant

insurers from using side agreements with their insured to

disclaim, in a contribution action by another insurer, liabil-

ities covered by the policies that they issued.

2. Contribution Under the OECAA

Allianz’s contribution claim against the defendant

insurers also relies on the OECAA. As amicus curiae former

Governor Kulongoski points out, the OECAA “was enacted

to assure the prompt availability of insurance proceeds due

and owing” from the insurance companies whose insureds

“ ‘face potential liability for their ownership of or roles at

Cite as 367 Or 711 (2021) 743

polluted sites in this state.’ ” (Quoting ORS 465.478.) The

statute does so, amicus Kulongoski explains, “by prescribing

rules of construction, imposing consequences for delay and

obfuscation, and rewarding performing insurers by vest-

ing them with contribution rights against nonperforming

insurers.”

The two key provisions of that statute that are at

issue here are an “all sums” provision that makes all insur-

ers liable for claims that come within the terms of their pol-

icies, regardless of other insurance that may be available,

and a statutory contribution right for an insurer that has

paid covered claims to seek recovery from other “liable or

potentially liable” insurers. The “all sums” provision, ORS

465.480(3)(a), states:

“An insurer with a duty to pay defense or indemnity costs

or both, to an insured for an environmental claim under

a general liability insurance policy that provides that the

insurer has a duty to pay all sums arising out of a risk cov-

ered by the policy, must pay all defense or indemnity costs,

or both, proximately arising out of the risk pursuant to the

applicable terms of the policy, including its limit of liabil-

ity, independent and unaffected by other insurance that may

provide coverage for the same claim.”

(Emphases added.) Amicus Kulongoski describes that pro-

vision as “transfer[ring] the risk of an intransigent insurer

from the insured to its other insurers, where it is more eas-

ily and more fairly borne.” But the potential sweep of the

“all sums” provision is offset by an insurer’s right to seek

contribution from other insurers:

“An insurer that has paid all or part of an environmen-

tal claim may seek contribution from any other insurer that

is liable or potentially liable to the insured and that has not

entered into a good-faith settlement agreement with the

insured regarding the environmental claim.”

ORS 465.480(4)(a) (emphasis added).

Here, Allianz paid environmental claims on behalf

of Daimler, including contingent claims against Freightliner

that Daimler had assumed when it acquired Freightliner,

and it now seeks contribution from Freightliner’s co-insurers

744 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

during the time of the business operations that gave rise to

those claims. Under the OECAA, an insurer that has paid

environmental claims may seek contribution from other

co-insurers, unless the co-insurers have entered into good-

faith settlement agreements with their insured (which has

not happened here). And each insurer’s obligations are tied

directly to “applicable terms of the policy,” including those in

“general liability polic[ies].” ORS 465.480(3)(a). The OECAA

is thus consistent with our longstanding recognition of

common-law inter-insurer contribution claims, see Carolina

Casualty, 242 Or at 417, as well as our decisions interpret-

ing insurance policies as a matter of law according to their

“applicable terms,” see Hoffman, 313 Or at 469 (intention of

parties to an insurance policy determined by policy’s “terms

and conditions”).

The existence of side agreements, indemnification

promises, or an insured’s waiver of policy terms is simply

irrelevant to the contribution rights set out in the OECAA.

Under that statute, as under our coverage cases, see Ledford,

319 Or at 399-400, whether an insurance company has a

“duty to defend or indemnify” its insured depends on two

documents: the insurance policy and the complaint. Here,

whether defendant insurers had a duty to defend or indem-

nify Freightliner under their policies—and therefore are

“liable or potentially liable” for contribution to Allianz on

the environmental claims—are questions of law for the

court, and they turn solely on the terms of the applicable

insurance policies and the complaints that raise the envi-

ronmental claims at issue.

3. The Statutory Context of Insurance Regulations

Finally, Con-Way’s position is contrary to the state

and federal regulatory structures surrounding insurance

and businesses that are required by law to purchase insur-

ance. Con-Way states that the policies that it purchased

from the insurance companies, when taken together with

the side indemnification agreements, were simply a means

of “self-insurance,” and that the insurer’s “duty to defend

was released even before it was incurred.” But that view of

the insurance policies as strictly private business transac-

tions between Con-Way and the insurers is divorced from

Cite as 367 Or 711 (2021) 745

the regulatory and legal world in which the transaction took

place.18 Freightliner could not have lawfully operated its

business of building and transporting trucks without meet-

ing specific federal and state legal requirements, including

maintaining insurance or other security acceptable to the

regulatory authorities. See 49 USC § 13906 (2018); former 49

USC § 315 (1970); former 49 USC § 10927 (1994); ORS 825.160

(2019) (all requiring demonstration of financial responsibil-

ity for motor carriers operating on public highways). Those

regulatory requirements exist to ensure that the public will

be protected against injury or damage caused by Con-Way’s

and Freightliner’s business activities, even if the businesses

dissolve or become bankrupt. State and federal law ensures

that protection by requiring businesses to buy insurance to

cover harms that arise from their activities.

Con-Way had no legal authority to “self-insure” or to

act as an insurer under Oregon or federal law. State and

federal law instead required it to purchase and main-

tain insurance from insurers authorized to do business in

Oregon. It met those statutory obligations by purchasing the

policies at issue here, those policies were required to—and

did—have provisions approved by Oregon regulators, and

under Oregon law they must be interpreted and applied in

accordance with those terms. The side agreements between

Con-Way and its insurers do not alter the insurers’ duties,

as set out in the policies, to defend or pay for claims covered

by those policies or the statutory or equitable contribution

claims of other insurers, such as plaintiff, that have paid

damages or defense costs for such claims.

Because the “Limited Judgment as to Fronting

Insurers and Intervenor Con-Way, Inc.” was based on a jury

verdict that incorrectly asked the jury to interpret insur-

ance policies that should have been interpreted by the trial

court, it must be set aside.

18

We do not mean to suggest that a separate side agreement between an

insured and an insurer never may affect the rights of third parties under an

insurance policy. Here, however, where the insurance policies were purchased to

meet federal and state legal requirements and protect the public, the insurer’s

agreement to indemnify the insurer against any potential liability or responsi-

bility set out in the policy may not be interposed to prevent injured parties from

seeking to recover under the policy.

746 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

C. The “Endorsement” Issue in the ACE and Westport

Policies

Before the Court of Appeals and this court, Allianz

challenged the trial court’s rulings regarding certain “endorse-

ments” to the ACE and Westport policies that limited their

liability under those policies. As with the side agreements,

Allianz asserts that the legal effect of the endorsements

should have been decided by the court as a matter of law,

rather than being presented to the jury as part of questions

6 and 7 in the verdict form. It argued that the jury instruc-

tions on the endorsement issue, the denial of its motion for a

directed verdict, and the denial of its post-trial motion to set

aside the verdict constituted reversible error.

In contrast to the dispute over the side agreements,

however, no party appears to argue that the endorsements

were not part of the policies. See ORS 731.122 (“policy” for

purposes of the Insurance Code “includes all clauses, riders,

indorsements and papers which are a part thereof * * *”).19

For the reasons discussed above, we agree with Allianz that

the meaning of the disputed “endorsements,” as part of the

ACE and Westport policies, should have been decided by the

trial court, rather than by the jury. For that reason, as well,

the “Limited Judgment as to Fronting Insurers and Con-

Way, Inc.” must be set aside.

D. Proceedings on Remand

We have held that the trial court erred in submit-

ting to the jury the questions of whether ACE, General, and

Westport have a duty to defend or indemnify Freightliner

against the environmental remediation and asbestos claims

that are the subject of this case. That issue should be decided

by the trial court based on the terms in the insurance pol-

icies and without regard to the side agreements or other

extrinsic evidence.

In some cases when this court has vacated a trial

court judgment—including some insurance contribution

cases—we have simply determined the judgment that

should have been entered, see, e.g., Carolina Casualty, 242

19

And no party argues that “endorsement” has a different meaning than

“indorsement.”

Cite as 367 Or 711 (2021) 747

Or at 418. Here, the complexity of the record regarding the

insurance policies, the different time periods covered by the

policies, differences in the wording of some of the policies,

and similar potentially important details preclude us from

accurately determining the nature of the appropriate judg-

ment. On remand, the trial court should conduct further

proceedings consistent with this opinion before entering a

judgment on plaintiffs’ claims for equitable contribution and

for contribution under the OECAA.

As to the interpretation of the endorsements to the

ACE and Westport policies, we also hold that the trial court

erred in submitting the issue to the jury. In contrast to the

side agreements, however, the endorsements are part of the

insurance policies, and, on remand, their meaning should

be decided by the court as part of interpreting the policies.

IV. THE POLLUTION EXCLUSIONS

The final issue we must resolve involves the

“qualified pollution exclusion” clauses found in certain of

Freightliner’s insurance policies. As with Allianz’s chal-

lenge to the trial court rulings regarding the effect of the

side agreements, the Court of Appeals did not reach this

issue, and Con-Way and defendants request that we remand

for the Court of Appeals to consider it in the first instance.

We decline to do so for the reasons previously described.

A. Background of the Pollution Exclusion Issue

The insurance policies contained versions of a qual-

ified pollution exclusion providing that those policies did not

cover bodily injury or property damage resulting from pollu-

tion.20 Those provisions, however, each contained an excep-

tion that described categories of pollution or circumstances

to which the exclusion did not apply (hence the description

of the exclusions as “qualified”) and where the policy thus

would provide coverage. As relevant on review and described

earlier, there are two primary variations of the qualified

20

The exclusions themselves refer to the “discharge” of matter onto land or

into air or a body of water, with some variations in the degree of specificity with

which that “discharge” is described. The parties appear to agree, however, that

these exclusions were generally directed at “pollution,” and so we use that term

as shorthand.

748 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

pollution exclusion—the Domestic exclusion, which appears

in the ACE and Westport policies, and the London exclusion,

which is in the London and General policies. The Domestic

version excepts from the pollution exclusion—and thus pro-

vides insurance coverage for—claims arising out of a dis-

charge of pollutants that is “sudden and accidental.”21 The

London version excepts from the pollution exclusion—and

thus provides insurance coverage for—claims arising from

pollution that results from a “happening” that is “sudden,

unintended[,] and unexpected.”22

The two different pollution exclusions were the sub-

ject of extensive and repeated discussion among the par-

ties and the trial court, including various trial motions and

disputes over the verdict form and the jury instructions.

The positions of the parties, however, were generally consis-

tent throughout the trial proceedings.23 Allianz viewed the

Domestic and London exclusion clauses as having the same

legal effect. It relied on this court’s decision in McCormick

& Baxter Creosoting, 324 Or 184, to argue that the different

pollution exclusions should be interpreted as a matter of law

21

The exception in the ACE and Westport policies provides: “* * * this exclu-

sion does not apply if such discharge, dispersal, release or escape is sudden and

accidental[.]”

22

The parties and the trial court considered the ACE and Westport policies,

which had the Domestic exclusion, together and gave one jury instruction that

covered both of those policies. The variations between the exclusions in those

policies appear to be negligible. The parties and the trial court also considered

the London and General policies together and gave two separate but virtually

identical jury instruction as to those policies. Although the parties did not appear

to differentiate between the exclusions in the London and General policies at

trial, referring to them both as having “London exclusions,” the policies issued

by the London defendants provide that the exclusion does not apply “where such

seepage, pollution or contamination is caused by a sudden, unintended[,] and

unexpected happening.” (Emphasis added.) The exclusion in the General policies

does not apply “if the discharge is sudden, unexpected, [and] unintentional.” We

express no opinion as to the effect, if any, of those differences in the terms of the

London and General policies. Rather, our decision in this case concerns the nar-

row question of construing the two phrases “sudden and accidental” and “sudden,

unintended[,] and unexpected.”

23

Con-Way and the defendant insurers raise various preservation objec-

tions regarding Allianz’s challenges to the trial court rulings on the pollution

exclusion issue. Some of Allianz’s arguments at trial and assignments of error on

appeal could have been more clearly presented, but there is little doubt that the

parties and the trial court understood the central disputes between the parties.

Allianz’s assignments of error are sufficiently raised and developed for this court

to address them.

Cite as 367 Or 711 (2021) 749

to provide insurance coverage for the kind of environmen-

tal pollution at issue here. In that case, which we describe

in greater detail below, we interpreted the term “sudden and

accidental” in a pollution exclusion provision to mean “unin-

tended and unexpected”—that is, not to have the “temporal

meaning” that is often associated with the word “sudden.”

Id. at 215-16. Allianz argued that the “sudden and acciden-

tal” wording in the Domestic exclusion and the term “sudden,

unintended[,] and unexpected” in the London exclusion should

be interpreted similarly as not having a temporal element.

Defendants responded that neither the exceptions

for “sudden and accidental” or “sudden, unintended[,] and

unexpected” pollution applied to the kind of gradual, long-

term environmental contamination that Allianz alleged

in the complaint. They argued for a narrow reading of

McCormick & Baxter Creosoting as applied to the Domestic

exclusion and against its extension to the London exclu-

sion.24 Defendants’ proposed instructions for both versions

of the exclusions included the following sentence: “In this

respect, sudden means short in time or duration, or quick.”

The trial court gave separate instructions on the

Domestic and London exclusions. As to the Domestic exclusion

in the ACE and Westport policies, the instruction described

the pollution exclusion and the exception to the exclusion for

the discharge of pollutants that is “sudden and accidental.”

Following McCormick & Baxter Creosoting, the court then

provided the interpretation of that policy term that the jury

was to use: “In this respect, sudden and accidental means

unexpected and unintended.” In describing the London

exclusion in the London and General instructions, the trial

court also described the pollution exclusion and quoted the

exception to the exclusion in the policy providing that there

would be insurance coverage if the discharges were “sud-

den, unintended[,] and unexpected.”25 The final instruction

24

Defendants’ proposed instructions on the London and General policies

were separate, but used similar language.

25

The quoted phrase is from the instruction for the London policy and is

based on the wording in the policy. The General policy used the slightly different

phrase “sudden, unexpected, [and] unintentional,” and the instruction for the

General policy tracks that wording. No party argues that those two phrases have

a different legal meaning.

750 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

regarding the London exclusion emerged from a confer-

ence with the trial court. Allianz objected to London’s pro-

posed definition of “sudden” as “short in time or duration, or

quick,” arguing that it was contrary to McCormick & Baxter

Creosoting, where this court had interpreted “sudden” in the

term “sudden and accidental” not to have a temporal mean-

ing. 324 Or at 214-15. The trial court agreed with plaintiff to

that extent and rejected London’s proposed definition, but it

did not use Allianz’s proposed definition. Thus, the instruc-

tions to the jury regarding the Domestic exclusion included

a definition of “sudden and accidental” as “unexpected and

unintended,” while the instructions regarding the London

exclusion included no definition of “sudden, unintended[,]

and unexpected.”

The jury returned different verdicts as to the

Domestic and London exclusions. In its answer to verdict

form question 21, regarding the ACE and Westport policies,

the jury found that the “discharge of pollutants that caused”

“property damage” was “sudden and accidental” and thus

came within the exception set out in the Domestic pollution

exclusions in those policies. It found those defendants liable

for contribution to Allianz as outlined in the complaint.26

As to the London and General policies (jury verdict form

question 22), however, the jury answered “NO” to the ques-

tion of whether “the discharge of pollutants that caused any

of the property damage [was] sudden, unintended[,] and

unexpected.” Because the evidence as to the nature of the

pollution was the same for all four policies, the jury neces-

sarily found that the alleged pollution did not come within

the exception to the London pollution exclusion. Based on

that jury verdict, the trial court entered the limited judg-

ment in favor of the London defendants. The verdict in

favor of General on the pollution exclusion is reflected

in the limited judgment as to the fronting insurers and

Con-Way.

On appeal, Allianz assigned error to various trial

court rulings regarding the London pollution exclusions.

Allianz reprised the arguments outlined above, asserting

26

The jury verdicts involving the pollution exclusions in the ACE and

Westport policies are not part of the limited judgments before us and we express

no opinion as to those verdicts.

Cite as 367 Or 711 (2021) 751

that the London and Domestic exclusions had the same legal

meaning and that the trial court erred in submitting the

London exclusions to the jury for interpretation, rather than

interpreting them for the jury as a matter of law. Allianz

also argued that, because the same evidence was presented

as to environmental claims under all the policies, if the jury

had been given the same instructions about the meaning of

the London exclusion as it had about the Domestic exclusion,

it would have reached the same conclusion: that the policies

covered the environmental claims. It therefore requests that

the jury verdict as to the London exclusion—verdict question

22—be set aside. Allianz further asks, based on the errors

at trial, that this court exercise its authority under Article

VII (Amended), section 3, of the Oregon Constitution to

direct that a judgment be entered in its favor on the London

pollution exclusion issue.

Defendants respond that there was no ambigu-

ity in the London exclusion, and so the trial court was not

required to interpret the terms of the policy for the jury.

Additionally, defendants argue that Article VII (Amended),

section 3, does not permit an appellate court to apply the

jury’s answer to one special verdict question to a different

verdict question, as Allianz requests. If the trial court erred,

defendants assert, the remedy is to remand to the trial court

for further proceedings.

B. Merits

For reasons that we set out below, we conclude that

Allianz is correct that the trial court erred in failing to

instruct the jury on the meaning of the London pollution

exclusion. We also agree with Allianz that, properly inter-

preted, the term “sudden, unintended[,] and unexpected”

in the London policy and the term “sudden, unexpected,

[and] unintentional” in the General policy have the same

legal meaning that we ascribed to the term “sudden and

accidental” in the policies at issue in McCormick & Baxter

Creosoting and that the jury should have been so instructed.

But we reject Allianz’s request that this court substitute the

jury’s verdict in favor of plaintiff on the ACE and Westport

policies for the defense verdict that the jury actually reached

regarding the London and General policies.

752 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

We begin with the issue of whether the trial court

erred by failing to instruct the jury as to the meaning of

the policy term “sudden, unintended[,] and unexpected.”

Allianz asserts that that phrase in the London exclusions

was ambiguous and that the trial court erred in not deter-

mining its meaning as a matter of law and directing the

jury to use that meaning in applying the exclusion to the

facts. As explained at length above, the interpretation of an

insurance contract is a question of law, the goal of which

is to ascertain the intent of the parties at the time of con-

tracting. Hoffman, 313 Or at 469. If terms in the policy are

not defined and there are reasonable, “competing, plausible

interpretations,” the court must determine what the dis-

puted terms mean, using the principles set out in Hoffman.

Id. at 470-71. In McCormick & Baxter Creosoting, for exam-

ple, we found the term “sudden and accidental” in an insur-

ance policy’s pollution exclusion clause to be ambiguous and

proceeded to interpret the term as a matter of law. 324 Or

at 215-16. Allianz argues that we should follow the same

path here and interpret the admittedly different term in the

policies at issue here in the same way.

Defendants do not purport to seek reversal of

McCormick & Baxter Creosoting, but rather argue that it is

distinguishable because the phrase “sudden, unintended[,]

and unexpected” is not ambiguous as used in the London

and General policies here, and, therefore, the trial court did

not err in failing to interpret that term as a matter of law

for the jury.

Given our prior decisions, particularly McCormick

& Baxter Creosoting, defendants’ position is untenable. In

McCormick & Baxter Creosoting, the policy at issue excluded

from coverage bodily injury or property damage arising

from various enumerated types of pollution, but provided

that the “exclusion d[id] not apply if such discharge, disper-

sal, release, or escape is sudden and accidental.” 324 Or at

212 (emphasis and quotation marks excluded). The insurers

in McCormick & Baxter Creosoting argued that “sudden”

had “a temporal meaning, connoting an abruptness and

short duration,” and “accidental” meant “unintended,” but

could not be something that occurred over a long period of

time as a part of regular business practices. Id. at 212-14.

Cite as 367 Or 711 (2021) 753

The insured company argued in response that “sudden and

accidental” simply meant “unintended and unexpected.”

Id. at 213. Neither “sudden” nor “accidental” was defined in

the policy, and on review we noted that both sides offered

evidence of their competing interpretations, including case

law from other jurisdictions as well as statements by rep-

resentatives of the insurance industry. Id. at 216. We con-

cluded in that instance that the exclusion was ambiguous

and that the competing case law and statements from indus-

try representatives “simply help[ed] to demonstrate that the

exclusion [was] ambiguous.” Id.

Defendants assert, however, that because the

London exclusion used the words “unexpected and unin-

tended”—rather than “accidental”—together with the word

“sudden” in the exception to the pollution exclusion, the

ambiguity that this court identified in the McCormick &

Baxter Creosoting policy does not exist. Rather, they say that

the jury could simply be instructed—as it was in this case—

to give the contractual terms “their ordinary meaning,

unless you decide that the parties * * * intended the words to

have another meaning.” Defendants’ argument appears to

rest on the fact that, while the court in McCormick & Baxter

Creosoting held that “unexpected” was a plausible interpre-

tation of “sudden” in the policy at issue there, “unexpected”

is not a plausible interpretation of “sudden” in the London

exclusion because the word “unexpected” itself also appears

in the exclusion. Defendants argue that to interpret “sud-

den” as “unexpected” in the London exclusion would be to

render the word “sudden” a meaningless redundancy, con-

trary to one of our principles of insurance contract interpre-

tation referred to in Hoffman, 313 Or at 472 (“We assume

that parties to an insurance contract do not create meaning-

less provisions.”).

The plain meanings of the policy terms do not pro-

vide much clarity. As we explained in McCormick & Baxter

Creosoting, the word “sudden” may either have or not have a

temporal element:

“1a : happening without previous notice or with very brief

notice : coming or occurring unexpectedly : not foreseen or

prepared for * * * b : changing angle or character all at once

: precipitous * * * : abrupt * * * c : come upon or met with

754 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

unexpectedly 2a : characterized by or manifesting hasti-

ness : rash, headlong.”

324 Or at 213 (quoting Webster’s Third New Int’l Dictionary

2284 (unabridged ed 1993)) (internal quotation marks omit-

ted, alterations in original). In that case, we also looked to

the common meaning of the word “accidental”:

“ ‘2 : occurring sometimes with unfortunate results by

chance alone : a : unpredictable : proceeding from an unrec-

ognized principle, from an uncommon operation of a known

principle, or from a deviation from normal.’ Webster’s at 11

[(1993)].

“The dictionary goes on to state that, ‘when it is used in

reference to events, accidental may stress lack of intent.’

Ibid. In other words, an accidental event may be an unin-

tentional, or chance, event.”

324 Or at 213-14. Likewise, the words “unexpected” and

“unintended” are defined, respectively, as “not expected

: unlooked-for, unforeseen, surprising,” Webster’s Third

New Int’l Dictionary 2494 (unabridged ed 2002), and “not

intended; esp. not deliberate,” Webster’s at 2499 (2002).

Defendants argue that “sudden” as used in the

London exclusion must unambiguously have a temporal

element and mean, essentially, “abrupt,” because to read

it otherwise would be to duplicate the term “unexpected.”

Allianz argues that the word is ambiguous and could rea-

sonably be interpreted as having a similar meaning to the

words that follow—“unexpected” and “unintended”—as

opposed to having a dissimilar meaning, such as “abrupt.”

We agree with defendants that, where a policy con-

tains both the words “sudden” and “unexpected,” it would

not make sense to interpret the word “sudden” to mean

“unexpected.” The court in McCormick & Baxter Creosoting

notably did not conclude that “sudden” can only mean “unex-

pected,” but rather that the phrase used was ambiguous,

partly because “sudden” might reasonably have several

meanings—in addition to “unexpected”—that lack any

temporal element, such as “unforeseen” and “unprepared

for.” 324 Or at 214-16. The holding in McCormick & Baxter

Creosoting—that where the phrase claimed to be ambiguous

Cite as 367 Or 711 (2021) 755

was “sudden and accidental,” “sudden” might reasonably be

interpreted to lack a temporal meaning, and be synonymous

with “unexpected,” “unforeseen,” or “unprepared for”—was

specific to the policy at issue. But courts do not interpret

single words in insurance contracts in isolation; rather, we

construe the words in the context of the particular provision

and of the policy as a whole. Hoffman, 313 Or at 470-71.

Although we agree with defendants that “sudden” may not

mean “unexpected” where that word appears as part of the

same policy term, it is not, in our view, unambiguously clear

that “sudden” in that context does not mean “unforeseen” or

“unprepared for.” Put another way, it is not unambiguous

from the words used in the policy that “sudden” in this con-

text must mean “abrupt,” as defendants argue.

As in McCormick & Baxter Creosoting, both parties

cite case law from other jurisdictions in support of their argu-

ments. Compare Helena Chemical v. Allianz Underwriters,

357 SC 631, 641 n 4, 594 SE2d 455, 460 n 4 (2004) (apply-

ing the same interpretation to exclusions using the phrases

“sudden and accidental” and “sudden, unintended, and unex-

pected happening”), and Cotter Corp. v. American Empire

Surplus, 90 P3d 814, 821 (Colo 2004) (noting that previous

cases had interpreted both the phrases “sudden and acci-

dental” and “sudden, unintended, and unexpected” in pollu-

tion exclusions as meaning “unexpected and unintended”),

with Shell Oil Co. v. Winterthur Swiss Ins. Co., 12 Cal App

4th 715, 753, 15 Cal Rptr 2d 815 (1993) (“If covered pollution

has to be ‘a sudden, unintended and unexpected happen-

ing,’ then we must distinguish ‘sudden’ from ‘unexpected’

and ‘unintended.’ That distinction lies in the temporal con-

notation inherent in the ordinary meaning of ‘sudden.’ ”),

and EDO Corp. v. Newark Ins. Co., 878 F Supp 366, 374-75

(D Conn 1995) (“If ‘sudden’ meant ‘unexpected,’ * * * then

the * * * policies would read, ‘unexpected, unintended, and

unexpected.’ Such a reading would render the word ‘sudden’

superfluous and * * * [the court] will not subscribe to such

an interpretation.”). As we noted in McCormick & Baxter

Creosoting, 324 Or at 215, although it is not conclusive, we

do consider differing judicial interpretations of an insurance

policy clause as evidence that that clause is ambiguous.

Jones v. Ins. Co. of North America, 264 Or 276, 282 n 1, 504

756 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

P2d 130 (1972) (so stating). See also John Alan Appleman

and Jean Appleman, 13 Insurance Law and Practice § 7404

(1976) (“The very fact that a number of courts have reached

conflicting conclusions as to the interpretation of a certain

provision is frequently considered evidence of ambiguity.”).

We conclude that, like the Domestic exclusion at

issue in McCormick & Baxter Creosoting, the London exclu-

sion’s term “sudden, unintended[,] and unexpected” is sus-

ceptible to different interpretations and that the London

and General policies in which the term appears do not

resolve those ambiguities. The contrast between the way

the jury was instructed regarding the Domestic and London

exclusions was particularly stark here, where the court gave

the jury a definitive legal (and perhaps nonintuitive) defini-

tion to apply to the term “sudden and accidental,” while giv-

ing no specific definition of the term “sudden, unintended[,]

and unexpected.” That left the jury with only the standard

instruction, applicable to all 22 of the special verdicts, that

it interpret words according to “their ordinary meaning.”

Given the ambiguity in that critical wording of the exclu-

sion exception and the requirement that ambiguous terms

in insurance policies be interpreted as a matter of law by

the court, it was error for the trial court not to interpret the

London exclusion for the jury. That part of the verdict and

the aspects of the limited judgments based on it must be set

aside.

C. Remedy

Having concluded that the trial court should have

interpreted the London exclusion for the jury, we turn to

the question of the proper interpretation of that exclusion.

As discussed above, London seeks to distinguish this court’s

interpretation of “sudden and accidental” in McCormick &

Baxter Creosoting. It argues that the word “sudden” as used in

the London exclusion—in contrast to its use in the Domestic

exclusion—should be read as including a temporal element

because otherwise the word would be redundant of the other

words in the term, “unintended” and “unexpected.” But our

cases do not suggest that the fact that a policy includes words

that may be interchangeable or the definitions of which may

overlap does not foreclose those definitions. Indeed, the

Cite as 367 Or 711 (2021) 757

insurers in McCormick & Baxter Creosoting argued that the

interpretation eventually adopted by this court was imper-

missibly redundant, but we rejected that argument. 314 Or

at 214. Moreover, the various words used in McCormick &

Baxter Creosoting to describe what is excepted from the pol-

lution exclusion—“sudden,” “accidental,” “unintended,” and

“unexpected”—are the very words included in the London

exclusion.

More significantly, London ignores the holdings in

Hoffman and McCormick & Baxter Creosoting that, where

a word or phrase in an insurance policy is susceptible to

differing plausible interpretations and the ambiguity can-

not be resolved by considering the context of the wording

and of policy as whole, we construe the ambiguous term in

favor of coverage. Hoffman, 313 Or at 470-71; McCormick &

Baxter Creosoting, 324 Or at 216. In McCormick & Baxter,

this court undertook a similar exercise when it construed

the ambiguous term “sudden and accidental” not to include

a temporal element and to mean “unintended and unex-

pected.” Because, as we conclude above, the term “sudden,

unintended[,] and unexpected” is ambiguous, those cases

support Allianz’s argument that the term should be con-

strued against the drafter and in favor of coverage.27 That

construction requires a jury instruction similar to that used

for the Domestic exclusion.

Finally, we turn to Allianz’s argument that the

jury’s verdict on the Domestic policies can be applied to the

London policies as well. London disagrees, taking the posi-

tion that Article VII (Amended), section 3, of the Oregon

Constitution does not permit the court to direct that the

jury’s verdict on one policy be applied to another policy.

We agree with London that Allianz’s requested

relief is not appropriate. Allianz cites Carolina Casualty

27

London argues for the first time on review that, because Allianz is a

“stranger” to the insurance policies, it is not “entitled” to have any ambiguities

construed in its favor. We do not foreclose the possibility that in other circum-

stances it may be appropriate to preclude a nonparty to an insurance policy from

benefiting from that rule of construction. In this contribution context, however,

we adhere to our longstanding rule that ambiguities in an insurance policy be

“construe[d] against the drafter,” McCormick & Baxter Creosoting, 324 Or at 216,

“against the insurer,” Hoffman, 313 Or at 474, and “in favor of extending coverage

* * *.” North Pacific Ins. Co., 332 Or at 25.

758 Allianz Global Risks v. ACE Property & Casualty Ins. Co.

for the proposition that, “under the Oregon Constitution,

Article VII, Section 3, if this court can ascertain with cer-

tainty the judgment that should have been entered in

the trial court, it is proper for this court to direct it to be

entered.” 242 Or at 418. Allianz argues that here, too, we

can “ascertain with certainty the judgment that should

have been entered in the trial court.” In Carolina Casualty,

the court held that the trial court had erred in admitting

parol evidence regarding a potential “sham” lease and that,

without the introduction of that parol evidence, the written

terms of the contract would control and one party would

clearly prevail. Id. at 417-18. In that sense, the issue in that

case was clear-cut: Were it not for the introduction of the

parol evidence, the issue could be resolved as a matter of

law from the face of the contract and, therefore, Article VII

(Amended), section 3, permitted this court to enter the cor-

rect judgment.

Given the complicated factual circumstances and

the procedural posture of this case—including that we are

remanding the “side agreement” issue to the trial court

for decision—we conclude that it is not appropriate for this

court to step into the shoes of the jury. Rather, we conclude

that the proper resolution is to remand the pollution exclu-

sion issue to the trial court with instructions to give the

jury a similar instruction regarding the term “sudden, unin-

tended[,] and unexpected” in the London exclusion as it did

regarding the term “sudden and accidental” in the Domestic

exclusion.28

V. CONCLUSION

In summary, we reverse the Court of Appeals’ hold-

ing that Daimler did not assume the contingent liabilities

of Freightliner—including the liabilities at issue here—and

affirm the jury verdict on that issue. On Allianz’s appeal, we

agree that the trial court erred in submitting to the jury the

question of whether, because of the side agreements between

Con-Way/Freightliner and the insurers, those insurers

28

This holding is limited to the issue before us regarding the interpretation

and jury instructions as to the portions of the London pollution exclusion that

we discuss. We express no opinion as to the meaning of other provisions in the

London and General policies.

Cite as 367 Or 711 (2021) 759

had a “duty to defend or indemnify Freightliner.” In this

inter-insurer contribution case, that question is to be decided

by the trial court as a matter of law based on the relevant

policies. Finally, as to the London pollution exclusion, we

agree with Allianz that it was error for the trial court not to

provide a legal interpretation of a key provision in the policy

as part of the jury instructions. We also conclude that the

jury instructions regarding the London pollution exclusion

should be similar to those regarding the Domestic exclusion.

The decision of the Court of Appeals is reversed. The

limited judgments of the trial court are affirmed in part and

reversed in part, and the case is remanded to the trial court

for further proceedings.