Two rulings in one decision just reshaped the math for any carrier that pays a big claim and expects co-insurers to share the pain.
On July 8, 2026, the Oregon Court of Appeals told a lead insurer it cannot pass along attorney fees it racked up by refusing to settle - and separately capped what insurers must reimburse for out-of-town defense counsel.
The dispute traces to the Portland Harbor Superfund cleanup. Schnitzer Steel Industries and a related company, together called Schnitzer, were named as potentially liable parties. Schnitzer picked Continental Casualty Company as its "targeted" insurer under Oregon's environmental cleanup insurance law, which lets an insured pin the whole loss on one large general liability carrier. Continental paid in 2018, then sued the other insurers - including Employers Insurance Company of Wausau - for contribution.
Here is why it matters at the claims desk. Before Continental paid, Schnitzer had already beaten it in federal court over unpaid defense bills. That court awarded Schnitzer $8,601,700 for unpaid nonlocal attorney fees, $3,756,037 in attorney fees under a statute that bites when an insurer fails to settle within six months of a proof of claim, and $2,812,185 in prejudgment interest. Continental tried to fold all of it into the pot to split among insurers.
The court said no to the settlement-failure fees. They flowed from Continental's own litigation choice, not a shared policy duty, so co-insurers walk. The fee liability "was not attributable to conduct by Wausau," the court wrote, and Continental "is obligated to pay the fees for its own resistance to Schnitzer's federal claim on the Continental policy."
Prejudgment interest went the other way and stayed in the shared pot, because it grew out of the shared duty to defend.
Then the fee cap. The court held that the statutory limit tying reimbursement to "the regular and customary rates" in the community where the claim is defended applies to out-of-town counsel too - not just local lawyers. It did not decide how much that trims the bill, sending that back to the trial court.
On policy limits, the outcome split: certain older Wausau policies stayed in the contribution calculation, while the policies covering a Schnitzer tenant, Northwest Pipe, came out as exhausted by a December 2014 settlement and earlier payments.
One judge dissented in part, arguing the settlement-failure fees should have been shared because both insurers backed the same losing position on rates.
The court reversed in part, affirmed in part, and sent the allocation back for reconsideration. The lesson for carriers: if you are the lead insurer and you litigate rather than settle, the penalty for that choice may be yours alone - even when your co-insurers quietly agreed with you.
