The Duty to Indemnify When The Insured Settles: Who Has The Burden of Proof?

When an insured’s liability is established at trial, the duty to indemnify is based on the facts proven at trial.  Ledford v. Gutoski, 319 Or. 397, 403, 877 P.2d 80, 84 (1994).  However, when the insured enters a settlement, the duty to indemnify is determined on the facts that form the basis for the settlement.  Bresee Homes, Inc. v. Farmers Ins. Exch., 353 Or. 112, 126, 293 P.3d 1036, 1044 (2012).  Unlike a trial, a settlement agreement may not be documented by a transcript of proceedings or pleadings.  Accordingly, determining coverage for liability incurred in a settlement can present a unique challenge, which raises the question of whose challenge it is.