341 P.3d 192
Or. Ct. App.2014Background
- Sunset Presbyterian sued general contractor Andersen for construction defects causing water intrusion and property damage; Andersen had subcontracted masonry work to B&B.
- Andersen tendered defense to B&B under a subcontract indemnity clause; B&B refused, Andersen sued subcontractors and later settled with Sunset, assigning third-party claims to Sunset.
- Sunset dismissed all claims against B&B except a breach-of-contract claim seeking recovery of Andersen’s defense costs based on B&B’s alleged duty to defend under the subcontract.
- Trial court held B&B had a contractual duty to defend Andersen only to the extent Sunset’s allegations implicated B&B’s own work/negligence, because ORS 30.140 limits indemnity in construction agreements.
- Sunset presented only undifferentiated litigation fees (seeking the full amount Andersen incurred); the court awarded zero damages because Sunset failed to segregate fees attributable to B&B‑related allegations.
- Trial court identified Sunset as the prevailing party but awarded no damages or fees; on appeal the court affirmed the zero‑damages ruling but reversed the prevailing‑party designation, naming B&B the prevailing party and remanding for appropriate fee proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether subcontractor’s promise to indemnify includes duty to defend all claims in complaint ("defend‑one‑defend‑all") | Sunset: duty to defend is broader than indemnify; once duty triggered, indemnitor must defend entire action | B&B: ORS 30.140 restricts construction indemnities so duty to defend extends only to claims implicating indemnitor’s own negligence | Court: ORS 30.140 limits indemnity provisions; duty to defend may be limited to allegations implicating indemnitor’s fault |
| Whether ORS 30.140 applies to duty to defend (vs. only to indemnify) | Sunset: statute mentions indemnify only, so it does not limit duty to defend | B&B: statute limits shifting of contractor’s liability and defense costs to subcontractor; applies to duty to defend | Court: statute’s reference to indemnify encompasses provisions that trigger and define duty to defend; legislative history supports limiting duty to defend |
| Whether Sunset proved damages (segregation of attorney fees) | Sunset: entitled to full fees Andersen incurred because duty-to-defend should cover entire suit; did not segregate | B&B: fees must be apportioned to part of suit implicating B&B; undifferentiated fees not recoverable | Court: plaintiff failed to meet burden to segregate fees attributable to B&B‑related claims; award of zero damages affirmed |
| Who is the prevailing party for contractual fee provision | Sunset: prevailing party because it obtained judgment on duty/breach (even though no damages) | B&B: prevailing party because Sunset sought damages and recovered none; liability without damages does not make plaintiff prevailing | Court: plaintiff did not obtain what it sought; B&B is prevailing party; trial court’s designation of Sunset was error |
Key Cases Cited
- U. S. Fire Ins. Co. v. Chrysler Motors, 264 Or 362 (contractual hold‑harmless generally includes defense obligation)
- St. Paul Fire & Marine v. Crosetti Bros., 256 Or 576 (duty‑to‑defend rules from insurance law apply to contractual indemnities)
- National Union Fire Ins. Co. v. Starplex Corp., 220 Or App 560 (indemnity language governs scope of duty to defend)
- Walsh Construction Co. v. Mutual of Enumclaw, 338 Or 1 (ORS 30.140 bars requiring subcontractor to insure contractor for contractor’s own negligence)
- Valley Inland Pac. Constructors v. [Unnamed], 43 Or App 539 (promise to indemnify may include promise to defend)
- Spectra Novae, Ltd. v. Waker Assocs., Inc., 140 Or App 54 (liability without damages does not establish prevailing party)
- Beggs v. Hart, 221 Or App 528 (definition and determination of prevailing party for fee awards)