American Hallmark Insurance Company of Texas v. American Family Mutual Insurance Company et al, No. 6:2009cv00976 - Document 112 (D. Or. 2011)
Court Description: ORDER: Granting in Part Denying in Part Plaintiff's Motion for Summary Judgment 97 . Granted as to defendant's affirmative defenses, and granted as to plaintiff's request for a declaratory judgment. Denied as to Plaintiff's motion for attorney fees. Order Denying Defendant's Cross-Motion for Summary Judgment 103 . Defendant's request for oral argument is denied as unnecessary. Signed on 6/1/2011 by Chief Judge Ann L. Aiken. (lg)
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American Hallmark Insurance Company of Texas v. American Family Mutual Insurance Company et al IN THE UNITED STATES DISTRICT Doc. 112 COU~T FOR THE DISTRICT OF OREGON AMERICAN HALLMARK INSURANCE COMPANY OF TEXAS, a ign corporation, 1 No. 09-976-AA OPINION AND ORDER Plaintiff, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a foreign corporation; and JRP DRYWALL ENTERPRISES, INC., an corporation, Defendants. David P. Rossmiller Dunn Carney Allen 851 SW 6 th Ave. f Portland, Oregon 97204 Attorney for intiff LLP Page 1 - OPINION AND ORDER Dockets.Justia.com Ronald J. Clark Bullivant Houser Bailey PC 300 Pioneer Tower 888 SW 5 th Ave. Portland, Oregon 97204 Attorney for defendant American Family Mutual Insurance Company AIKEN, Chief Judge: Plaintiff American Hallmark Insurance Company moves for summary judgment pursuant to Fed. R. Civ. P. 56 for dismissal of defendant American Family Mutual Insurance Company's affirmative defenses. Plaintiff also seeks a declaratory judgment pursuant to 28 U.S.C. § 2201. Additionally, plaintiff moves for attorney fees. Defendant filed a cross-motion for summary judgment pursuant to Fed. R. Civ. P. 56. For the reasons set forth below, defendant's motion for summary judgment is denied and plaintiff's motion is granted, as is plaintiff's request for a declaratory judgment. Plaintiff's motion for attorney fees is denied. BACKGROUND American Hallmark Insurance Company ("Hallmark") insured general contractor Henry Popoff ("Popoff"). On or about September 3, 2007, Popoff and subcontractor JRP Drywall Enterprises, Inc. ("JRP") orally agreed that JRP would perform drywall work on a house located in Bend, Oregon (the "Project") JRP held a insurance policy with American Family Mutual Insurance Company ("Mutual"), in which Popoff was listed as an "additional insured." On September 6, 2007, during the course of construction on Page 2 - OPINION AND ORDER the Project, Gerardo Herrera ("Herrera"), an employee of JRP, fell from scaffolding and was severely injured. On February 1, 2008, Herrera filed suit against Popoff alleging damages, equaling $3.2 million, arising from injuries sustained during the September 2007 fall. Hallmark and Mutual paid to defend Popoff in the underlying lawsuit. However, on May 19, 2009, Mutual denied its duty to indemnify Popoff, and refused to contribute to any settlement. On July 14, 2009, a mediation was held and a Defense Limitation Agreement ("DLA") was reached between the parties. Pursuant to the DLA, on July 17, 2010, Hallmark authorized a settlement with Herrera for $900,000. As part of the settlement, Popoff assigned to Hallmark all claims against JRP and Mutual arising out of the Herrera lawsuit. On August 19, 2009, Hallmark filed an insurance coverage lawsuit against Mutual and JRP. Plaintiff alleged seven claims in its complaint; four against Mutual and three against JRP. However, defendant Mutual later disputed the terms of the DLA, and as such, a bifurcated court trial was held on December 9, 2010 to determine the terms of the DLA. On December 20, 2010, this Court found that the DLA was a legally binding agreement. This court also found that, under the DLA, the parties agreed that if plaintiff paid $900,000 to settle the Herrera lawsuit, defendant would agree that the dollar amount of the settlement was reasonable and limit its defenses to those expressly outlined in the DLA. Page 3 - OPINION AND ORDER See Findings of Fact and Conclusions of Law (December 20, 2010), CV 09-976-AA. In accordance with this Court's findings and conclusions, plaintiff renewed its motion for summary judgment. Defendant cross-moved for summary judgment pursuant to Fed. R. Civ. P. 56. STANDARD Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." 56©. Fed. R. Civ. P. Substantive law on an issue determines the materiality of a fact. T.W. Electrical Serv., Inc. v. Pacific Electrical Contractors Assoc., 809 F.2d 626, 630 (9th Cir. 1987). Whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party determined the authenticity of a dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) . The moving party has the burden of establishing the absence of a genuine issue of material fact. 477 U.S. 317, 323 (1986). Celotex Corp. v. Catrett, 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. Special rules of construction apply when evaluating summary judgment motion: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the Page 4 - OPINION AND ORDER moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. T.W. Electrical, 809 F.2d at 630. DISCUSSION Although both parties move for summary judgment, it is undisputed that defendant's duty to indemnify can only be triggered if JRP is negligent. Therefore, implicit in these motions is that the percentages of fault attributable to JRP and Popoff can only be determined by a trier of fact. Accordingly, such a determination is not appropriate at this stage in the proceedings. As such, the Court construes plaintiff's motion for summary judgment as a partial one, applying only to its claim for declaratory judgment and defendant's affirmative defenses. I. Defendant's Affirmative Defenses This Court's December 2010 Findings of Fact and Conclusions of Law (the "Opinion") limited defendant's affirmative defenses to the following: 1) Or. Rev. Stat. § 30.140; 2) the employer's liability exclusion of defendant's policy; 3) the negligence of Herrera and Popoff; and 4)the proper construction of the two parties "other insurance clauses" with regard to which policy was primary and which was excess for the percentage of the Herrera loss attributable to JRP's fault. See Findings of Fact and Conclusions of Law (December 20, 2010), CV 09-976-AA. As stated above, it is undisputed that the issues raised on summary judgment are questions of law, excluding any determination of fault. Page 5 - OPINION AND ORDER Be re scussing the validity of affirmative defenses reserved by the DLA, a preliminary matter must be addressed. , defendant now Despite the clear limitations of the alleges two additional affirmat answer. in se de and 2) s in ses are: 1) Popoff was not an additional ffective assignment from Sec. Amend. Answer at pg. 5. the "not an s second amended ff. See Def. Because this Court expressly barred tional insured" defense in its Opinion, this defense may not be asserted or cons ide here, even for defendant's purported purpose of preserving it on appeal. D e ' s "ineffective assignment" de precluded by the Opinion. it was only se was also Regardless, defendant now argues that ed from reasserting this defense for direct claims by iff, but not for claims resulting assignment from ff. However, the DLA an Def. Response Brf. at 2. not differentiate between cla made directly by Hallmark or those based on an assignment. does not matter ff was not involved in mediation; such a Neverthe Thus, it 2009 e is now prohibited. ss, even assuming that defendant is correct in reasserting this se, it is well settled within Circuit that anti assi assignment of a cl h provisions do not foreclose the r breach of contract. v. First Nat'l Bank of Nev., 406 F.2d 1205, 1209 & n.1 ( 1968) ; Illinois Union Ins. Co., 590 F.3d 984, 988 Page 6 - OPINION AND ORDER (9th Cir. 2009) Cir. (affirming Groce v. Fid. Gen. Ins. Co., 252 Or. 296, 306-7, 448 P.2d 554 (1968) (anti-assignment "provision does not preclude the assignment of a cause of action for damages for breach of a contract./I)) Thus, Popoff's assignment to Hallmark is valid for a breach of contract claim, which, in fact, is the only t claim asserted by Hallmark. of Thus, even if defendant's "ineffective assignment" defense were allowed, plaintiff's claim arising as a result of the assignment would still be viable. Therefore, the Court now turns to those affirmative defenses explicitly A. served in the Opinion. Or. Rev. Stat. § 30.140 Defendant re-alleges this defense in both answer and motion for summary judgment. s second amended Defendant s that plaintiff is seeking contribution for Popoff's own igence, as the Herrera settlement only reflects Popoff's fault, which is ssly foreclosed by Or. Rev. Stat. contends it is merely seeking that § 30.140. Plaintiff fendant indemnify Popoff to the extent that his liability arises out of JRP's negligence. Defendant's policy states that it will provide coverage for Popoff "with re to liability for 'bodily inj caused by [JRP's] ongoing operations for the insured(s) ional . only to the extent that such 'bodily injury' . is caused by [JRP's] negli or t performing operations on your behalf./I negl See Exh Hallmark's First Amended Complaint at pg. 51. Page 7 - OPINION AND ORDER of those it 3 to Or. Rev. Stat. § 30.140 was enacted to prevent nparties with greater leverage in construction agreements (generally, owners and contractors) from shifting exposure for their own negligence-or the costs of insuring against that exposure-to other parties (generally subcontractors) on a 'take-it-or-1eave-it' basis." Walsh Constr. Co. v. Mutual of Enumclaw, 189 Or. App. 400, 408-10, 76 P.3d 164 (2003), aff'd, 338 Or. 1, 104 P.3d 1146 (2005). The parties are in agreement that, based upon the terms of defendant's policy and in accordance with Or. Rev. Stat. § 30.140(2), defendant is obligated to indemnify Popoff for Herrera's injuries if the injuries arise out of the fault of JRP, or the fault of JRP's agents, representatives or subcontractors. Regardless, defendant asserts that the settlement attributes no liability to JRP. Therefore, Or. Rev. Stat. § 30.140 precludes plaintiff's claims since the underlying settlement represents only Popoff's negligence less Herrera's fault. Further, defendant argues that, to the extent that Herrera was negligent in causing the accident, his negligence cannot be imputed to JRP. Defendant cites to a number of cases in support of this contention. See Def. Resp. to PI.'s Mot. for S.J. at pgs. 10-12. As such, defendant concludes that it has no duty to contribute. Defendant's argument fails for three reasons. First, under Oregon's worker's compensation laws, Herrera is forbidden from directly suing JRP. See Or. Rev. Stat. § 656.018. Thus, even if JRP were at fault for Herrera's injuries, Herrera Page 8 - OPINION AND ORDER could not allege as much without reducing his recovery in the suit against Popoff. Therefore, that fact that Popoff was the only defendant in the underlying litigation is unpersuasive as far as determining whether JRP was at fault. Second, defendant's assertion that the settlement solely represents a negotiation of Popoff's own negligence less Herrera's responsibility for the accident, thereby precluding plaintiff from seeking contribution, is legally inaccurate. Cases within this district have held that an underlying settlement has no bearing on the allocation of fault between the parties in a coverage case. Home Indem. Co. v. Stimson Lumber Co., 229 F.Supp.2d 1075, 1090 (D.Or. 2001) ("it is clear that any issues of fact determined in the underlying claims would have no estoppel effect on the same issues in the coverage case because there is no dispute that plaintiffs are defending the underlying cases under a reservation of rights, exposing a conflict of interest") . Thus, even if defendant is correct that the settlement reflects solely Popoff's fault, it still would not prevent plaintiff's claims for contribution or indemnity in this coverage action. Third, and most importantly, the cases relied on by defendant do not support its argument. To the extent that the cited cases are relevant, they show only that where an employee files a complaint in which the contractor's negligence is the sole basis for liability, the subcontractor's insurer does not have a duty to defend. See Richardson v. Howard S. Wright Page 9 - OPINION AND ORDER Constr. Co., 2007 WL 1467411, 7-9 (D.Or. 2007) (unreported), Clarendon Nat'l Ins. Co. v. American States Ins. Co., 688 F.Supp.2d 1186, 1192-3 (D.Or. 2010) Herrera's complaint, however, negligence was the sole basis for 1 admitted that his own negli litYi rather, Herrera contributed to the accident. Popoff to the extent that Moreover, defendant agreed to his liability arises due to JRP's" of those performing not allege that Popoff's igence or the negligence rations on your behalf," suggesting that Herrera's fault could attributed to JRP under the policy. Regardless, this matter is not now before the Court, as defendant actually defended f ng the settlement. question for this Court is Thus, the only r defendant had a duty to indemnify. The duty to "i and, even though t re may be no duty to defend, "based on allegations in the i on which liabili indemnify if is independent of the duty to defend" i 1 complaint, the facts proved at t is e ished may give rise to a duty to insured's conduct is covered." WL 1467411 at *8. of fact never allocated fault between JRP, Herrera, and Popoff. Therefore, whether defendant to contribute to the Herrera its duty to indemni settlement, ff to the extent of JRP's can only be determined at t plaintiff seeks. Page 10 Richardson, 2007 As discussed above, because the parties reached a settlement, a t will be requi al OPINION AND ORDER aI, which is precisely what i to Accordingly, as a matter of law, I find that Or. Rev. Stat. § 30.140 does not preclude 's indemnity obligation for this claim to the extent of JRP's negligence in causing Herrera's loss. B. Employer's Liability Exclusion of Defendant's Policy Defendant reasserts this defense in both its second amended answer and motion for summary j Defendant argues that the Employer Liability exclusion in its policy excludes coverage for bodily injury to any of JRP, the time of the accident. PI uding Herrera at iff argues that this exclusion limits coverage only for employees of Therefore, s not bar its claims. aintiff contends that this exclusion Defendant's Employer's Liability exclusion states that coverage does not apply to: "'[b]odily injury' to . 'employee' of the insured. u Amended Complaint at pg. 30. t 3 to Hal An additional with respect to . this insurance applies: each Named Insured were the only Named I rately to each insured against whom c U k's First sion, the ration of Insureds clause, states: "[e] Limits of Insurance [a]n (A) As if ; and (B) im s or suit is i es with nearly . at 37. courts have construed insurance ical language, and held that the employer's liabil y exclusion must be analyzed separately as to ea Cimarron Ins. Co. v. Travelers Ins. Co., 224 Or. 57, 72, 355 P.2d 742 (1960); Klamath Pac. Corp. v. Reliance Ins. Co., 152 Or. App. 11 OPINION AND ORDER 738, 740, 955 P.2d 340 (1998). not all to be the pIa fendant "was Thus, where loyer's iff's employer, 152 Or. y." liability exclusion does not App. at 740. It is undisputed that "additional insured." Insureds fendant's policy listed Popoff as an Accordingly, under the S of with sion, Popoff has a contractual relation defendant independent from JRP. in a Thus, under Oregon case law and with the express language of defendant's Popoff would be "the insured" under the exclusion. find that icy, Therefore, I exclusion applies only when the injured an employee of Popoff's. However, s it is undisput Herrera was not Popoff's employee, exclusion de se fails as a matter is Employer's Li 0 that lity law. Clauses" with Regard to Which Policy was Primary Plaintiff construed this de objection from de Thus, defendant's poli loss attribut as conceded with no is now undisputed that is primary for that portion of the Herrera to JRP's negligence. As such, defendant's motion for s and plaintiff's motion for summary j judgment is denied is granted in to defendant's affirmative defenses. II. Declaratory Judgment Plaintiff see U.S.C. § 2201, that a declaratory judgment, pursuant to 28 fendant had an obli 12 - OPINION AND ORDER ion to indemnify ff for liability attributable to JRP's negligence in the Herrera lawsuit. di e as to this issue, and there summa iff's motion for re, judgment is granted. Pla § However, as discussed above, there is no iff moves for attorney fees 742.061. suant to Or. Rev. Stat. In the alternative, plaintiff seeks attorneys fees as reliance damages. Sect 742.061 of Or. Rev. Stat. in an s that a plaintiff of attorney policy action is entitled to an awa fees "if sett proof of is not made within six months ss is date led with [the] insurer" and \\ recovery aintiff's amount of any tender made by [insurer] . " See Badrick v. Farmers Ins. Co. of Ore., 238 Or. 320, 322, 242 P.3d 685(quoting and interpreting Or. Rev. Stat. However, as defendant argues, courts within t have held t § 742.061). s district an insurance company's claim for contribution or inst another insurance company does not give rise to fees under Or. Rev. Stat. Co., 235 Or. § 742.061. . 99, 114-5, 230 P.3d 103 (2010) ("an table contribution action [by an insurance company] is not the type of action for which the 1 attorney s. slature intended to extend a right to . the triggering events in ORS 742.061(1) pertain to the relations In light of this Page 13 - OPINION AND ORDER between an insured and its , and since it is unclear If) • what theory plaintiff will prevail at trial, to award attorney fees pursuant to § I find it premature 742.061 or reliance damages. Therefore, plaintiff's motion for attorney fees is denied. Consistent with this ruling, plaintiff may renew its motion once liability is determined. CONCLUSION Plaintiff's motion for summary judgment (doc. 97) is GRANTED as to defendant's affirmative defenses and GRANTED as to plaintiff's request for a declaratory judgment. Defendant's cross-motion for summary judgment (doc. 103) is DENIED. Plaintiff's motion for attorney fees (doc. 97) is DENIED. Additionally, defendant's request for oral argument is DENIED as unnecessary. Therefore, defendant's affirmative defenses are dismissed. The only remaining issue to be determined at trial is the amount of fault attributable to JRP, Herrera, and Popoff. In light of this decision, the Court strongly encourages the parties to resume settlement negotiations. IT I S SO ORDERED. Dated this ~ ~ O~Oll. Ann Aiken United States District Judge Page 14 - OPINION AND ORDER
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