OR's Environmental Clean-Up Statute

In 1999, the Oregon legislature enacted the OECAA (the “1999 Law”) purportedly to promote “the fair and efficient resolution of environmental claims.” The 1999 Law sets forth “rules of construction” for “general liability insurance policies” involving “environmental claims.” Three key provisions of the 1999 Law are: 1) Any action or agreement by the Oregon Department of Environmental Quality (“ODEQ”) or the United States Environmental Protection Agency (“USEPA”) against or with an insured in which the ODEQ or USEPA in writing directs, requests or agrees that an insured take action with respect to contamination within the State of Oregon, is equivalent to a suit or lawsuit as those terms are used in any general liability insurance policy. 2) Insurance coverage for any reasonable and necessary fees, costs and expenses pursuant to a written voluntary agreement, consent decree or consent order between the insured and either the ODEQ or the OSEPA shall not be denied by the insured on the ground that such expenses constitute voluntary payments by the insured. 3) Oregon law shall be applied in all cases where the contaminated property to which the action relates is located within the State of Oregon. As to other sites located outside of Oregon, common law rules governing choice of law determinations apply.

The 1999 Law states that the rules of construction set forth above “shall not apply if the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy.”

2003 Amendment

In 2003, the Oregon legislature amended the OECAA, with an effective date of Jan. 1, 2004 (the “2003 Amendment”). The 2003 Amendment addresses, among other things, issues of allocation and lost policies.

With respect to allocation, the 2003 Amendment purports to render each of an insured's insurers jointly and severally liable for covered costs associated with environmental claims in connection with general liability insurance policies that provide that the insurer has a duty to pay all sums arising out of a risk covered by the policy, regardless of the existence of any other applicable insurance.

With respect to lost policies, the 2003 Amendment requires both the insurer and insured to share with each other all documents establishing facts related to the lost policy. If the insured can show by a preponderance of the evidence that a general liability policy was issued but cannot provide information tending to show the policy's limits, then the limits are assumed to be the minimum issued by the insurer for that form of policy for that year. However, where the insured is able to produce evidence tending to show other limits, the burden is on the insurer to establish different limits or other relevant policy exclusions.

Significantly, the 2003 Amendment, by its terms, is retroactive, “apply[ing] to all environmental claims, whether arising before, on or after the effective date [of the] Act.” The amendment also provides that the rules of construction discussed above with respect to the 1999 Law and the 2003 Amendment “do not apply if the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy” (the “savings clause”).

2013 Amendment

In 2013, the Oregon legislature again amended the OECAA (the “2013 Amendment”). The key changes resulting from the 2013 Amendment include certain new rules of construction. Specifically:1) Anti-Assignment Provision: Insurers cannot rely on so-called “anti-transfer” clauses to prevent insureds from settling with claimants and assigning their rights under the policy to such claimants. 2) Non-Cumulation Provision: A non-cumulation provision in a liability policy may not be construed to reduce the policy limits available to an insured that has filed a long-tail environmental claim ' an environmental claim covered by multiple general liability insurance policies. 3) Owned Property Exclusion Provision: Provisions in liability policies that bar coverage for pollution on the insured's own property cannot be enforced if that pollution presents any possibility of damaging the property of the state or another third party.

In addition, the 2013 Amendment contains various rules with respect to contribution claims by and between insurers with respect to environmental claims that “preempt all common law contribution rights.” Among other things, the 2013 Amendment creates a process for court-approved protection for settling insurers to encourage settlements. It also permits policyholders, in certain circumstances, to retain, at the insurer's expense, independent counsel and, to the extent needed, environmental consultants to assist such independent counsel, to defend environmental claims.

Finally, the 2013 Amendment gives policyholders the right to sue insurers for violating various “unfair environmental claims settlement practices.” Such practices include, among other things, failing to: 1) commence investigation of an environmental claim in a timely manner; 2) make timely payment for costs reasonably incurred in the defense of environmental claims or for reasonable costs for which indemnity is owed; and 3) participate in nonbinding environmental claim mediation. An insured aggrieved by unfair environmental claims settlement practices may, after providing notice to the insurer, sue to recover actual damages sustained, together with the costs of the action, including reasonable attorney fees and litigation costs. In addition, if it is found that the insurer acted “unreasonably,” the court may award up to three times the actual damages.

The 2013 Amendment, by its terms, applies retroactively. However, the 2013 Amendment reaffirmed the savings clause in the 2003 Amendment that the rules of construction “do not apply if the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy.”

Coverage Disputes Under Older Policies

By its terms, the OECAA applies to liability policies that were negotiated and issued before the effective dates of the OECAA and its amendments. However, as a general rule, there is a presumption against retroactive legislation. This presumption is based on fairness concerns ' i.e., that parties have advance notice of a statute so they can conform their behavior to new or revised requirements. While exceptions to this rule exist, such as when a new law confers only a benefit or when a law is passed to bring legal rights and relationships into conformity with what people thought they were, such exceptions are few and far between.

With respect to contracts specifically, it is unconstitutional, under both the United States Constitution and Oregon Constitution, for legislation to retroactively impair existing contracts. Article I Section 10 of the United States Constitution provides: “No State shall ' pass any ' Law impairing the Obligation of Contracts[.]” In assessing whether a legislative provision violates the federal constitution, courts: 1) consider whether the contract is substantially impaired; 2) examine whether the state has a “ significant and legitimate public purpose” for the regulation; and 3) determine whether the resulting adjustment of the contract obligations is reasonable in its conditions and character in light of the underlying public purpose.

Similarly, Article I Section 21 of the Oregon Constitution provides: “No ' law impairing the obligation of contracts shall ever be passed.” In assessing whether a new law is unconstitutional under this provision, the Supreme Court of Oregon has explained that any law that alters retroactively the terms of a contract is unconstitutional insofar as it affects those terms.

Courts will not apply a statute retroactively if retroactive application would result in manifest injustice. A litigant may successfully challenge the retroactive application of a statute by demonstrating that his or her rights have been substantially impaired. The impairment need not be so extensive as to constitute a complete destruction of the value of the contract to one party. Courts have often used the reasonable expectations of contract parties as a basis for judging impairment created by new state regulation. In determining whether the impairment is substantial, courts assess the extent to which reasonable expectations under the contract have been disrupted.

To our knowledge, no Oregon case has addressed whether the OECAA is facially unconstitutional. On May 9, 2013, Paul De Muniz, Distinguished Jurist in Residence at Willamette University who served as an appellate judge in Oregon for 23 years, testified before the Oregon House Committee on Consumer Protection and Government Efficiency with respect to the constitutionality of various provisions of the 2013 Amendments. Judge De Muniz concluded that numerous OECAA provisions impair the bargained for obligations and duties of insurers under pre-existing policies.

The analysis below further explains why the retroactive application of the OECAA is constitutionally problematic. First, we assess the constitutionality of retroactively applying provisions of the OECAA that attempt to rewrite or modify the plain language of existing policy provisions. Second, we discuss the constitutionality of retroactively applying provisions of the OECAA that change the construction of policy provisions. Finally, we examine the OECAA's savings clause to assess to what extent it saves the constitutionality of the OECAA.

1. Where the OECAA Directly Contradicts the Plain Meaning of Policy Terms, Retroactive Application Is Unconstitutional. The amendments that attempt to rewrite or modify existing policy provisions are unconstitutional when applied retroactively. Clearly, where a policy is unambiguous, it should be construed in accordance with its plain meaning as written, regardless of any rules of construction or presumptions set forth in the OECAA. This approach is supported not only by the legal principles outlined above, but also by the language of the OECAA itself.

In construing an insurance policy, the policy language encompasses the intent of the parties. Therefore, the OECAA's savings clause ' providing that the statute's rules “do not apply if the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy” ' requires that an unambiguous policy provision should not be altered by OECAA. Indeed, cases that have addressed the constitutionality of the OECAA's rule of construction with the term “suit” have used the ambiguity of such terms in a policy as a basis for upholding the constitutionality of the rule of construction. For example, in Anderson Bros., Inc. v. St. Paul Fire & Marine Ins. Co., 729 F.3d 923, 932 (9th Cir. 2013), the Ninth Circuit reasoned that because the term “suit” is ordinarily ambiguous, “the policy necessarily does not demonstrate any intent of the parties that would be contrary to OECAA's statutory definition of the term.”

Provisions of the OECAA that invalidate the express terms of old insurance policies, however, should not apply retroactively, e.g., the anti-assignment provision in the OECAA prohibits insurers from enforcing “anti-transfer” clauses that would prevent policyholders from settling with claimants and assigning them their rights under the policy.

In Holloway v. Republic Indemnity Company, 341 Or. 642, 644, 147 P.3d 329, 330 (2006), the Supreme Court of Oregon concluded that an “anti-transfer” clause is not ambiguous and ultimately upheld the anti-assignment provision. Although the anti-assignment clause at issue was broadly worded, providing no exceptions or qualifications, the court reasoned that the provision prohibited the assignment of the insured's rights or duties without regard to whether they arose pre-loss or post-loss. The Supreme Court of Oregon explicitly rejected the reasoning of other cases that held that anti-assignment clauses only prohibit the assignment of pre-loss rights. Because the anti-assignment provision of the OECAA explicitly prohibits “anti-transfer” clauses like the one in Holloway, any retroactive application of this provision would violate the reasonable expectations of the parties and would be unconstitutional.

Similarly, the owned property exclusion provision in the OECAA states that provisions in liability policies that bar coverage for pollution on the insured's own property cannot be enforced if that pollution presents any possibility of damaging the property of the State or another third party. Because this provision of the statute explicitly overrides the plain language of the policy, it cannot be applied retroactively.

2. Even Where the OECAA Does Not Directly Contradict the Plain Meaning of Policy Terms, Retroactive Application May Be Unconstitutional if it Materially Alters the Terms of the Policy. The United States Supreme Court has reasoned that once a contract is formed, a court “cannot give it a different construction in consequence of the statute which was afterwards passed.” King v. President, etc. of Dedham Bank, 15 Mass. 447, 454 (1819). Here, the OECAA contains various rules of construction that, while not directly contradicting policy language, changes the benefit of the bargain, often to the insurer's detriment.

For example, the OECAA invalidates insurers' non-cumulation provisions to the extent they are construed to reduce the policy limits available to an insured that has filed a long-tail environmental claim ' an environmental claim covered by multiple general liability insurance policies. While this provision of the OECAA does not invalidate all non-cumulation provisions, it materially alters the terms of the policy. Non-cumulation provisions have previously been enforced under Oregon law and insurers who signed policies predating the OECAA had a reasonable expectation that the non-cumulation clauses in their policies would be honored consistent with Oregon law.

The OECAA materially alters the manner in which non-cumulation clauses are understood by impairing the right of the insurer to reduce the policy limits available to an insured for a claim covered by multiple general liability insurance policies. Instead, the OECAA shifts the obligation onto the insurer to seek contribution from other insurers. However, as Judge De Muniz points out, the OECAA does not prevent the other insurer from asserting non-cumulation against the targeted insurer seeking contribution. This unilateral shift in the obligations of the insurer under pre-existing policies is unconstitutional.

The Savings Clause Does Not Save the Constitutionality of the OECAA

The OECAA's savings clause ' which states, “[t]he rules of construction ' do not apply if the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy” ' is an apparent attempt to circumvent the constitutional obstacle to retroactivity. However, as Judge De Muniz articulates, many of the OECAA provisions are more in the nature of “substantive law” than “rules of construction.”

In addition, as explained above, the constitutional analysis regarding retroactivity does not require impairment to both parties to the contract; impairment to a single party is sufficient to render retroactive application of a law unconstitutional. Yet the savings clause arguably requires frustration of the intent of both parties ' “contrary to the intent of the parties” ' in order to prevent retroactive application of an OECAA provision. As a result, an argument can be made the OECAA is facially unconstitutional.

For example, the OECAA's restriction on the construction of non-cumulation provisions may result in an interpretation contrary to the intent or reasonable expectation of the insurer alone (only the insurer intended non-cumulation provisions to reduce the policy limits). Under a literal reading, the savings clause may not apply when the intent of only one party is hampered by retroactive application of a particular OECAA provision.

In order for the savings clause to truly save the retroactive application of the OECAA, it must be read broadly to encompass situations in which retroactive application of the OECAA is prohibited even when the interpretation of the policy is contrary to a single party's intent or reasonable expectation. Until Oregon courts examine the extent of this provision, it remains unclear whether the savings clause truly saves the constitutionality of the OECAA's retroactivity.

Chet A. Kronenberg, a member of this newsletter's Board of Editors, is a litigation partner in the Los Angeles office of Simpson Thacher & Bartlett LLP. Michelle S. Kallen is a litigation associate in the same office.

In 1999, Oregon enacted the Oregon Environmental Cleanup Assistance Act (“OECAA”) to fill gaps in the law that purportedly resulted in insurance companies withholding or delaying payment of funds to policyholders on account of contaminated Oregon sites. In 2003 and 2013, the Oregon legislature amended the OECAA to add provisions to further maximize coverage for policyholders. By its terms, the OECAA applies to policies negotiated and purchased both before and after the effective date of the OECAA. This article summarizes the OECAA and its various amendments, and discusses to what extent the OECAA may apply retroactively to existing policies.

The OECAA

The '1999 Law'

In 1999, the Oregon legislature enacted the OECAA (the “1999 Law”) purportedly to promote “the fair and efficient resolution of environmental claims.” The 1999 Law sets forth “rules of construction” for “general liability insurance policies” involving “environmental claims.” Three key provisions of the 1999 Law are: 1) Any action or agreement by the Oregon Department of Environmental Quality (“ODEQ”) or the United States Environmental Protection Agency (“USEPA”) against or with an insured in which the ODEQ or USEPA in writing directs, requests or agrees that an insured take action with respect to contamination within the State of Oregon, is equivalent to a suit or lawsuit as those terms are used in any general liability insurance policy. 2) Insurance coverage for any reasonable and necessary fees, costs and expenses pursuant to a written voluntary agreement, consent decree or consent order between the insured and either the ODEQ or the OSEPA shall not be denied by the insured on the ground that such expenses constitute voluntary payments by the insured. 3) Oregon law shall be applied in all cases where the contaminated property to which the action relates is located within the State of Oregon. As to other sites located outside of Oregon, common law rules governing choice of law determinations apply.

The 1999 Law states that the rules of construction set forth above “shall not apply if the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy.”

2003 Amendment

In 2003, the Oregon legislature amended the OECAA, with an effective date of Jan. 1, 2004 (the “2003 Amendment”). The 2003 Amendment addresses, among other things, issues of allocation and lost policies.

With respect to allocation, the 2003 Amendment purports to render each of an insured's insurers jointly and severally liable for covered costs associated with environmental claims in connection with general liability insurance policies that provide that the insurer has a duty to pay all sums arising out of a risk covered by the policy, regardless of the existence of any other applicable insurance.

With respect to lost policies, the 2003 Amendment requires both the insurer and insured to share with each other all documents establishing facts related to the lost policy. If the insured can show by a preponderance of the evidence that a general liability policy was issued but cannot provide information tending to show the policy's limits, then the limits are assumed to be the minimum issued by the insurer for that form of policy for that year. However, where the insured is able to produce evidence tending to show other limits, the burden is on the insurer to establish different limits or other relevant policy exclusions.

Significantly, the 2003 Amendment, by its terms, is retroactive, “apply[ing] to all environmental claims, whether arising before, on or after the effective date [of the] Act.” The amendment also provides that the rules of construction discussed above with respect to the 1999 Law and the 2003 Amendment “do not apply if the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy” (the “savings clause”).

2013 Amendment

In 2013, the Oregon legislature again amended the OECAA (the “2013 Amendment”). The key changes resulting from the 2013 Amendment include certain new rules of construction. Specifically:1) Anti-Assignment Provision: Insurers cannot rely on so-called “anti-transfer” clauses to prevent insureds from settling with claimants and assigning their rights under the policy to such claimants. 2) Non-Cumulation Provision: A non-cumulation provision in a liability policy may not be construed to reduce the policy limits available to an insured that has filed a long-tail environmental claim ' an environmental claim covered by multiple general liability insurance policies. 3) Owned Property Exclusion Provision: Provisions in liability policies that bar coverage for pollution on the insured's own property cannot be enforced if that pollution presents any possibility of damaging the property of the state or another third party.

In addition, the 2013 Amendment contains various rules with respect to contribution claims by and between insurers with respect to environmental claims that “preempt all common law contribution rights.” Among other things, the 2013 Amendment creates a process for court-approved protection for settling insurers to encourage settlements. It also permits policyholders, in certain circumstances, to retain, at the insurer's expense, independent counsel and, to the extent needed, environmental consultants to assist such independent counsel, to defend environmental claims.

Finally, the 2013 Amendment gives policyholders the right to sue insurers for violating various “unfair environmental claims settlement practices.” Such practices include, among other things, failing to: 1) commence investigation of an environmental claim in a timely manner; 2) make timely payment for costs reasonably incurred in the defense of environmental claims or for reasonable costs for which indemnity is owed; and 3) participate in nonbinding environmental claim mediation. An insured aggrieved by unfair environmental claims settlement practices may, after providing notice to the insurer, sue to recover actual damages sustained, together with the costs of the action, including reasonable attorney fees and litigation costs. In addition, if it is found that the insurer acted “unreasonably,” the court may award up to three times the actual damages.

The 2013 Amendment, by its terms, applies retroactively. However, the 2013 Amendment reaffirmed the savings clause in the 2003 Amendment that the rules of construction “do not apply if the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy.”

Coverage Disputes Under Older Policies

By its terms, the OECAA applies to liability policies that were negotiated and issued before the effective dates of the OECAA and its amendments. However, as a general rule, there is a presumption against retroactive legislation. This presumption is based on fairness concerns ' i.e., that parties have advance notice of a statute so they can conform their behavior to new or revised requirements. While exceptions to this rule exist, such as when a new law confers only a benefit or when a law is passed to bring legal rights and relationships into conformity with what people thought they were, such exceptions are few and far between.

With respect to contracts specifically, it is unconstitutional, under both the United States Constitution and Oregon Constitution, for legislation to retroactively impair existing contracts. Article I Section 10 of the United States Constitution provides: “No State shall ' pass any ' Law impairing the Obligation of Contracts[.]” In assessing whether a legislative provision violates the federal constitution, courts: 1) consider whether the contract is substantially impaired; 2) examine whether the state has a “ significant and legitimate public purpose” for the regulation; and 3) determine whether the resulting adjustment of the contract obligations is reasonable in its conditions and character in light of the underlying public purpose.

Similarly, Article I Section 21 of the Oregon Constitution provides: “No ' law impairing the obligation of contracts shall ever be passed.” In assessing whether a new law is unconstitutional under this provision, the Supreme Court of Oregon has explained that any law that alters retroactively the terms of a contract is unconstitutional insofar as it affects those terms.

Courts will not apply a statute retroactively if retroactive application would result in manifest injustice. A litigant may successfully challenge the retroactive application of a statute by demonstrating that his or her rights have been substantially impaired. The impairment need not be so extensive as to constitute a complete destruction of the value of the contract to one party. Courts have often used the reasonable expectations of contract parties as a basis for judging impairment created by new state regulation. In determining whether the impairment is substantial, courts assess the extent to which reasonable expectations under the contract have been disrupted.

To our knowledge, no Oregon case has addressed whether the OECAA is facially unconstitutional. On May 9, 2013, Paul De Muniz, Distinguished Jurist in Residence at Willamette University who served as an appellate judge in Oregon for 23 years, testified before the Oregon House Committee on Consumer Protection and Government Efficiency with respect to the constitutionality of various provisions of the 2013 Amendments. Judge De Muniz concluded that numerous OECAA provisions impair the bargained for obligations and duties of insurers under pre-existing policies.

The analysis below further explains why the retroactive application of the OECAA is constitutionally problematic. First, we assess the constitutionality of retroactively applying provisions of the OECAA that attempt to rewrite or modify the plain language of existing policy provisions. Second, we discuss the constitutionality of retroactively applying provisions of the OECAA that change the construction of policy provisions. Finally, we examine the OECAA's savings clause to assess to what extent it saves the constitutionality of the OECAA.

1. Where the OECAA Directly Contradicts the Plain Meaning of Policy Terms, Retroactive Application Is Unconstitutional. The amendments that attempt to rewrite or modify existing policy provisions are unconstitutional when applied retroactively. Clearly, where a policy is unambiguous, it should be construed in accordance with its plain meaning as written, regardless of any rules of construction or presumptions set forth in the OECAA. This approach is supported not only by the legal principles outlined above, but also by the language of the OECAA itself.

In construing an insurance policy, the policy language encompasses the intent of the parties. Therefore, the OECAA's savings clause ' providing that the statute's rules “do not apply if the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy” ' requires that an unambiguous policy provision should not be altered by OECAA. Indeed, cases that have addressed the constitutionality of the OECAA's rule of construction with the term “suit” have used the ambiguity of such terms in a policy as a basis for upholding the constitutionality of the rule of construction. For example, in Anderson Bros., Inc. v. St. Paul Fire & Marine Ins. Co. , 729 F.3d 923, 932 (9th Cir. 2013), the Ninth Circuit reasoned that because the term “suit” is ordinarily ambiguous, “the policy necessarily does not demonstrate any intent of the parties that would be contrary to OECAA's statutory definition of the term.”

Provisions of the OECAA that invalidate the express terms of old insurance policies, however, should not apply retroactively, e.g., the anti-assignment provision in the OECAA prohibits insurers from enforcing “anti-transfer” clauses that would prevent policyholders from settling with claimants and assigning them their rights under the policy.

In Holloway v. Republic Indemnity Company, 341 Or. 642, 644, 147 P.3d 329, 330 (2006), the Supreme Court of Oregon concluded that an “anti-transfer” clause is not ambiguous and ultimately upheld the anti-assignment provision. Although the anti-assignment clause at issue was broadly worded, providing no exceptions or qualifications, the court reasoned that the provision prohibited the assignment of the insured's rights or duties without regard to whether they arose pre-loss or post-loss. The Supreme Court of Oregon explicitly rejected the reasoning of other cases that held that anti-assignment clauses only prohibit the assignment of pre-loss rights. Because the anti-assignment provision of the OECAA explicitly prohibits “anti-transfer” clauses like the one in Holloway, any retroactive application of this provision would violate the reasonable expectations of the parties and would be unconstitutional.

Similarly, the owned property exclusion provision in the OECAA states that provisions in liability policies that bar coverage for pollution on the insured's own property cannot be enforced if that pollution presents any possibility of damaging the property of the State or another third party. Because this provision of the statute explicitly overrides the plain language of the policy, it cannot be applied retroactively.

2. Even Where the OECAA Does Not Directly Contradict the Plain Meaning of Policy Terms, Retroactive Application May Be Unconstitutional if it Materially Alters the Terms of the Policy. The United States Supreme Court has reasoned that once a contract is formed, a court “cannot give it a different construction in consequence of the statute which was afterwards passed.” King v. President, etc. of Dedham Bank, 15 Mass. 447, 454 (1819). Here, the OECAA contains various rules of construction that, while not directly contradicting policy language, changes the benefit of the bargain, often to the insurer's detriment.

For example, the OECAA invalidates insurers' non-cumulation provisions to the extent they are construed to reduce the policy limits available to an insured that has filed a long-tail environmental claim ' an environmental claim covered by multiple general liability insurance policies. While this provision of the OECAA does not invalidate all non-cumulation provisions, it materially alters the terms of the policy. Non-cumulation provisions have previously been enforced under Oregon law and insurers who signed policies predating the OECAA had a reasonable expectation that the non-cumulation clauses in their policies would be honored consistent with Oregon law.

The OECAA materially alters the manner in which non-cumulation clauses are understood by impairing the right of the insurer to reduce the policy limits available to an insured for a claim covered by multiple general liability insurance policies. Instead, the OECAA shifts the obligation onto the insurer to seek contribution from other insurers. However, as Judge De Muniz points out, the OECAA does not prevent the other insurer from asserting non-cumulation against the targeted insurer seeking contribution. This unilateral shift in the obligations of the insurer under pre-existing policies is unconstitutional.

The Savings Clause Does Not Save the Constitutionality of the OECAA

The OECAA's savings clause ' which states, “[t]he rules of construction ' do not apply if the application of the rule results in an interpretation contrary to the intent of the parties to the general liability insurance policy” ' is an apparent attempt to circumvent the constitutional obstacle to retroactivity. However, as Judge De Muniz articulates, many of the OECAA provisions are more in the nature of “substantive law” than “rules of construction.”

In addition, as explained above, the constitutional analysis regarding retroactivity does not require impairment to both parties to the contract; impairment to a single party is sufficient to render retroactive application of a law unconstitutional. Yet the savings clause arguably requires frustration of the intent of both parties ' “contrary to the intent of the parties” ' in order to prevent retroactive application of an OECAA provision. As a result, an argument can be made the OECAA is facially unconstitutional.

For example, the OECAA's restriction on the construction of non-cumulation provisions may result in an interpretation contrary to the intent or reasonable expectation of the insurer alone (only the insurer intended non-cumulation provisions to reduce the policy limits). Under a literal reading, the savings clause may not apply when the intent of only one party is hampered by retroactive application of a particular OECAA provision.

In order for the savings clause to truly save the retroactive application of the OECAA, it must be read broadly to encompass situations in which retroactive application of the OECAA is prohibited even when the interpretation of the policy is contrary to a single party's intent or reasonable expectation. Until Oregon courts examine the extent of this provision, it remains unclear whether the savings clause truly saves the constitutionality of the OECAA's retroactivity.

Chet A. Kronenberg, a member of this newsletter's Board of Editors, is a litigation partner in the Los Angeles office of Simpson Thacher & Bartlett LLP. Michelle S. Kallen is a litigation associate in the same office.