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March 2012

Seattle Insurance Team Obtains Summary Judgment To Dismiss $1.865 Million Claim Against Insurance Client

Seattle partner Don Verfurth and associate Sally Kim prevailed on a summary judgment motion in a case where the plaintiff demanded $1.865 million from Gordon & Rees's insurance company client under ORS 742.031, which permits a claimant to collect judgment unpaid by an insured from the insurer.

In this case, insurer issued an automobile liability policy to a lumber company, under which the driver of the employer-provided vehicle qualified as an insured. Plaintiff and the driver were both employed by the lumber company. While they were on their way to work in the employer-provided vehicle, they were involved in a one-car accident. Plaintiff sustained serious injuries and was in the hospital for several weeks, undergoing numerous surgeries.

Plaintiff received Workers' Compensation benefits but also commenced a lawsuit against the driver for his injuries. The insurer declined coverage to the driver based upon the "fellow employee" exclusion in its automobile liability policy. The driver did not appear in the lawsuit, and default judgment in the amount of $1.865 million was entered against the driver.

Plaintiff then commenced a lawsuit against the insurer to collect the $1.865 million default judgment, claiming that there is coverage for the driver under the policy. The parties moved for cross-summary judgment motions. Gordon & Rees argued on behalf of its insurance company client that the "fellow employee" exclusion applies to preclude coverage because the plaintiff and the driver are fellow employees, and plaintiff's damages arose out of and in the course of his employment. Gordon & Rees also argued that the "fellow employee" exclusion does not violate the Oregon Financial Responsibility Law and analogized this case to a Tenth Circuit Court of Appeals case as there is no Oregon law on this issue. Plaintiff argued that the "fellow employee" exclusion is ambiguous; that he was not "employed" at the time of the accident because he was not receiving any compensation for travel; and that the "fellow employee" exclusion violated the Oregon Financial Responsibility Law because the statute did not specifically reference the "fellow employee" exclusion as an acceptable exclusion in automobile liability policies.

Judge Marco A. Hernandez in the U.S. District Court, District of Oregon, agreed with Gordon & Rees. Judge Hernandez held that the "fellow employee" exclusion does not violate the Oregon Financial Responsibility Law and that the exclusion applies to preclude coverage to the driver, and, in turn, to the plaintiff. This ruling by Judge Hernandez is a complete victory for Gordon & Rees's insurance company client and the case against it will be dismissed in its entirety.

Earlier in the lawsuit, the parties agreed to bifurcate the coverage issues from the damages portion of the case, including all related discovery. Because the parties focused first only on discovery necessary to resolve the coverage issues on summary judgment, Gordon & Rees was able to provide a complete victory to its client without expending additional costs related to discovery for the damages portion of the case.

Donald J. Verfurth



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