W. Hills Dev. Co. v. Chartis Claims, Inc.

W. Hills Dev. Co. v. Chartis Claims, Inc.

Opinion

 [**1054]  [*652]   En Banc

BREWER, J.

This case presents a question about a liability insurer's duty to defend an insured against a civil action. Ordinarily, courts decide whether an insurer had a duty to defend by comparing the provisions of the insurance [***2]  policy to the allegations of the complaint against the insured, without regard to extrinsic evidence. Bresee Homes, Inc. v. Farmers Ins. Exchange, 353 Ore. 112, 116, 293 P3d 1036 (2012). In this case, the trial court and the Court of Appeals concluded that extrinsic evidence should be considered, and after considering such evidence, held that the insurer had a duty to defend. On review, we agree that the insurer had a duty to defend and therefore affirm. We do not see any need to resort to extrinsic evidence,  [**1055]  however, or to modify our existing case law regarding when an insurer has a duty to defend.

I. OVERVIEW OF DUTY TO DEFEND

Before we discuss the facts of this case, it is helpful to set out the legal principles that govern our analysis.

A. Duty to Defend and Duty to Indemnify

] When an insured purchases an insurance policy that protects against liability, the insurer typically agrees to assume multiple duties to the insured. Typically the insurer agrees to pay the insured for any liability that is covered by the policy (up to the policy limits). That contractual obligation is known generally as the duty to indemnify. See Bresee Homes, 353 Ore. at 114; Ledford v. Gutoski, 319 Ore. 397, 405, 877 P2d 80 (1994). Another important duty commonly found in liability policies is an agreement to defend the insured in legal actions involving claims covered by [***3]  the policy. That contractual obligation is known generally as the duty to defend. See FountainCourt Homeowners v. FountainCourt Develop., 360 Ore. 341, 354, 380 P3d 916 (2016).

Although both duties turn on the terms of the policy, the two duties are independent. See Bresee Homes, 353 Ore. at 114; City of Burns v. Northwestern Mutual, 248 Ore. 364, 368, 434 P2d 465 (1967). Thus, there are occasions when an insurer has a duty to defend, but if trial ends with a verdict that is not covered by the policy, then the insurer has  [*653]  no duty to indemnify. See ZRZ Realty v. Beneficial Fire and Casualty Ins., 349 Ore. 117, 150, 241 P3d 710 (2010), on recons, 349 Ore. 657, 249 P3d 111 (2011). Conversely, there are times when an insurer does not have a duty to defend, but if the trial ends with a judgment that is covered by the policy, then the insurer will have a duty to indemnify. Ledford, 319 Ore. at 403; City of Burns, 248 Ore. at 368-69.

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