Serles v. Beneficial Oregon, Inc.

756 P.2d 1266 (1988)

91 Or.App. 697

Wilbert O. SERLES and Betty Serles, Husband and Wife, and Donald Serles, Appellants, v. BENEFICIAL OREGON, INC., a Foreign Corporation, Respondent.

CV86-458; CA A45602.

Court of Appeals of Oregon.

Argued and Submitted April 18, 1988.

Decided June 22, 1988.

*1267 Loren W. Collins, Salem, argued the cause and filed the brief for appellants.

Gary M. Georgeff, Portland, argued the cause for respondent. With him on the brief were James C. Waggoner and Waggoner, Farleigh, Wada, Bogrand and Georgeff, Portland.

Before WARDEN, P.J., and VAN HOOMISSEN and GRABER, JJ.

GRABER, Judge.

Plaintiffs appeal from a judgment dismissing each of their successive complaints for failure to state a claim. They borrowed money from defendant to buy a truck. The truck, which was collateral for the loan, was damaged in a collision. Plaintiffs allege that defendant agreed in the loan contract to provide insurance for the truck but failed to do so. Their complaints assert theories of breach of contract, negligence, and violation of ORS 725.060. The trial court granted motions to dismiss all three complaints. We reverse and remand on the contract claim but otherwise affirm.

Because this case was decided on motions to dismiss, we accept the facts plaintiffs pleaded as true. Sommerfeldt v. Trammell, 74 Or. App. 183, 187, 702 P.2d 430 (1985). Wilbert and Betty Serles are husband and wife; Donald Serles is their son. In November 1984, Wilbert and Betty borrowed approximately $2,700 from defendant to buy a truck for Donald. The truck, an automobile, and some personal *1268 property secured the loan. The loan agreement required that plaintiffs[1] keep all the property securing the loan insured, with defendant as the loss payee on the insurance policy. Plaintiffs purchased insurance from defendant. The policy covered the personal property securing the loan, but not the truck. The truck was damaged in a collision, and its value was reduced by $3,000.

Plaintiffs first assign error to the trial court's dismissal of their breach of contract claim. They argue that the loan contract requires defendant to insure the truck or that, at least, the contract is ambiguous on the issue of insurance. Defendant contends that the contract is unambiguous and does not promise coverage.

Whether the contract is ambiguous is a question of law. Evenson Masonry, Inc. v. Eldred, 273 Or. 770, 772, 543 P.2d 663 (1975). A provision is ambiguous when it is reasonably susceptible of more than one meaning. Western Fire Insurance Co. v. Wallis, 289 Or. 303, 308, 613 P.2d 36 (1980). The meaning of an ambiguous term is a question of fact. Timberline Equip. v. St. Paul Fire and Mar. Ins., 281 Or. 639, 643, 576 P.2d 1244 (1978). The issue here is is whether defendant agreed, in the loan agreement, to provide insurance for the truck. The agreement provides, in relevant part:

                 "SECURITY:            To secure this loan, you give us a
                                       security interest in the following
                                       Property:
"Please check    /xx/                  The motor vehicle(s) and attached
Applicable Box                         equipment described in the
                                       Identification of Security form.
                 /xx/                  The household consumer goods
                                       described in the Identification of
                                       Security form.
                 "* * *
                 "PROPERTY INSURANCE:  You will keep the Property insured
                                       against loss by fire or other risks,
                                       and name us as a loss payee. If the
                                       Property includes a motor vehicle you
                                       will insure the motor vehicle against
                                       loss by collision.
                 "* * *
                 "PROPERTY PROTECTION
                 "PROPERTY: You have agreed to keep the property that
                 secures your loan insured against loss by fire and other
                 hazards. Protection may be purchased through any agent or
                 broker or through us.
                 "REPRESENTATION AND ELECTION: We have asked you if you have
                 adequate protection on the property. Your reply is as
                 follows:
"INITIAL         /BS/[[2]]           "1) You have no protection and you
APPROPRIATE                            are buying the protection offered
   BOX                                 through us."
                                       "* * *
                 "PROTECTION (IF ELECTED): You are buying property
                 protection offered through us as shown below and authorize
                 us to pay the cost from the amount of credit extended.
/BS/                  "Household contents: Pays the repair
"INITIAL                               cost or full replacement value of the
BOX IF                                 property that secures your loan up to
PROTECTION                             amount of protection elected with no
ELECTED                                adjustment for wear and tear. You are
                                       protected against loss or damage due
                                       to fire, lightning, flood, earthquake
                                       and certain other perils, and, at a
                                       $25 deductible, burglary."

*1269 The contract is ambiguous. One reasonable interpretation is that defendant agreed to provide protection for all of the property that secured the loan the household goods and the truck. Another reasonable interpretation, as shown by the last portion of the quoted material, is that plaintiffs purchased protection for the household goods only. Because the loan contract is ambiguous, there is a question as to whether defendant agreed to provide insurance for the truck. Therefore, the trial court erred in dismissing plaintiffs' breach of contract claim.

Plaintiffs next assign error to the trial court's dismissal of their negligence claims. Their first amended complaint alleged:

"Defendant was negligent in the following particulars: "(a) In failing to notify plaintiffs that the insurance policy did not provide collision coverage for the 1962 Chevrolet pickup. "(b) In failing to properly explain the loan contract to plaintiffs. "(c) In presenting plaintiffs with a loan agreement, loan statement and description of available insurance which falsely indicated that plaintiffs were purchasing protection for the secured property from defendant."

Plaintiffs' original complaint alleged that "[d]efendant was negligent in failing to notify plaintiffs that the insurance policy provided did not comply with Oregon Financial Responsibility laws." Both complaints alleged that defendant knew or should have known that the contract could be interpreted to provide insurance coverage for the truck. Although those allegations might support a breach of contract or fraud claim, they are not allegations that defendant acted negligently.[3]

Plaintiffs' amended complaint can also be read to allege that defendant promised to procure insurance but failed to do so. An insurance agent's failure to procure insurance may be actionable negligence. See, e.g., Joseph Forest Products v. Pratt, 278 Or. 477, 480, 564 P.2d 1027 (1977). Here, however, plaintiffs did not plead that an agency relationship existed. Neither did they allege that they relied on defendant's special knowledge or expertise to procure the insurance. Cf. Precision Castparts v. Johnson, 44 Or. App. 739, 743, 607 P.2d 763 (1980) (where agency relationship existed, "plaintiff had a right to rely on the superior expertise of its agent and had the right to assume that its agent performed its duty").

Plaintiffs rely on Dowell v. Mossberg, 226 Or. 173, 179, 355 P.2d 624, 359 P.2d 541 (1961), to argue that negligent performance of a contract can be a tort. In Kisle v. St. Paul Fire & Marine Ins., 262 Or. 1, 6, 495 P.2d 1198 (1972), the court cited Dowell for the proposition that "damage caused by the negligent performance of a contract can in certain instances be recoverable in tort." See also Securities-Intermountain v. Sunset Fuel, 289 Or. 243, 259, 611 P.2d 1158 (1980). As the Kisle court explained, however, those "certain instances" are cases where parties have entered a relationship in which the law imposes an obligation of due care "apart from any obligation assumed by contract." 262 Or. at 7, 495 P.2d 1198. Thus, in Dowell, the negligence claim arose when the defendant physician violated the physician-patient relationship. Here, apart from the contract, there was no relationship alleged that gives rise to such an obligation. We reject plaintiffs' suggestion that every breach of contract or failure to discuss a contract term is negligence.

It is not sufficient, as plaintiffs assert, merely that the events that led to their damage may have been foreseeable. Foreseeability is not the only element of a negligence claim. Plaintiffs' damage must arise from "conduct [that] unreasonably created a foreseeable risk to a protected interest of the kind of harm that *1270 befell the plaintiff." Fazzolari v. Portland School Dist. No. 1J, 303 Or. 1, 17, 734 P.2d 1326 (1987). (Emphasis supplied.) The harm that befell plaintiffs was lack of insurance, but that is not a "protected interest," unless defendant contracted to provide insurance. Accordingly, plaintiffs' remedy is in contract, not in tort. Plaintiffs have not stated facts sufficient to constitute a negligence claim.

Finally, plaintiffs alleged that defendant violated ORS 725.060[4] and that a private cause of action lies to remedy that violation.[5] Violations of ORS 725.060 do not give rise to a private cause of action. If, as here, a statute is silent as to private enforcement rights, courts may recognize a private claim only when it is necessary to carry out the policy of the statute. Bob Godfrey Pontiac v. Roloff, 291 Or. 318, 332, 630 P.2d 840 (1981); Miller v. City of Portland, 288 Or. 271, 278, 604 P.2d 1261 (1980). Because the director of the Department of Insurance and Finance has authority to enforce ORS 725.060, see ORS 725.910, there is no need to recognize a private cause of action to carry out the statutory policy.[6]See Farris v. U.S. Fid. and Guar. Co., 284 Or. 453, 458, 587 P.2d 1015 (1978). Accordingly, plaintiffs have not stated a claim for relief under ORS 725.060.

Reversed and remanded on the breach of contract claim; otherwise affirmed.

NOTES

[1] All three Serleses were plaintiffs below and are appellants on appeal. Only Wilbert and Betty signed the loan contract.

[2] Betty Serles initialed the boxes.

[3] In their original complaint, plaintiffs alleged that defendant negligently failed to provide liability insurance; in their first amended complaint, they alleged that defendant negligently failed to provide collision insurance. In the light of our disposition, we need not discuss those two claims separately.

[4] ORS 725.060 provides:

"No licensee or other person shall advertise, print, display, publish, distribute or broadcast or cause or permit to be advertised, printed, displayed, published, distributed or broadcast in any manner whatsoever any statement or representation with regard to the rates, terms or conditions for loans which is false, misleading or deceptive."

[5] On appeal, plaintiffs suggest that violation of ORS 725.060 is negligence per se. They never pleaded that theory, however, and therefore we do not address it.

[6] There is no helpful legislative history on the issue of whether the legislature intended ORS 725.060 to create a private cause of action.