AMCO Insurance is suing Cincinnati Insurance, alleging it has no duty to contribute to an $8.4 million settlement its rival unilaterally paid.
The legal battle, filed in federal court in Oregon, centers on a construction defect claim involving faulty HVAC systems at a Eugene senior living facility – and raises questions about how insurers should split costs when multiple policies cover the same risk.
AMCO Insurance Company claims it owes nothing on the $8.435 million settlement that The Cincinnati Insurance Company paid to resolve claims against their mutual insured, Comfort Flow Heating, Co. The filing alleges Cincinnati cut it out of settlement negotiations despite years of shared defense costs, then sought reimbursement.
At the heart of the dispute is a disagreement over time on risk. AMCO covered Comfort Flow for just 282 days following the project's substantial completion in June 2017. Cincinnati, the filing states, insured the contractor for 2,192 days across six consecutive policy years – nearly eight times longer.
Yet both insurers split defense costs fifty-fifty.
The underlying facts describe an installation that went wrong. Comfort Flow installed 15 variable refrigerant flow heating ventilation and air conditioning systems at the Facility at Greer Gardens in Eugene. The contractor completed installation on or about June 23, 2017, during AMCO's policy period, which ran from April 1, 2017 to April 1, 2018.
At some point afterwards, the facility owner began identifying issues with the VRF system's operation. Comfort Flow returned to the project a handful of times between June 23, 2017 and April 1, 2018 to perform repair, warranty and maintenance work. The complaint alleges these problems were restricted to the VRF systems themselves, which is Comfort Flow's own work.
The troubles persisted. Long after the AMCO policy ended, and after repeated issues with the VRF system, the facility owner retained MacDonald Miller to maintain and repair the systems. Between August and September 2024, one of the 15 units, CU-4, was replaced. Following that replacement, MacDonald Miller performed more high-ticket repairs. The facility owner and its experts determined the remaining 14 units would also need to be replaced because of Comfort Flow's defective installation. The filing states Comfort Flow's own expert acknowledged Comfort Flow's installation as the source of problems with the VRF systems.
The facility owner, Facility at Greer Gardens, LLC fka Springs IV at Eugene, LLC, filed arbitration against general contractor Todd Construction, Inc., which brought in Comfort Flow. Both AMCO and Cincinnati agreed to defend under reservation of rights, each paying half the legal bills.
When settlement talks began, AMCO offered to contribute $574,433 toward the settlement amount based on its time on risk from substantial completion. The insurer did not discount its contribution based on its coverage defenses despite what it describes as a lack of evidence of covered property damage during its policy period.
Cincinnati rejected the offer. According to the filing, Cincinnati unilaterally refused AMCO's contribution over AMCO's objections and voluntarily funded the entirety of Comfort Flow's $8.435 million settlement with the facility owner. The complaint alleges that Comfort Flow had asked Cincinnati to fund the entirety of its share of the settlement, and that despite a reasonable contribution offer from AMCO, Cincinnati chose to pay more than it would otherwise owe.
The filing alleges that after conspiring with Comfort Flow to pay all Comfort Flow owed the facility owner in exchange for an assignment of rights against AMCO, Cincinnati – without AMCO's input as a fully defending co-insurer – authorized Comfort Flow to settle its claims against equipment suppliers JB Oregon, LLC fka JB Oregon, Inc. and LG Electronics U.S.A., Inc for $750,000. That settlement further reduced the amount Cincinnati would have otherwise owed for Comfort Flow under the arbitration settlement.
Cincinnati and Comfort Flow subsequently arranged for AMCO to be excluded from the release between the parties to the arbitration and the equipment suppliers, despite the years of defense costs AMCO paid at 50% for Comfort Flow and Todd Construction, according to the complaint.
Now AMCO is pushing back. The insurer argues it never had a duty to indemnify in the first place.
AMCO's policy required property damage to occur during the policy period – April 1, 2017 to April 1, 2018. The insurer contends Comfort Flow did not meet its burden to prove or establish evidence of covered property damage during the policy period.
The policy's commercial general liability coverage form states AMCO "will pay those sums up to the applicable Limit of Insurance that the insured becomes legal obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies."
The insurance applies to bodily injury and property damage only if: the bodily injury or property damage is caused by an occurrence that takes place in the coverage territory; the bodily injury or property damage occurs during the policy period; and prior to the policy period, no insured listed under the relevant section and no employee authorized to give or receive notice of an occurrence or claim knew that the bodily injury or property damage had occurred, in whole or in part.
Even if damage occurred during the policy period, AMCO argues that multiple exclusions bar coverage.
Exclusion k eliminates coverage for property damage to "your product" arising out of it or any part of it.
Exclusion l bars coverage for property damage to "your work" arising out of it or any part of it and included in the "products-completed operations hazard." This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on the insured's behalf by a subcontractor.
Exclusion m removes coverage for property damage to "impaired property" or property that has not been physically injured, arising out of a defect, deficiency, inadequacy or dangerous condition in "your product" or "your work," or a delay or failure to perform a contract or agreement in accordance with its terms. This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to "your product" or "your work" after it has been put to its intended use.
Exclusion n blocks coverage for damages claimed for any loss, cost or expense incurred for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of "your product," "your work," or "impaired property" if such property is withdrawn or recalled from the market or from use because of a known or suspected defect, deficiency, inadequacy or dangerous condition.
The policy defines "your work" as work or operations performed by the insured or on its behalf, and materials, parts or equipment furnished in connection with such work or operations. It includes warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your work," and the providing of or failure to provide warnings or instructions.
"Property damage" means physical injury to tangible property, including all resulting loss of use of that property, with all such loss of use deemed to occur at the time of the physical injury that caused it. Alternatively, it means loss of use of tangible property that is not physically injured, with all such loss of use deemed to occur at the time of the occurrence that caused it.
An "occurrence" is defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
"Impaired property" means tangible property, other than "your product" or "your work," that cannot be used or is less useful because it incorporates "your product" or "your work" that is known or thought to be defective, deficient, inadequate or dangerous, or because the insured failed to fulfill the terms of a contract or agreement - if such property can be restored to use by repair, replacement, adjustment or removal of "your product" or "your work" or by fulfilling the terms of the contract or agreement.
AMCO is asking the court to declare it has no duty to indemnify Comfort Flow or Cincinnati, which now holds an assignment of Comfort Flow's rights. The insurer also wants the court to rule it owes no contribution to Cincinnati.
Beyond that, AMCO seeks reimbursement. It wants money back for overpaid defense costs, arguing allocation should reflect time on risk rather than a fifty-fifty split. AMCO also seeks its proportionate share of the $750,000 that the equipment suppliers paid in the arbitration on Comfort Flow's behalf, and the surplus Cincinnati received due to that settlement.
AMCO argues Cincinnati made a business decision to pay the full settlement despite having a contribution offer on the table. Having chosen to pay more than necessary, AMCO contends, Cincinnati should not be permitted to seek contribution for amounts it voluntarily paid – particularly when AMCO alleges no coverage exists under its policy.
The case is AMCO Insurance Company v. The Cincinnati Insurance Company and Comfort Flow Heating, Co., Case No. 3:25-cv-01989, in the U.S. District Court for the District of Oregon, Portland Division, filed October 27, 2025.
