1. PARSONS
FARNELL
&GREIN, LLP
A T T O R N E Y S A T L A W
1030 SW Morrison Street
Portland, Oregon 97205
(503) 222-1812 • FAX: (503) 274-7979
www.pfglaw.com
S E T H H , ROW
Admitted in Oregon and Washington
E-Mail Address: srow@pfglaw.com
June 12, 2013
Via Email and Facsimile
Senator Betsy Johnson
900 Court St NE, S-209
Salem, OR 97301
Email: Sen.BetsvJolinson@state.or.us
Facsimile: 1-503-986-1080
Re: HB 3160/SB414-A5
Dear Senator Johnson:
I am an attorney in Portland and part of a seven-lawyer group at my firm that exclusively
represents insurance policyholders, both businesses and individuals, in disputes with their
insurance companies. Most of our clients are commercial-lines policyholders, and most of them
are small businesses.
1 write to ask you to support HB3160/SB414-A5, and to explain why from my
perspective it is so important that this piece of legislation be passed to complement SB814, the
amendment to the Oregon Environmental Cleanup Assistance Act ("OECAA") recently signed
into law. fJB3160/SB414-A5 is critically important because the OECAA does not apply to the
vast majority of coverage disputes that small businesses experience. The OECAA was aimed at
a relatively narrow (albeit important) class of coverage disputes; what commercial policyholders
also need is the kind of broad protection that HB3160/SB414-A5 would provide in every
situation.
The OECAA, and SB814's amendments to it, address a problem with serious public
policy ramifications: the difficulty that businesses have had getting insurance companies to cover
claims by the EPA or DEQ for pollution of public lands under "long-tail" policies that were sold
before liability insurance policies began to routinely include a "pollution exclusion." The goal of
the statute is to encourage companies to voluntarily reach agreements with environmental
regulators to clean up historically contaminated sites, without the need for expensive, time-
consuming litigation, by making it harder for insurance companies to deny coverage under those
older, broader policies.
O:SHRHB3160 AdvocacyWOOl shr Senator Johnson Itr.docx

2. Senator Betsy Johnson
June 12,2013
Page 2
The OECAA was passed in 1999 because companies that were being good corporate
citizens, and were working with the state or EPA to reach agreements to clean up historical
contamination (which, oftentimes, they did not cause), were turning to their insurance companies
to pay for the cleanup under these broad older policies, only to be told "we won't pay unless
there is a lawsuit in court - if you reach an out-of-court agreement with the government, you are
on your own." The OECAA was therefore written to say that the insurance company has to step
in to respond to any kind of written demand by EPA or DEQ that a company do something about
contamination in Oregon. No litigation is required.
Although passed in 1999 (and amended in 2003), the OECAA had not been significantly
tested until the Portland Harbor Superfund Site came along. In 2008, the EPA started sending
out written demands to hundreds of companies demanding that they participate in a non-judicial
resolution process to allocate responsibility for cleanup ofthe Willamette River. The OECAA in
hand, those companies (large and small) turned to their insurance companies to defend them,
reasoning that since they had received a written demand from the EPA to do something about a
Superfund site, surely the insurance company would step in. Imagine the surprise when the
response, from many ofthe nation's largest insurance carriers, was no. These businesses then
had to sue in federal court, where three different judges have now found that the insurance
companies violated the OECAA by refusing to provide coverage for these written demands from
the EPA.
One of those businesses is a landowner in your District: Anderson Brothers, Inc.
Anderson Brothers is a family-owned truck repair and parts company that has been in Portland
since 1935. In the 1970s it bought some land in Portland's Northwest Industrial area that had
been used for all manner of industrial purposes over the decades by prior owners. Even though
Anderson's property is "upland" (not on the river), when the Superfund site started up Anderson
was dragged in because upland potential sources are within the EPA's zone of concern, and
under the Superfund law one only has to be a landowner within the zone to be potentially liable,
even if the business did not use any hazardous materials itself on the site.
For decades Anderson faithfully purchased liability coverage from one company -
St. Paul Fire & Marine. When the EPA demanded that Anderson hire a lawyer and defend itself,
Anderson was faced with a potentially disastrous situation: it could not afford to pay for a full
defense itself, but if it did not defend it could be put out of business down the road once the EPA
unilaterally allocated it a share of the cleanup cost. Anderson paid a lawyer to defend it as best it
could, but when its ability to fund its defense ran out, it turned to its long-time insurer, St. Paul
(now a part of the Travelers Group) - which then refused to help. I helped Anderson sue
St. Paul, and the court found the insurance company in breach. The case is on appeal with the
Ninth Circuit.

3. Senator Betsy Johnson
June 12, 2013
Page 3
Although the insurance company had to reimburse Anderson for its past defense costs
and for my fees in the insurance coverage case, that's all that St. Paul has had to pay for
breaching its policy - nothing for the anguish that it caused Anderson, no punitive damages, and
nothing for the delay in the cleanup process that its refusal to obey the law caused.
Anderson's insurance company took an aggressive position - defying the OECAA and
forcing Anderson to sue - because in general there is little "downside" risk for an insurance
company that refuses to step in and defend its policyholder. Because Oregon courts have
generally refused to recognize a cause of action for "bad faith" denial of coverage, if an
insurance company loses in court it will only have to reimburse the policyholder for past defense
costs, perhaps pay a settlement if the policyholder was able to fund a settlement, and pay a little
bit to the policyholder's attorney in attorney fees. On the other hand, if the policyholder lacks
the financial ability to sue the insurer, as is so often the case, the insurance company walks away
scot-free. Faced with that math, insurance companies have very little incentive to step in and
defend against any kind of claim for accidental property damage. Put another way, insurance
companies believe that in Oregon they get a "free breach" of their insurance contract, so they roll
the dice by denying a defense.
And, it is important to note, the policyholder cannot "cover" for this breach of the
insurance policy. A business caimot go out and purchase a new insurance policy to provide
coverage for an accident that already happened. If the insurance policy that the business bought
before the accident happened does not provide coverage, the business is simply stuck.
With SB814 that situation has been rectified by the addition of a "bad faith" cause of
action to the OECAA - but the OECAA does not apply in most coverage situations. The
OECAA was intentionally limited in scope in many respects. For example, the "suit" portion of
the statute limited to written demands by just two agencies: the EPA, and the DEQ. An action by
some other governmental entity, like a county government, or a tribe, would likely not fall into
the protection that the OECAA gives to the policyholder. And if the claim is not one for
"pollution," but for some other kind of property damage, the statute may also not apply. Indeed
modern environmental damage claims often avoid alleging that they are "pollution" cases, to
avoid the impact of the "pollution exclusion" that insurance companies put in the fine print of
their policies. The OECAA may not apply to those claims.
In those situations in which the OECAA and the SB814 amendments will not apply, and
where policyholders will not have the "stick" of a bad faith claim, insurance companies will
continue their practice of denying a defense unless and until the policyholder files suit. That is
an enormously un-level playing field for small businesses. The cost to an ordinary business of
just defending a suit, and particularly a contamination suit, is often more than the company can
bear, let alone also fund an insurance coverage lawsuit. By comparison, insurance companies
have virtually unlimited access to lawyers to defend them.

4. Senator Betsy Johnson
June 12, 2013
Page 4
Permitting insurance companies to continue to operate this way is also not good public
policy. In environmental damage cases not covered by the OECAA, where there is no insurance
money brought to the table property damage is often not remediated at all, or if it is remediated it
is done much later than it should have been. Businesses, taxpayers, and the environment pay the
price, while insurance companies walk away with premiums for which they provide nothing.
HB3160/SB414 will help to level the playing field in all cases, not just Superfund cases,
for small businesses like Anderson Brothers and businesses like it - developers, gas-station
owners, light manufacturers, food processors - who purchased liability coverage so that in the
unlikely event that a property damage claim is made they will, at the least, get a lawyer paid for
by their insurance company to help them bring the case to resolution. SB814 was an important
step, but was only the first step, in providing real improvements to the insurance code that will
benefit small businesses. I urge you to support HB3160/SB414.
Very truly yours.
Seth H. Row
SHR/dtg
cc: Senator Chip Shields
Jerry Lawson/John Anderson, Anderson Brothers, Inc.