Century Indemnity Co. v. Marine Group, LLC (131 F. Supp. 3d 1018, 2015)

OPINION AND ORDER

ACOSTA, United States Magistrate Judge:

Introduction

This action addresses the alleged obligations of numerous insurance companies to defend and indemnify third-party plaintiffs The Marine Group,' LLC (“Marine Group”); Northwest Marine, Inc. (“NW Marine”); Northwest Marine Iron Works (“Marine Iron”); and BAE Systems San Diego Ship Repair, Inc. (“BAE Systems”) (collectively referred to as “Insureds”) with regard to the assessment, removal, and remediation of hazardous materials released at the Portland Harbor Superfund Site (the “Environmental Claims”). At Insureds’ request, the court bifurcated the proceedings into two separate stages: the first involving duty to defend issues, including identification' of insurance companies with a duty to defend, allocation of defense costs under the Oregon .Environmental Cleanup Assistance . Act (Or.Rev.Stat, 465.475-465.484) (the “OE-CAA”), designation of expenditures as defense costs, and the reasonableness and necessity of such defense costs,- and the second involving issues related to coverage and the duty to indemnify.

Currently before the court are motions for partial summary judgment filed by various insurance companies with regard to their duty to defend, Insureds’ motion for summary judgment on their status as an uninsured under the OECAA, and a motion for summary judgment filed by a managing general agent for a pool of insurance companies. Specifically:

1)National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) moves for partial summary judgment on its obligation to provide Insureds with a defense under the terms of its policies which expressly exclude coverage for environmental claims brought or issued by or on behalf of any federal, state, or local governmental authority;

2) Century Indemnity Company (“Century”) moves for partial summary judgment on its duty to defend Insureds under its policies, which require Century to indemnify Insureds for identified defense costs, and on the allocation of a share of defense costs to Insureds as an insurer under the OECAA based on a self-insured retention;

3) Granite State Insurance Company (“Granite State”) moves for partial summary judgment on its obligation to participate in the defense of the Environmental Claims as an excess/umbrella insurer over Century’s primary policies;

4) Insureds seek a ruling they are not “uninsured” under the OECAA based on policies issued by National Union, Century, and Granite State, and that occurrence-based general liability policies covering the Environmental Claims were not commercially available between August 1, 1985, and February 28,1987;

5) Insurance Company of the State of Pennsylvania (“ICSOP”) moves for partial summary judgment on its obligation to defend Insureds as an excess/umbrella insurer over underlying policies issued by St. Paul Fire & Marine Insurance Company (“St. Paul”); Argonaut Insurance Company (“Argonaut”), and Home Insurance Company (“Home”); and

6) The Water Quality Insurance Syndicate (the “Syndicate”) moves for partial summary judgment on its duty to defend Insureds under policies providing coverage for ships, or vessels, owned or operated and declared by Insureds.

The court finds:

1) Insureds’ liability results from actions brought by or on behalf of a federal or state government;

2) a duty to indemnify for defense costs does not create a current duty to defend;

3) excess insurers have no duty to defend until the underlying insurance is either exhausted or found to exclude the Environmental Claims;

4) the insolvency of an underlying insurer does not alter the obligations of an excess insurer or require the excess insurer to drop down into the position of primary insurer for either indemnification or defense purposes;

5) the Environmental Claims do not allege a release of hazardous materials from a vessel;

6) the existence of self-insured retentions do not make an insured an “insurer” for purposes of OECAA allocation for defense costs; and

7) any determination that Insureds are “uninsured” under the OECAA or that occurrence-based general liability insurance for the Environmental Claims was commercially unavailable after August 1, 1985, is premature.

Accordingly:

1) the policy exclusion found in the National Union insurance policies reheves National Union of any duty to defend;

2) Century has no current duty obligation to defend based on its obligation to indemnify Insureds for defense costs;

3) Granite State and ICSOP, as excess insurers, have no duty to defend until the underlying insurance is either exhausted or found to exclude the Environmental Claims;

4) the Syndicate has no duty to defend in the absence of a vessel-related release;

5) Insureds are not an “insurer” under the OECAA based on a self-insured retention; and

6) Insureds’ status as “uninsured” under the OECAA between July 1,1982, and February 28, 1987, including whether occurrence-based general liability insurance for the Environmental Claims was commercially unavailable after August 1,1985, is deferred to the indemnity stage of this litigation.

Background

In December of 2000, the United States Environmental Protection Agency (the “EPA”) listed a stretch of the lower Willamette River from approximately river mile 2 to river mile 11, located near Portland, Oregon, on the National Priorities List as a federal Superfund Site ( the “Site”). (Rycewicz Decl. dated April 27, 2015 (“April 27th Rycewicz Deck”) Ex. 6 at 1.) At that time, the EPA began contacting individuals or entities identified as potentially responsible parties (“PRPs”) of their possible liability for costs incurred in responding to the release, or threats of release, of hazardous material at the ■ Site under the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. §§ 9601-9675)(the “CERCLA”). (April 27th Rycewicz Decl. Ex. 6 at 1.) The EPA advised that parties are liable as PRPs under CERCLA:

if they owned or operated a facility at the time of the release of hazardous substances, they became the owner or operator after the time of the release but knew or reasonably should have known of the release when they first became the owner or operator, or who obtained actual knowledge of thé release and subsequently transferred ownership or operation without disclosing such knowledge, or if-they caused or exacerbated the release or unlawfully hindered or delayed entry to or investigation or removal activities at a facility.

(April 27th Rycewicz Decl. Ex. 6 at 2.)

In January 2008, Insureds received correspondence informing them they were being considered as PRPs with regard to the Site, In a confidential letter dated January 11, 2008, David C. Batson (“Batson”), as the convening neutral of a group “brought together by the [EPA] for the purpose of exploring the creation of a PRP groupí,]” invited BAE Systems, ás successor to Marine Iron, to participate in an informational meeting regarding cleanup at the Site. (April 27th Rycewicz Decl. Ex. 6 at 1.) Batson stated that “one or more participants in the Convening Group believe that you or your company are potentially responsible for response costs incurred and being incurred at the Site under Section 107(a) of CERCLA and ORS 465.255. A narrative summary of information. about your facility and its relationship to the Site is enclosed with this letter.” (April 27th Rycewicz Decl. Ex. 6 at 2.) Those attending the meeting “will learn about Site conditions and contamination, EPA and Natural Resource Trustees intentions regarding cleanup of the Site and legal actions and how parties are associated with the Site.” (April 27th Rycewicz Decl. Ex. 6 at 3.)

The narrative summary provided the following information with regard to Insureds’ activities at, and relationship to, the Site between 1944 and 1993:

Northwest Marine ’Iron Works (NMIW) operated as a private contractor for marine vessel repair operations (including sandblasting and painting). Primarily, NMIW utilized the Portland Ship Yard (PSY) and the former Port of Portland dry docks located at Willamette Cove for its operations. NMIW operated in the Portland Harbor Area for more than 40 years. , In "addition to the facilities leased by NMIW, it reportedly owned two lots (Lots 1 and 2 of Block 38) at the Triangle Park property. The parcels associated with NMIW operations also are the locations for other parties (e.g., Cascade General, Metro, Triangle Park, LLC) which received General Notice Letters in 2000.

In addition to the marine vessel repair operations at the dry docks, NMIW also utilized several facilities to support its activities such as carpentry and 'steel fabrication. Overwater activities were key to NMIW operations, and numerous releases to the Willamette River near the PSY have been documented; In particular, (1) a release of lube oil in 1982, (2) reported dumping of sandblast grit in 1988, (3) possible release of unknown sludge from barrels at the PSY dry dock berths, and (4) release of waste oil/lubricants in 1991. Another significant event occurred in 1944, when the U.S. Army Corps of Engineers reported that a Russian vessel, being-repaired by NMIW for the War Assets Administration, capsized at the former Port of Portland dry docks (Willamette Cove). No additional information is available concerning the condition of the vessel and/or releases from the vessel during the removal action. In addition to the known releases, NMIW was also cited for poor housekeeping and waste disposal practices at facilities it leased at the PSY including incidents involving open burning of industrial waste which was a common practice prior to 1965. Also a 1996 Bureau of Fire inspection report required NMIW to cease storing marine paint, zinc, chromate and other flammable materials.

Environmental assessments at PSY, Triangle Park and Willamette Cove, all locations utilized by NMIW for its ship repair operations, have revealed soil and groundwater contamination consisting of SVOCs, VOCs, PCBs, heavy metals, petroleum, hydrocarbons, and PAHs. As a ship repair company NMIW likely produced discharges of hazardous substances to the surface waters and sediments of the Swan Island Lagoon and the River; as reported by EPA, these substances were likely to include but not necessarily be limited to chromium, copper, lead, mercury, zinc and other heavy metals, grease and oils, abrasives, solvents, cutting fluids, organic compounds, organotins, resins, fiberglass,, cyanide and used paints.

As reported in the PSY RI Work Plan, contamination exists on the PSY facility including contamination associated with ship buildings activities; areas such as the dry docks were used for ship hull surface preparation and painting and contamination includes metals (copper, nickel, zinc), HPAHs, LPAHs and phthalates.' The preliminary ' second round sampling results, near adjacent river sediments at PSY, Triangle1 Park and Willamette Cove revealed contamination from one or more of the following constituents: pesticides, PAHs, PCBs dioxin/furans, phthalates,' SVOCs and VOCs and heavy metals.

Finally, NMIW disposed .of waste materials at the Rivergate Oil Sump, Parcel 100. For example, NMIW disposed of three shipments of waste materials at the Rivergate Oil Sump at Parcel 100 through a transporter in 1948. Barges transported waste oil and waste bilge water to the sump and transferred the waste materials to the sump area using a pipeline. . - Laboratory analysis of groundwater and soil samples collected between 2000 and 2006 in the vicinity of the sump revealed the presence of hazardous substances including: diesel fuel, metals (including arsenic, chromium, copper, lead, mercury, nickel and zinc), PAHs, PCBs and VOCs. Laboratory sampling of sediments adjacent to Parcel 100 revealed the presence of hazardous substances including: chromium; copper, lead; zinc, PCBs, PAHs and TPH. V ■ -

(April 27th Rycewicz Deck Ex. 6 at 4-6.)

On January 18, 2008, the EPA sent' identical letters’ to' BAE Systems,' and to'NW Marine and Marine Group on behalf of Marine Iron (collectively “Marine”), informing Insureds of a remedial investigation to identify Site characteristics and define the nature and extent of soil, air, surface water, and groundwater contamination at, and risks posed by, the Site, and feasibility studies to -evaluate different cleanup options at the Site. (April 27th Rycewicz Deck Exs. 8, 9.) The letter indicated the EPA was “seeking information from current and past landowners, tenants, and other entities believed to have information about activities that may have resulted in releases or potential threats of releases of hazardous substances to the Site.” (April 27th Rycewicz Decl. Exs. 8 at 1; 9 at 1.) The EPA requested information relating to Insureds.and the Site under authority of the CERCLA, and advised Insureds the information would be used to assist in identify them as PRPs. (April 27th Rycewicz Decl. Exs. 8 at 1-2; 9 at 1-2.) The letter cautioned that even if the EPA has “documents related to one or more of your Properties already in [its] possession,” Insureds still needed to provide information relevant to those documents. (April 27th Rycewicz Decl. Exs. 8 at 2; 9 at 2.) The information requested related nearly exclusively to property in which Insureds had an interest and the possible release of hazardous materials on, or from, that property.

On January 30, 2008, the Portland Harbor' Natural Resource Trustee Council (“Council”) sent a letter addressed to “Interested Party,” inviting the recipient to participate in funding and implementing a natural resource damage assessment (“NRDA”). (April 27th Rycewicz Decl. Ex. 15.) The Council represented the notice was separate from the EPA notice and connected with the NRDA portion of the CERCLA action at the Site. (April 27th Rycewicz Decl. Ex. 15.)

Between May and July 2008, Insureds sent letters to numerous insurance companies from which they purchased insurance policies, demanding provision of a defense for, and indemnification of, the Environmental Claims. (Sumner Decl. dated April 22, 2015 (“April 22nd Sumner Decl.”) Ex. E; Woods Decl. Ex. 9.) In at least one of the letters, Marine indicated two distinct claims had been made against them: 1) the EPA’s claim under CERCLA “related to site assessment and characterization and removal and remediation activities at the Site”; and 2) the Council’s claim under CERCLA “related to natural resource injury assessment, damages, and restoration at the Site.” (April 22nd Sumner Decl. Ex. E at 2.)

On November 8, 2008, Century filed this action against Marine seeking a declaratory judgment that it owes neither a duty to defend nor a duty to indemnify Marine with regard to the Environmental Claims. Marine, joined by B.AE Systems, filed a third-party complaint against numerous insurance companies alleging such companies issued insurance policies to Insureds covering the Environmental Claims, asserting a claim for breach of contract, and seeking declaratory judgment regarding the insurers’ duties to defend and indemnify the Insureds.

In “General Notice Letters” dated March 12,2010, Batson informed Insureds they had been identified as PRPs based on a belief “that hazardous substances have been or are being released from the facilities located' at 5555 North Channel Avenue, 5815 North Lagoon Avenue, and 5851 North Lagoon Avenue in Portland, Oregon, into the ‘study area’ for the ... Site.” (April 27th Rycewicz Decl. Ex. 10 at 2; Ex. 11 at 2.) Batson advised Insureds they might be required to perform response actions deemed néCessary by the EPA and be held responsible for “costs incurred by the government in response to any release or threatened release at the Site” a's well as “damages to, destruction of, or loss of natural resources, including the costs 'of assessing such damages,” and encouraged Insureds to communicate with other PRPs to allocate damages and resolve intra-party issues prior to settlement discussions with the EPA. (April 27th Rycewicz Decl. Ex. 10 at 1-2; Ex. 11 at 1-2.) On March 22, 2010, Marine sent a letter addressed to “Insurers’ Counsel” again tendering EPA’s claims for defense and indemnity coverage. (April 22nd Sumner Decl. Ex. C.)

Argonaut is the only insurer to accept Insureds’ tender of defense of the Environmental Claims, and it has paid approximately eight million dollars in defense costs. (Rycewicz Decl. dated June 3, 2015 (“June 3rd Rycewicz Decl.”) ¶ 7.) The court allowed Argonaut to intervene in this action as a third-party defendant. Century Indem. Co. v. The Marine Group, Civ. No. 08-1375-AC, 2010 WL 3946958 (D.Or. Oct. 6, 2010). Insureds have paid an additional $420,000, which amount Argonaut has not reimbursed. (June 3rd Rycewicz Decl. ¶ 7.) In a prior opinion, this court found four other insurers, the Insurance Company of North America, Agricultural Insurance Company, Agricultural Excess and Surplus Insurance Company, and St. Paul have a duty to defend Insured as well. Century Indem. Co. v. The Marine Group, CV No. 08-1375-AC, Opinion and Order, at 3 (D.Or. Dec. 26, 2012) (“the court concludes that Insurers have a duty to defend [Insureds].”). These insurers have yet to contribute to, or participate in, the defense of the Environmental Claims.

Legal Standards

I. Summary Judgment

Summary judgment is appropriate where the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a) (2013). Summary judgment is not proper if material factual issues exist -for trial. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995).

The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party shows the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings' and identify facts which show a genuine issue for trial. Id. at 324, 106 S.Ct. 2548. A nonmoving party cannot defeat summary judgment by relying on the allegations in the complaint, or with unsupported conjecture or conclusory statements. Hernandez v. Spacelabs Medical, Inc., 343 F.3d 1107, 1112 (9th Cir.2003). Thus, summary "judgment should be entered against' “a party who fails to make a showing sufficient to establish the existence of'an element essential to that party’s case, and on which that party .will bear the burden of proof at trial.” Celotex, 477 U.S. at 322, 106 S.Ct. 2548.

The court must view the evidence in the light most favorable to the nonmoving party. Bell v. Cameron Meadows Land Co., 669 F.2d 1278, 1284 (9th Cir.1982). All reasonable doubt as to the existence of a genuine issue of fact should be resolved against the moving party. Hector v. Wiens, 533 F.2d 429, 432 (9th Cir.1976). Where different ultimate inferences may be drawn, summary judgment is inappropriate. Sankovich v. Life Ins. Co. of North America, 638- F.2d 136, 140 (9th Cir.1981).

However, deference to the nonmoving party has limits. A party asserting that a fact cannot be true or is genuinely disputed must support the assertion with admissible evidence. Fed.R.Civ.P. 56(e) (2013). The “mere existence of a scintilla of evidence in support of the [party’s] position [is] insufficient.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Therefore, where “the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (internal quotations marks omitted).

II. Construction of Insurance Policies

Under Oregon law, the interpretation of plain and unambiguous contract provisions is a question of law for the court. Hoffman Constr. Co. v. Fred S. James & Co., 313 Or. 464, 469, 836 P.2d 703 (1992). Construction of insurance contracts requires ascertaining the parties’ intent, which is determined from the terms and conditions of the policy. Groshong v. Mutual of Enumclaw Ins. Co., 329 Or. 303, 307, 985 P.2d 1284 (1999); McLeod v. Tecorp Int'l Ltd., 318 Or. 208, 215, 865 P.2d 1283 (1993). If an insurance policy explicitly defines the word or phrase at issue, the court is bound to apply that definition. Holloway v. Republic Indem. Co. of America, 341 Or. 642, 650, 147 P.3d 329 (2006). If the policy does not define the word or phrase," the court next looks to its primary and general meaning. Id.; Or.Rev.Stat: § 42.250. Where the word or phrase is susceptible to two -or more plausible interpretations, it must be considered in the particular context in which is used in the policy and in the broader context of the policy as a whole. Holloway, 341 Or. at 650, 147 P.3d 329. A term is ambiguous only if more than one interpretation remains reasonable after such review. Hoffman, 313 Or. at 470, 836 P.2d 703. The insurer has the burden of drafting insurance policies that are clear and unambiguous. North Pac. Ins. Co. v. Hamilton, 332 Or. 20, 29, 22 P.3d 739 (2001). Therefore, any unresolved ambiguity in an insurance policy should be strictly construed against the insurer. Hoffman, 313 Or. at 470, 836 P.2d 703.

Ill, Insurer’s Duty to Defend

In Ledford v. Gutoski, 319 Or. 397, 400, 877 P.2d 80 (1994), the Supreme Court of Oregon wrote: “[w]hether an insurer has a duty to defend an action against its insured depends on two documents: the complaint and the insurance policy. An insurer has a .duty to defend an action against its insured if the claim against the insured stated in the complaint could, without amendment, impose liability for conduct covered by the policy.” Thus, “[a]n insurer should be able to determine from the face of the complaint whether to accept or reject the tender of the defense of the .action.” Id. (citing Ferguson v. Birmingham Fire Ins., 254 Or. 496, 505-506, 460 P.2d 342 (1969)).

Accordingly, the duty to defend arises if:

the complaint provides any basis for which the insurer provides coverage. Even if the complaint alleges some conduct outside the coverage of the policy, the insurer may still have a duty to defend if certain allegations of the complaint, without amendment; could impose liability for conduct covered by the policy. Any ambiguity in the complaint with respect to whether the allegations could be covered is resolved in favor of the insured.

Id. (internal citations omitted) (emphasis in original). To be clear: “[i]f some of the allegations pertain to conduct that could be covered by the insurance policy, and some that could not, the insurer must defend the entire action.” Klamath Pacific Corporation v. Reliance Insurance Co., 151 Or. App. 405, 413, 950 P.2d 909 (1997) (citing Timberline Equip. v. St. Paul Fire and Mar. Ins., 281 Or. 689, 645, 576 P.2d 1244 (1978)).

IV. Interpretation of Policy Exclusions

The Oregon Court of Appeals described the method for interpreting a policy exclusion:

In determining whether a policy exclusion applies to the conduct at issue, we look “only at the facts alleged in the complaint, to determine whether they provide a basis for a recovery that could be covered by the policy.” If the allegations in the complaint 'are ambiguous, but a reasonable interpretation would bring them within coverage, there is a duty to defend. Moreover, if 'some allegations' reasonably can be interpreted as falling within the coverage, the insurer owes a duty to defend — even if other allegations of conduct or damage are excluded.

Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 237 Or.App. 468, 478, 240 P.3d 67 (2010) (quoting Ledford, 319 Or. at 400, 877 P.2d 80) (internal citations omitted). It is the insurer’s burden to prove that an exclusion applies. ZRZ Realty Co. v. Beneficial Fire and Casualty Insurance Co., 349 Or. 117, 127, 241 P.3d 710 (2010). Whether an exclusion applies is a question of law-which seeks to determine the parties’ intent. Id. at 480, 240 P.3d 67.

V. Construction of Statutes

A federal court interpreting Oregon law should “interpret the. law as would the [Oregon] Supreme Court.” Planned Parenthood of Idaho, Inc. v. Wasden, 376 F.3d 908, 925 (9th Cir.2004). Therefore, the court must “apply the familiar framework for statute interpretation established in Portland Gen. Elec. v. Bureau of Labor and Indus., 317 Or. 606, 859 P.2d 1143 (1993), and subsequently modified by State v. Gaines, 346 Or. 160, 206 P.3d 1042 (2009).” Sundermier v. State ex rel. Pub. Emps. Ret. Sys., 269 Or.App. 586, 595, 344 P.3d 1142 (2015).

Under this framework, the primary goal of statutory construction is to discern the legislature’s intent in enacting the statute at issue. Gaines, 346 Or. at 171, 206 P.3d 1042; OR. REV. STAT. 174.020. To do so, the court first looks to the “text and context” of the statute as “there is no more persuasive evidence of the intent of the legislature than' ‘the words by with the legislature undertook to give expression to its wishes.’ ” Id. (quoting State ex rel. Cox v. Wilson, 277 Or. 747, 750, 562 P.2d 172 (1977)).

Courts must assume the legislature intended the words of the statute to have their plain, natural, and’ ordinary meaning unless specifically defined by the legislature. Gaines, 346 Or. at 175, 206 P.3d 1042. A statutory term’s “context” includes both its immediate context — “the phrase or sentence in which the term appears”— and the “broader context,” which includes other statutes “on the same subject.” State v. Stamper, 197 Or.App. 413, 417-18, 106 P.3d 172 (2005). After reviewing the statutory text and context, the court should consider pertinent legislative history offered by the parties. Gaines, 346 Or. at 172, 206 P.3d 1042. Finally, and only if the legislative "intent remains in doubt after consideration of the text, context, and legislative history, the court may resort to general rules of statutory construction for guidance in resolving the issue before it. Id. at 172, 206 P.3d 1042.

Discussion

I. National Union’s Duty to Defend in Light of Pollution Exclusion

Third-party defendant National Union issued two comprehensive general liability insurance policies to Marine Iron, which were in effect from August 1, 1985, to February 28, 1987. National Union Policy No. GLA 160 2986 RA covered a one-year term from August 1, 1985, to August 1, 1986, while National Union Policy No. GLA 502 0229 RA originally covered a one-year term from August 1, 1986, to August 1,1987, but was cancelled effective February 28, • 1987 (the “National Union Policies”). (April 22nd Sumner Decl. Ex. F at MG202117, MG202150, MG202143.) The issue before the court is whether the Hazardous Substance Remedial Action Exclusion found in the National Union Policies (the “Exclusion”) applies to the claims asserted against National Union by Insureds, thereby relieving National Union of any duty to provide the Insureds with a defense to the Environmental Claims.

National. Union asserts the Environmental Claims are unambiguously excluded from coverage by the Exclusion. The Exclusion provides:

This policy does not apply to the liability of the Insured, or liability of another for which the Insured - may be liable in whole or in part, resulting from any suit, action, proceeding or order brought or issued by or on behalf of any Federal, State or local ■ governmental authority seeking (a) Remedial Action or the cost thereof, (b) damages for injury to, destruction of or loss of natural resources, including the costs of assessing such injury, destruction or loss, if such suit, action, proceeding or order arises from the release of a hazardous substance at any area, whether or not owned by the Insured. The company shall not have the obligation to defend any Suit, action or proceeding seeking to impose such liability..

(April 22nd Sumner Decl. Ex. F at MG202137, MG 202167.) The Insureds acknowledge the Exclusion applies to claims brought by or on behalf of a federal, state, or local governmental authority, but argue it does not exclude claims for natural resource damage (“NRD”) asserted by Indian Tribes (“Tribes”) as national resource trustees under the CERCLA. Therefore, the only dispute between the parties relates to whether the Tribes, asserting NRD claims as members of the Council, are properly characterized as federal, state, or local governmental authorities for the purposes of this action.

First, the court must determine whether the underlying complaint could/ without amendment, impose liability for .a claim covered by the National Union Policies. Insureds’ sole argument in support of coverage is that the Exclusion does not bar coverage for the Environmental Claims to the extent they are asserted by a Tribe. In other words, Insureds assert that if the Tribe has asserted an NRD claim against Insureds, the Exclusion does not apply and National Union must participate in the defense of the Environmental Claims. Accordingly, the court must determine if the underlying complaint could be viewed to contain a Tribe claim for NRD.

Insureds received letters detailing their current, and possible future, obligations as PRPs from the EPA and Council, but no formal complaint has been filed delineating the specific claims asserted against Insureds. The court previously held administrative communications, such as the 104(e) letter and notifications of PRP status, constitute suit documents triggering the insurers’ duty to defend. Century Indem. Co. v. The Marine Group, LLC, 848 F.Supp.2d 1238, 1255-56 (D.Or.2012). Consequently, the court will look to the contents of these communications to determine if they contain a claim asserted by a Tribe.

The initial eommunicatiofis from the EPA do not assert claims "for NRD and are, therefore, not relevant. ■ The initial communications from the Council to Insureds invite them to participate in the ongoing NRDA and reference a list of “Natural Resource Trustees” for the Site. The CERCLA designates the Unitéd States Government, the States, and Indian tribes as public trustees for natural resources belonging to, managed by, controlled by, or appertaining to them (“Natural Resource Trustees”). 42 U.S.C. § 9607(f). An individual or entity responsible for the injury to, destruction of, or loss of natural resources is liable to the Natural Resource Trustee tasked with protecting the natural resource affected and only Natural Resource Trustees may take action to recover for NRD. Id.

The Natural Resource Trustees on the list established the Council, which has the authority to conduct activities for the benefits of its members with regard to the NRD and NRDA for the Site. (April 27th Rycewicz Deck Ex. 15 at 3.) Members of the Council include:

Confederated Tribes and Bands of the Yakama Nation

Confederated Tribes of the Grande Ronde Community of Oregon

Confederated Tribes of Siletz Indians of Oregon

Confederated Tribes of the Umatilla Indian Reservation

Confederated Tribes of the Warm Springs Reservation of Oregon Nez Perce Tribe

Oregon Department of Fish and Wildlife United States Department of the Interi- or

National Oceanic and Atmospheric Administration (NOAA).

(“Member” or “Member's”). (April 27th Rycewicz Deck Ex. 15 at 3.) By identifying a number of Tribes as Members, the initial communications from the Council indicate the possibility, if not the likelihood, that at least one Tribe is asserting a claim for NRD through the Council.

Next, the court must look to the express terms of the Exclusion to determine whether it bars NRD claims brought or issued by or on behalf of a Tribe as a Member. The National Union Policies do not define the terms “Federal, State or local governmental authority,” which are at issue here, Accordingly, the court must consider the terms’ primary and general meanings.

Black’s Law Dictionary defines “government” as “[a]n organization through which a body of people exercises political authority; the, machinery by which sovereign power is expressed.” Black’s Law Dictionary 764 (9th ed.2009). The term “authority” is defined as the “right or permission to act legally on another’s behalf’ or “a governmental agency or corporation that administers a public enterprise.” Black’s Law Dictionary 152 (9th ed.2009). Ac'cordingly, the plain and general meaning of “governmental authority” includes an organization, agency, or corporation having the right or permission to exercise political authority or discretion for the benefit of the public they serve. Federal governmental authority relates to those acting for the benefit of citizens of the United States, state governmental authority relates to those acting for the benefit of citizens of the individual states, and local governmental authority relates to those acting for the benefit of citizens of a “particular locality, such as a city, county, or parish.” Black’s Law Dictionary 764 (9th ed.2009) (defining “local government”).

Insureds do not offer a different interpretation of these terms. Rather,- Insureds argue at least one court has found the Exclusion ambiguous and this eourt must, therefore, interpret the Exclusion in their favor. The. unreported case upon which Insureds rely addressed the question of whether counterclaims asserted between private parties could be viewed as “resulting from” a CERCLA action brought against one of the private parties by a state government authority. IMACC Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, No. C 98-01025-CW (N.D.Cal. Oct. 5, 1998). The case did not address the proper construction of the terms “Federal, State or Local governmental authority” and is not instructive here.

Similarly, the court rejects National Union’s reliance on Montana Refining Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA., 918 F.Supp. 1395 (D.Nev.1996). In Montana, the Nevada district court considered the phrase “resulting from any suit, action, proceeding or order brought or issued by or on behalf of any Federal, State or local governmental authority seeking (a) Remedial Action or the cost thereof, (b) damages for injury to, destruction of or loss of natural resources, including the . costs of assessing such injury, destruction or loss” found in the Exclusion and held that “a common sense reading of the exclusion is that, when a hazardous substance has been released, there is no coverage if a government sues for natural resource damages, or for ‘Remedial Action’ (which, as explained above, is reasonably interpreted as meaning any or all of the actions which define that term), or for both.” Id. at 1402. The court was not construing the terms “Federal,. State, or Local governmental authority”- but rather whether both a Remedial Action and a claim for natural resource damages must be initiated against the insured for- the Exclusion to apply. As such, the ruling is not relevant to the issue before the. court.

Having determined the clear and unanibiguous language of the Exclusion applies' to any claim resulting from any suit, áction, proceeding or order brought or issued by or on behalf of any organization, agency, or corporation having the right or permission to exercise political authority or discretion for the benefit of citizens of. the United States, citizens of the individual states,-or citizens of a particular locality, such as a city, county, or parish, the court must now consider whether the Tribe's claims fall with in the Exclusion. No Tribe, has asserted a claim directly against Insureds. Any claim asserted by a . Tribe would be through its involvement with the Council. Accordingly, the court must determine if the Tribes’ assertion of NRD claims in its capacity as a Member qualifies as an action brought or issued by or on behalf of a Federal, State, or local governmental authority. :

National Union argues the Council, as a whole, should be considered a governmental authority under the terms of the Exclusion. Insureds argue the Tribes’ presence on the Council defeats any argument the Council is properly characterized a governmental authority. Insureds’ argument contradicts the document creating and controlling the Council, federal regulations, and the only reasonable interpretation of congressional intent underlying the CERCLA.

The Council was created in 2002 by Natural Resource Trustees tasked with protecting natural resources which may have been damaged by the release of hazardous materials at or from the Site. The Natural Resource Trustees entered into a Memorandum of Agreement for the purpose of facilitating the coordination and cooperation of the Members with regard to the assessment, remedial activities, and prosecution or settlement of NRD claims arising from the Site (the “Memorandum”). (Rycewicz Decl. dated June 2, 2015 (“June 2nd Rycewicz Deck”) Ex. 1.) The Memorandum identifies the Members, including the Tribes, as “governmental entities”. (June 2nd Rycewicz Deck Ex. 1 at 1.) The Members executed the Memorandum “as representatives of their respective agencies, which act on behalf of the public as Trustees for natural resources, and as representatives of tribal governments, which act on behalf of their tribal membership.” (June 2nd Rycewicz Deck Ex. 1 at 9.)

The Memorandum requires the Council to work as a single entity for the benefit of the Members and the parties they represent. The purpose of the Council is explained in the Memorandum as follows:

The [Members] recognize the importance of coordinating: 1) an assessment of natural resource damages for injuries to natural resources resulting from hazardous substance releases at or from the Portland Harbor Site (“Site”); 2) any actions to restore, replace, or acquire the equivalent of those resources (restoration); and 3) any prosecution or settlement of natural resource damage claims associated with the Site. Further, the [Members] recognize the importance of coordinating their efforts as participants in the February 2001 Intergovernmental Memorandum of Understanding (Intergovernmental MOU) for .the Portland Harbor Superfund Site with the Environmental Protection Agency (EPA) and Oregon Department of Environmental Quality. -The purpose of this [Memorandum] is to provide a framework for such coordination and cooperation between the [Members] and for implementation of joint activities.

(June 2nd Rycewicz Deck Ex. 1 at l.)-The Council is the “forum through which the [Members] will coordinate their NRDA activities in connection with the Site” and. is responsible for developing and communicating joint positions on PRP deliverables in- accordance with the Intergovernmental Memorandum of Understanding; facilitating development and implementation of the assessment of NRD; assisting the Members in the negotiation and funding .of participation agreements for, along with managing the funding of, NRDA activities; and developing joint negotiation, settlement, litigation, and restoration activities. (June 2nd Rycewicz Deck Ex. 1 at 2-3.)

Council decisions must be unanimous, with all funding decisions memorialized in a resolution signed by the voting representatives. (June 2nd Rycewicz Decl. Ex. 1 at 4.) All monies generated by funding and participation agreements between the Council and PRPs for NRDA activities “are intended for the joint and undivided use and benefit of all the [Members] acting cooperatively in planning, coordinating and conducting joint [Members] NRDA activities.” (June 2nd Rycewicz Decl. Ex. Í at 6.) The Council is tasked with evaluating appropriate means for recovery of individual costs of participation and seeking -reimbursement of these costs from PRPs. (June 2nd Rycewicz Decl. Ex. 1 at 6.)

' The Council also works together cooperatively to settle NRD claims and “may enter into settlement negotiations with a PRP(s) for the purpose of resolving any natural resource damage claims.” (June 2nd Rycewicz Decl. Ex. 1 at 7.) With the exception of attempts to obtain reimbursement NRDA costs, “[n]o [Member] may conduct -independent settlement negotiations with a PRP ... unless all [Member] representatives agree in writing to such independent settlement negotiations,” and any “[Member] engaging in. independent claims or negotiations must withdraw from this [Memorandum].” (June 2nd Rycewicz Decl. Ex. 1 at 7, 8.) The Council deposits all funds recovered for the purpose of restoring natural resources injured, destroyed, or lost as a.result of the release of hazardous materials into the Portland Harbor NRD Fund. (June 2nd Rycewicz Decl. Ex. 1 at 6.)

The Memorandum ■ acknowledges the terms of the Memorandum may be inconsistent with existing directives of a Member as a Natural Resource Trustee, and it provides it should not be construed as requiring a Member to abrogate or cede “any responsibility or authority inherent in its trusteeship over natural resources.” (June 2nd Rycewicz Decl. Ex. 1 at 9.) In fact, in 2009, the Confederated Tribes and Bands of the Yakama Nation (the “Yakama Nation”) withdrew from the Council based on concerns the Council was concentrating primarily on damage to the Willamette River, not the downstream damage to the Columbia River. (June 2nd Rycewicz Decl. Ex. 2 at 1.) The Yakama Nation, whose reservation and ceded lands include the Yakima and Klickitat Rivers, and portions of the Columbia River, planned to conduct their own studies of the Columbia River. (June 2nd Rycewicz Decl. Ex. 2 at 1.)

It is evident from the Memorandum the Members are acting for the benefit of all Members as co-trustees, seeking the full amount of damage caused by the release of hazardous substances at the Site. The Council decisions are required to be unanimous, which means all Members must specifically consent to actions taken by the Council on them behalf, including settlement of any Member’s NRD claim. Any Member engaging in negotiations to protect their independent rights is required to withdraw from the Council, supporting a conclusion that the Council is acting to enforce the CERCLA for the benefit of the Council as a whole, not the unique rights of one Member. Further, all funds generated by Council actions are placed in an account for the “joint and undivided use and benefit” of all Members. Consequently, the Tribes’ participation in the Council not only benefits themselves, but also the federal and state agencies participating in the Council.

Viewed in this light, the Tribes are participating in. a suit, action or proceeding brought by or on behalf of the Members who are federal or state agencies. Alternatively, the federal and state agency Members are pursuing the claims of the Tribes with their consent. Despite Insureds’ claim to the contrary, a Tribe may consent to the United States acting on their behalf with regard to NRD claims. United States v. Asarco Inc., 471 F.Supp.2d 1063, 1068 (D.Id.2005) (“[T]he Tribe has agreed to let the United States government represent its interests.”)

Insureds have not identified any NRD claim asserted individually by a Tribe. The NRD claims asserted by a Tribe as a Member are brought on behalf of the federal and state agencies participating in the Council, or are brought by the federal and state agencies for the benefit of the Member Tribes. Either way, the NRD claims fall within1 the plain and unambiguous language of the Exclusion and National Union is not obligated to provide a defense for the Environmental Claims.

This conclusion is consistent with federal regulations, which encourage, if not require, Natural Resource Trustees to “coordinate and cooperate in carrying out their responsibilities” when necessary because of “coexisting or contiguous natural resources or concurrent jurisdictions.” 40 C.F.R. § 300.615(a) (2015). At least one court has similarly recognized the need for Natural Resource Trustees to act collectively in pursuing claims related to NRD under the CERCLA where the trustees hold joint interests in the natural resources and has held that “[i]n fact, in many instances, co-trustees are the norm and not the . exception.” Coeur D'Alene Tribe v. Asarco Inc., 280 F.Supp.2d 1094, 1115 (D.Id.2003). The same court later held the language of the CERCLA “dictates that a co-trustee acting individually or collectively with the other co-trustees may go after the responsible party or parties for the full amount of the damage— ” United States v. Asarco Inc., 471 F.Supp.2d at 1068.

Finally, general congressional policy supports a finding Tribes are properly considered federal governmental authorities for the purposes of the CERCLA. The CERCLA provides that a party responsible for the release of a hazardous substance shall be liable for, among other things, “damages for injury to, destruction of, or loss of natural resources, including the reasonable costs 'of assessing such injury, destruction, or loss resulting from such a release.” ■ 42' U.S.C. § 9607(a)(4)(C). The éntities entitled to recover such damages are limited to the United States Government, any State, and any Indian tribe which owns, manages, or controls the damaged resources for the benefit of the public or the tribe. 42 U.S.C. § 9607(f)(1).

Congress has recognized Tribes’ unique political status and have afforded them broad authority to govern themselves, although Tribes remain subject to the “plenary and exclusive” powers of Congress given to it by the Constitution to regulate and modify the status of the Tribes. United States v. Lara, 541 U.S. 193, 200, 124 S.Ct. 1628, 158 L.Ed.2d 420 (2004); see also California v. Cabazon Band of Mission Indians, 480 U.S. 202, 207, 107 S.Ct. 1083, 94 L.Ed.2d 244 (1987) (“The Court has consistently recognized that Indian tribes retain ‘attributes of sovereignty over both their members and their territory’ and that ‘tribal. sovereignty is dependent on, and subordinate to, only the Federal Government, not the States.’”) (citations omitted) For example, while reserving certain lands for the exclusive use and occupancy of the Tribes, Congress retained general supervisory power over such lands. McClanahan v. State Tax Comm’n of Arizona, 411 U.S. 164, 174-75, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973).

Congress gave the Tribes the authority to pursue claims for NRD under the CERCLA on behalf of their Tribe members, .who,, are also United States citizens. Lara, 541 U.S. at 203, 124 S.Ct. 1628 (“Congress has advanced policies of integration by conferring United States citizenship upon all Indians”). In the absence of such express delegation of authority, the Tribes would lack the ability to protect natural resources detrimentally affected by the release of hazardous substances otherwise provided to federal and state governments. Nat’l Ass’n of Mfrs. v. U.S. Dept. of Interior, 134 F.3d 1095, 1113 (D.C.Cir.1998) (“It is true that CERCLA does not permit private parties to seek recovery from damages to natural resources held in trust by the federal, state or tribal governments”) Therefore, in asserting NRD claims under CERCLA, the Tribes are acting pursuant to the right or permission to act legally on another's behalf. Stated another way, the -Tribes are acting pursuant to the authority,provided them by the federal government, or under federal governmental authority, not exclusively under tribal government authority.

National Union argues the Tribes should be considered local governmental authorities. However, CERCLA designates the United States government, State governments, and Tribes as public ■ trustees of natural resources and authorizes only trustees designated by the President, the governor of each state, or tribal chairman to initiate and pursue claims for damages to natural resources under their trusteeship. 42 U.S.C. § 9607(f)(2); 40 C.F.R. § 300.610. Therefore, unless a local government has been designated by a state as a trustee, local governments are not authorized to pursue actions for natural resource damage under CERCLA. Rockaway v. Klockner & Klockner, 811 F.Supp. 1039, 1049 (D.N.J.1993) (“[0]nly a ‘state official,’ specifically appointed by the governor of the state, may be an ‘authorized representative’ for purposes of bringing an action to recover for natural resource damages.”) As Tribes clearly have the authority to pursue natural resource damage claims, they are not properly characterized as local governmental authorities.

To the extent the Tribes are pursuing actions under the CERCLA as a Natural Resource Trustee for the benefit of Tribe members, who are also United States.citizens, the Tribes are exercising governmental authority granted to them by Congress for the benefit of citizens of the' United States. Accordingly, Tribes, in their capacity as Natural Resource'Trustees, are acting pursuant to federal government authority.

The court finds NRD claims asserted by a Tribe as a Member are brought by or on behalf of a Federal or State governmental authority and fall within the Exclusion. National Union has no duty to defend the Environmental Claims and is entitled to partial summary judgment.

II. Century’s Duty to Defend v. Duty to Indemnify for Defense Costs

Marine Iron purchased insurance from Century covering, the period from July 1, 1982 to August 1, 1985. (Rycewicz Decl. dated June 5, 2015 (“June 5th Rycewicz Decl.”) Ex. 1-2.) Specifically, Century Policy CIS 43 06 595 was effective from July 1, 1982, to August 1, 1984 (the “1982 Policy”) while- Century Policy CIS 43 11 40, which was a renewal of the 1982 Poliey, was effective August 1, 1984, to August 1, 1985 (the “1984 Policy”) (collectively the “Century Policies”). (June 5th Rycewicz Decl. Ex. 1-2.)

In the 1982 Policy, Century agreed:

;to indemnify the Insured for all sums which the Insured shall be obligated to pay by reason of liability

(a) imposed upon the Insured by Law, or

(b) assumed under contract or agreement by the Named Insured and/or any officer, director, stockholder, partner or employee of the Named Insured, while acting, in his capacity as such,

for damages, direct or consequential, and expenses, all as more fully defined by the term ultimate net loss on account of:

(1) personal injury, . ,

(2). property damage ■ .

caused by or arising out of an occurrence, occur[r]ing anywhere in the United States of America, its territories and possessions and/or Canada.

(June 5th Rycewicz Decl. Ex; 1 at 2.) Century’s liability is limited - to “the ultimate net loss in excess of the- self insured retention stated in the declarations in respect of each occurrence and thep only up to a further limit, as stated in the declaration in respect of each occurrence.” (June 5th Rycewicz Decl. Ex. 1 at 3.) The 1982 Policy has a self-insured retention of $100,009 per occurrence, with an $300,000 aggregate. (June 5th Rycewicz Decl. Ex. 1 at 2.)

“Ultimate net loss” is defined as:

the total sum which the Insured becomes obligated to . pay as damages either through adjudication or compromise, after making deductions, for. all recoveries and for other valid and collectible insurances, and shall also include claim expense. Claim expense shall include court costs, interest upon awards and judgements investigation, adjustment and legal expenses but shall not include salaries paid to the employees of the Insured or the company, fees paid to the Insured’s service company for handing claims or retainers paid to persons or firms consulted on or handling claims.

(June 5th Rycewicz Decl. Ex. 1 at 6.) With respect to payments under the 1982 Policy:

The Company shall be liable ,for payment under this policy only after the Insured has paid the amount of the self insured retention. Also, the Insured’s obligation to pay an amount of ultimate • net loss in excess of the “self insured ■retention” shall have-been fully determined either:

(1) by judgement against the Insured after actual trial, dr

(2) by written agreement of the Insured, the claimant, and. the Company.

Any claim against the -Company by the Insured under the policy shall be made within twelve months after the Insured shall have paid or become obligated to pay an ultimate net less in excess of the self insured retention. '

(June 5th Rycewicz Decl. Ex. T at 12.) The Insured has the duty to defend any action against it and Century has the option of participating in the defense of an action likely to result in the ultimate net loss amount. The 1982 Policy specifically provides:

The Insured shall be responsible for the settlement or defense of any claim made or suit brought or proceeding instituted against the Insured which no underlying insurer is obligation to defend. The Insured shall use due diligence and prudence to settle all such claims and suits which in the exercise of sound judgment should be settled, provided, however, that the Insured shall make no settlement for any sum in excess of the self insured retention without the approval of the Company.

When an occurrence involves, or appears reasonably likely to involve ultimate net loss, in excess of the self insured retention the Company shall have the right and shall be given the opportunity’ to associate with the Insured in the defense and control of any claim, suit or proceeding and the Insured and the Company shall cooperate in all things in the defense of such claim, suit or proceeding.

(June 5th Rycewicz Decl. Ex. 1 at 6.) The 1984 Policy contains virtually identical language with a few minor exceptions not relevant to the issues before the court. (June 5th Rycewicz Decl. Ex. 2.)

The Century Policies do not require Century to provide Insureds with a defense of the Environmental Claims. The policy language obligates Century to indemnify Insureds, subject to other provisions, but provides Century with the right, not the duty, to participate in the defense of an action, and then only when the ultimate net loss appears likely to exceed the self-insured retention. The clear and unambiguous terms of the Century Policies relieve Century of any duty to defend or otherwise participate in the defense of the Environmental Claims.

Insureds do not dispute this interpretation of the Century Policies. Instead, Insureds assert Century’s duty to indemnify for “claim expense,” which includes “legal expenses,” creates a duty to defend. Insureds argue the punctuation of the ultimate net loss definition places Century in a primary position for defense costs, requiring them to immediately participate in, and contribute to, the defense of the Environmental Claims.

“Ultimate net loss” is defined as “the total sum which the Insured becomes obligated to pay as damages either through adjudication or compromise, after making deductions for all recoveries and for other valid and collectible insurances, and shall also include claim expense.” While Insureds admit this language arguably establishes Century is an excess insurer for damages, and need not contribute until all other insurance is exhausted based on the presence of the restrictive phrase “after making deductions for all recoveries and for other valid and collectible insurances,” they contend the phrase modifies only damages, not claim expense, thus making Century a primary insurer for defense costs.

Insureds rely on the duty-to-defend analysis in Hernandez v. County of Dupage, No. 96 C 8030, 1998 WL 832644 (N.D.Ill. Nov. 23, 1998), in which the court addressed the question of when an insurer’s duty to defend is ripe for adjudication. In Hernandez, the insured sought a declaratory judgment on several insurance companies’ duties to defend, pay defense costs, or indemnify the insured with regard to an underlying action alleging civil rights and constitutional violations. Id. at *1. The insurers moved to dismiss the action asserting, among other things, lack of justiciability based on the absence of an actual, existing controversy with regard to their duties under the policies during the pendency of the underlying action. Id. at *3. The insurers argued the policies were indemnity, rather than liability, policies and there was no present duty to indemnify or defend. Id. at *5. The insurers were liable for insured’s ultimate net loss which was defined as “the total sum which the Assured becomes obligated to pay by reason of personnel injury or property damage claims, either through adjudication or compromise, ..., and shall also include ... all sums paid as salaries, wages, compensation, fees, charges and law costs for litigation, settlement, adjustment, and investigation of claims and suits which are paid as a consequence of any occurrence covered hereunder.” Id. The court found “[t]he policy clearly separates out damages, which Lloyd’s is required to pay only after litigation on the merits or settlement, from defense costs, which includes no such time limitations.” Id. at *6. The court found the question of the insurers’ duty to defend was ripe for adjudication while their duty to indemnify was not. Id. at *4.

Hernandez is easily distinguishable from the issue currently before the court. First, the court in Hernandez found “that there is an.actual controversy regarding whether the Insurance Defendants have [a] present duty to defend, but that the County’s claims regarding the Insurance Defendants’ duty to indemnify are not ripe.” Id. at *3. The court denied the insurers’ motion to dismiss with regard to the duty to defend but did not address the merits of the issue or find the duty to defend existed based on the terms of the policy. Therefore, Hernandez is ■ not instructive on the issue here. Second, the policies before the Hernandez court did not contain language providing that the insurer has the option, but not the duty, to advance defense costs. Id. at *5. In fact, the court specifically distinguished a case which contained such language. Id. (citing Zaborac v. American Casualty Co. of Reading, PA, 663 F.Supp. 330 (C.D.Ill.1987)). In Zaborac, the court found the duty to indemnify for defense costs arose only when the issue of indemnification was resolved. Zaborac, 663 F.Supp. at 333 (“This Court has already found from its reading of the liability insurance policy that the insurance company need only indemnify the insureds for losses, and the fact that the insurance company has agreed to reimburse the defense costs of the insureds does not create a duty to defend on the part of the insurance company.”)

When construing the terms of an insurance contract, a court must “construe the context of the policy as a whole, rather than view particular parts of the policy in isolation.” Bresee Homes, Inc. v. Farmers Ins. Exchange, 353 Or. 112, 122, 293 P.3d 1036 (2012). The Century Policies contain express language relieving Century of the duty to defend. ■ Construing the “ultimate net loss” definition as creating a present duty to defend is inconsistent with this express language, as well as other provisions of the Century Policies.

In the Century Policies, Century agrees to indemnify Insureds for all “damages, direct or consequential, and expenses, all as more fully defined by the term ultimate net loss” they “shall be obligated to pay by reason of liability (a) imposed upon the Insured by law, or (b) assumed under contract or agreement by the Named Insured.” “Ultimate net loss” includes both damages and claim expense, and are addressed consistently in this provision. To read the “ultimate net loss” definition in the manner offered by Insured — that it creates a duty to defend or pay claim expenses before their liability or duty to indemnify has been imposed by law or resolved through settlement — would force the court to ignore the clear language of the Century Policies.

Furthermore,- the Century Policies expressly provide Century shall be liable for payment under the Century Policies only after the Insured has paid the amount of the' self-insured retention and Century’s obligation to pay the ultimate net loss in excess of the self-insured .retention has been fully determined either: “(1) by judgement against the Insured after actual trial, or (2) by written agreement of the Insured, the claimant, and the Company.” Again, the Century