Oregon Increases Access to Historical Insurance Assets for Cleanup Liabilities
On June 11, 2021, Oregon Governor Kate Brown signed a law, HB 2377, intended to make the insurance policies of dissolved Oregon corporations and limited liability companies available to fund contaminated site cleanups. The law creates an exception to a five-year period for filing claims against these entities if the claims can be satisfied partly or fully by insurance assets. The law will go into effect in September 2021.
The law was supported by a range of stakeholders, many of them citing the cleanup of the Portland Harbor Superfund Site, one of the most costly contaminated sites in the country, as an impetus for the change in law.
Background and Overview of Changes to Oregon Law
To defray the expenses of addressing contaminated sites, parties performing cleanups frequently seek contribution from liable parties under federal and state law. Courts often divide these costs among liable parties based on equitable factors in an effort to allocate fairly the burden among responsible parties.[1] In many cases, companies operating in the past, sometimes long in the past, caused the greatest share of contamination at a site and therefore would bear primary responsibility for the cost of responding to that contamination.
But, state law often bars lawsuits against historical companies if they have been dissolved, unless claims are filed within a specified time period.[2] The inability to recover costs from defunct parties, such as dissolved companies, can leave others holding their “orphan” shares. This places an even greater burden on viable parties that are meeting cleanup obligations. It also reflects a policy tension between efforts to hold parties responsible under environmental cleanup laws and to expedite cleanups by ensuring sufficient funding and the need to provide businesses with clarity as to the end of their potential liabilities.[3]
To address these issues, Oregon amended its corporate laws to allow claims against dissolved corporations and limited liability companies after the state’s five-year survival period if the “claim … may be satisfied, in whole or in part, by insurance assets.”[4] Other key features include:
- Recovery under the amendment – i.e., for claims filed after the five-year claims period – is limited to “the rights, benefits or proceeds available from the insurance assets.”
- The amendment lifts the bar on claims against long-dissolved corporations that may have been subject to earlier versions of Oregon’s corporate laws.[5]
- The amendment also applies to claims against dissolved corporations that arose before the effective date of the new law.
- The law specifies how these claims must be served, since company representatives may no longer be around to receive service of process.
The recent changes, which were requested by the Oregon Attorney General, were supported by a broad coalition, including municipalities, utilities, and environmental groups. One of the driving forces identified by the law’s supporters is the cost of cleaning up the Portland Harbor Superfund Site – estimated at over a billion dollars. Although the Oregon Department of Environmental Quality did not take a position on the bill, the agency offered reasons why the availability of insurance assets would help to advance contaminated site cleanups in the state.
The new law opens up an avenue for parties burdened with the costs of cleaning up a contaminated site to seek insurance proceeds from companies that have been dissolved. This change is good news for parties that might be stuck paying the equitable shares of otherwise liable companies that have gone out of business.
Beveridge & Diamond’s Superfund, Site Remediation, and Natural Resources Damages practice group assists clients in litigation and allocation at CERCLA sites, including complex, large-scale sites. We counsel clients on developing case law and requirements under CERCLA and similar state laws. For more information, please contact the authors.
[1] See, e.g., ORS 465.257(1) (“When such a claim for contribution is at trial and the court determines that apportionment of recoverable costs among the liable parties is appropriate, the share of the remedial action costs that is to be borne by each party shall be determined by the court, using such equitable factors as the court deems appropriate ….”).
[2] State law usually governs the capacity of dissolved corporations to be sued in contribution lawsuits under the Comprehensive Environmental Response, Compensation, and Liability Act. See, e.g., Fed. R. Civ. P. 17(b)(2); Levin Metals Corp. v. Parr-Richmond Terminal Co., 817 F.2d 1448 (9th Cir. 1987).
[3] Notably, modern environmental laws were not in effect when many businesses now facing liability under federal and state cleanup laws were conducting operations. Despite the lack of notice, courts have upheld the retroactive application of liability under federal and state cleanup laws. See, e.g., United States v. Northeastern Pharmaceutical & Chem. Co., Inc., 810 F.2d 726 (8th Cir. 1986) (rejecting argument that retroactive liability under federal Superfund law was an “unconstitutional taking of property”); Newell v. Weston, 150 Or. App. 562 (1997) (citing with approval federal cases finding and upholding retroactive liability under federal Superfund law).
[4] Under current Oregon law, the five-year period starts to run when a dissolved corporation publishes required notice in a newspaper of general circulation. See, e.g., ORS 60.644(1)-(2).
[5] Claims against dissolved corporations are nonetheless still “subject to other applicable statutes of limitation.”
