Oregon Judge Denies Attempt to Introduce Use of Reasonableness Hearing in Insurance Coverage Case

Patterson Buchanan recently represented an insurer in successfully opposing a motion for a “reasonableness hearing” in an Oregon circuit court. In a reasonableness hearing, parties to a lawsuit seek a court’s approval of a proposed settlement between them.

After oral argument on March 28, 2011, the Honorable Donald R. Letourneau of the Circuit Court of the State of Oregon for the County of Washington denied the Stonewater Homeowners Association’s request for a reasonableness determination in an underlying construction defect case. The court found that (1) it had no authority to hold a reasonableness hearing, and (2) even if it had the authority, it would decline to exercise its discretion to hold such a hearing. 

The construction defect case originally was filed by Stonewater against some thirty defendants for construction defects claimed to exceed $18 million. The insured defendant entered into a stipulated settlement that specifically required a reasonableness hearing. When Stonewater filed a motion with the court for the reasonableness hearing, Patterson Buchanan attorneys Duncan Fobes and Kelly Croll filed a motion to intervene on behalf of the insurer and contested the reasonableness hearing on several grounds, including the authority of the court to hold such a hearing under Oregon law.  

The court’s denial of the reasonableness hearing in Oregon was significant, because in states like Washington where reasonableness hearings are common in insurance coverage cases, they tend to be unfavorable to insurers.

The case is Stonewater Homeowners Association v. Matrix Development Corporation, et al.