Brownstone Homes Condominium Ass'n v. Brownstone Forest Heights, LCC

If a plaintiff engages in a settlement agreement with a defendant that includes a nonexecution covenant releasing the defendant, any assignment of rights by the defendant for claims against defendant's insurer will be subject to the Stubblefield Rule.

Brownstone Homes Condominium Association (BHCA), appealed the trial court's determination that BHCA was not allowed to garnish proceeds of defendant A&T Siding, Inc.'s (A&T), insurer, Capitol Specialty Insurance Co (Capitol). BHCA filed suit against A&T for construction defects. A&T was insured by both Capitol and Zurich Insurance Company (Zurich). BHCA, A&T, and Zurich all entered into an settlement agreement, whereby A&T agreed to stipulate to judgment against A&T, in favor of BHCA, for $2 million. Zurich agreed to pay $900,000 of those damages on behalf of A&T. A&T assigned BHCA any claims that A&T had against Capitol for the remainder of the stipulated judgment. BHCA argued that Capitol was liable, under ORS 18.352 or ORS 742.031, for the unpaid portion of the stipulated judgment. Capitol argued that under the Stubblefield Rule, their liability was terminated by the settlement agreement and that Zurich's contribution had satisfied sums that A&T was "legally obligated to pay." The Court of Appeals held that the Stubblefield Rule controlled and that neither ORS 18.352 or ORS 742.031 created an assignable interest greater than that held by the insured, in this case A&T. The Court explained that because A&T had entered into a nonexecution covenant releasing A&T, as part of the settlement agreement, BHCA could not execute the judgment against A&T nor its insurer, Capitol. Therefore, under Subblefield, BHCA could not recover amounts from Capitol that its insured, A&T was not obligated to pay. Affirmed.