Hilton et al v. Indemnity Insurance Company of North America

Filing 36

OPINION AND ORDER: the Court DENIES defendant's Motion for Summary Judgment 13 . Also the Court GRANTS IN PART AND DENIES IN PART, without prejudice, defendants Motion to Strike 15 . (See 13 page opinion for more information.) Signed by Magistrate Judge Patricia Sullivan. (dsg)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PENDLETON DIVISION

ANTHONY and KIMBERLY HILTON,

Case No. 2:16-cv-00301-SU

Plaintiffs,
OPINION AND ORDER
v.
INDEMNITY INSURANCE COMPANY
OF NORTH AMERICA,
Defendant.
_______________________________________
SULLIVAN, United States Magistrate Judge:
Plaintiffs Anthony and Kimberly Hilton purchased an insurance policy from defendant
Indemnity Insurance Company of North America, covering, inter alia, a horse arena on their La
Grande, Oregon property. After a windstorm damaged the arena, including by blowing off two
metal roof panels, plaintiffs filed a claim for replacement of the roof.

Defendant declined to

cover replacement of the entire roof and claimed the policy required paying to repair only the

Page 1 – OPINION AND ORDER

damage to the two panels. The replacement cost of the two panels and a temporary fix of some of
the screws on the roof was below the policy’s deductible. Plaintiffs filed a claim for breach of
the insurance contract. The Court has removal diversity jurisdiction under 28 U.S.C. §§ 1332
and 1441. Defendant has moved for summary judgment (Docket No. 13), which plaintiffs
oppose (Docket No. 22). Defendant has also moved to strike the testimony of plaintiffs’ expert
John Lackey (Docket No. 15), which plaintiffs oppose in part (Docket No. 20). The Court heard
oral argument on March 20, 2017. (Docket No. 35). After review of the parties’ arguments and
submissions, the Court DENIES defendant’s Motion for Summary Judgment, and GRANTS IN
PART AND DENIES IN PART, without prejudice, defendant’s Motion to Strike.1
FACTUAL BACKGROUND
Plaintiffs own a house with several outbuildings in La Grande, Oregon. One outbuilding
is a horse arena with open sides and a metal roof. Clark Decl. (Docket No. 14) ¶ 3, Ex. B
(Docket No. 14-1), at 12-14. Defendant issued plaintiffs a farmowners insurance policy that
insured the main house and outbuildings, with a policy period of December 5, 2014, to
December 5, 2015. Hilton Decl. (Docket No. 23) ¶ 2; Clark Decl. (Docket No. 14) ¶ 2, Ex. A
(Docket Nos. 14-8 & 14-9), at 8-11 (the insurance policy). The arena was subject to a $1,000
deductible. Id. at 9. The policy covered the horse arena with “broad” form covered causes of
loss, id. at 8 & 9, which included coverage for windstorm damage, id. at 111 B.2. Broad form
coverage did not explicitly list as included, nor did it explicitly state as excluded, damage from
faulty workmanship or construction defects. See Pls.’ Resp. (Docket No. 22), at 7(x).

1

The parties have consented to the jurisdiction of the Magistrate Judge pursuant to 28 U.S.C.
§ 636. (Docket No. 17).
Page 2 – OPINION AND ORDER

On April 15, 2015, a windstorm damaged the arena and blew off two metal roof panels.
Pls.’ Resp. (Docket No. 22), at 2 (plaintiffs’ statement of “Undisputed material facts provided in
defendant’s summary judgment motion”). Defendant agreed to cover only the damage to these
two panels. Id. at 3. Because defendant’s adjuster estimated the cost of the work at $952.98,
less than the $1,000 deductible, defendant refused to pay for replacement. Clark Decl. (Docket
No. 14) ¶ 3, Ex. B (Docket No. 14-1), at 2, & ¶ 6, Ex. E (Docket No. 14-4), at 3.2
Defendant had an insurance adjuster and an engineer investigate the damage. Clark Decl.
(Docket No. 14) ¶¶ 3 & 4, Ex. B (Docket No. 14-1) (adjuster report) & Ex. C (Docket No. 14-2)
(engineer report). Both concluded that the roof had been improperly constructed, for several
reasons. The adjuster reported that roofing screws were drilled through the oriented strand board
(“OSB,” similar to particle board) sheathing only, instead of into joists, allowing the screws to
come loose and leave holes in the sheathing. Clark Decl. (Docket No. 14) ¶ 3, Ex. B (Docket
No. 14-1), at 1. Water was able to penetrate the roof at these holes. Id. The engineer reported
three construction defects with the roof: overdriven (overtightened) fasteners, inadequate
fastener penetration depth, and lack of felt paper underlayment between the panels and the OSB
sheathing. Clark Decl. (Docket No. 14) ¶ 4, Ex. C (Docket No. 14-2), at 6-7. These defects, plus
weakened sheathing at fastener locations, allowed wind at otherwise “non-damaging” speeds to
pull the fasteners loose. Id. at 6. Overdriven fasteners also allowed water leakage. Id.
An engineering expert and a construction expert plaintiffs hired disagreed with
defendant’s experts regarding the roof damage. Leslie Tipton, plaintiffs’ engineering expert,

2

Chris Loman Construction LLC ultimately repaired the two roof panels, screwed in some loose
screws on the roof, and charged plaintiffs $948.99 for the work. Clark Decl. ¶ 5 (Docket No.
14), Ex. D (Docket No. 14-3).
Page 3 – OPINION AND ORDER

reported that the two metal roofing panels’ displacement during the windstorm “appeared to have
been caused mainly by wind pulling the roofing screws up and out of the OSB” sheathing which
underlay the metal roofing, and which was fastened directly to the purlins (horizontal roofing
beams). Williams Decl. (Docket No. 25) ¶ 3, Ex. 2 (Docket No. 25-1), at 2 I.B.2-3 (Tipton
expert report). He concluded that “it is apparent . . . there are other metal roofing panels in
jeopardy of blowing off the same roof in a windstorm.” Id. at 2 I.C; see also Williams Decl.
(Docket No. 25) ¶ 6, Ex. 5 (Docket No. 25-1), Tipton Dep. 10:21-24 (“Once the roofing starts to
blow off, then it’s very likely that more panels would get blown off. And if these two panels had
gotten blown off, there is the likelihood that more panels would get blown off.”). This is because
the “metal roofing panels are subject to significant expansion and contraction,” specifically at the
fastening screws, and “over time, will likely result in a looser connection with the screw threads
in the OSB.”

Williams Decl. (Docket No. 25) ¶ 3, Ex. 2 (Docket No. 25-1), at 2 I.C.

Additionally, moisture could enter the screw threads, softening the OSB and making screws
easier to pull out. Id. Installing screws into sawn lumber (instead of into OSB) and installing an
underlayment of building paper beneath the metal roof panels to keep moisture out would
prevent these problems. Id. Tipton disputed that the screws were fastened to an insufficient
depth, based on his reading of an apparent contradiction in the metal roofing panel installation
guide, which stated a required minimum penetration into wood of 5/8 inches, but also allowed
for installation into 1/2 inch wood panels, suggesting that shallower fastener penetration was
acceptable. Id. at 3 I.C; see also Clark Decl. (Docket No. 14) ¶ 7, Ex. F (Docket No. 14-5), at
10. At deposition, Tipton testified that the roofing panels could be fastened directly to the OSB,
and that fastening to the purlins, though “probably recommended,” was not “required.” Williams

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Decl. (Docket No. 25) ¶ 6, Ex. 5 (Docket No. 25-1), Tipton Dep. 12:18-22. Tipton concluded his
report by saying that preventing additional panels from blowing off would require removing the
existing panels, installing building paper over the OSB sheathing, and fastening new panels with
screws through the OSB into the purlins (instead of just into the OSB). Williams Decl. (Docket
No. 25) ¶ 3, Ex. 2 (Docket No. 25-1), at 3 I.C.
Plaintiffs’ construction expert, Bret Wheeler, reported that “[t]here were several roof
panels that have blown off completely and others that appear to have been bent from wind.”3
Williams Decl. (Docket No. 25) ¶ 4, Ex. 3 (Docket No. 25-1), at 2 I.B.1 (Wheeler expert report).
He stated that “[t]he installation of the metal roofing is typical of how this product is installed in
our area and appears to be installed per the manufacture specifications . . . .” Id. at 2 I.B.2. He
repeated Tipton’s analysis of the required screw penetration depth and reported that the screws
were properly installed. Id. At his deposition, Wheeler conceded that some fasteners were
overtightened, damaging the washers, but testified that a majority were not overtightened.
Williams Decl. (Docket No. 25) ¶ 5, Ex. 4 (Docket No. 25-1), Wheeler Dep. 12:16-13:7; see also
Williams Decl. (Docket No. 25) ¶ 4, Ex. 3 (Docket No. 25-1), at 2 I.B.3 (“Generally the fasteners
do not appear to be over tightened or under tightened.”). Wheeler testified at deposition that the
roofing panels could be installed directly into plywood (i.e., OSB), and that installation
guidelines did not require attachment to the purlins. Williams Decl. (Docket No. 25) ¶ 5, Ex. 4
(Docket No. 25-1), Wheeler Dep. 15:2-7. Wheeler’s report also stated that he “did not observe
any workmanship that appeared to be defective or substandard.” Williams Decl. (Docket No.

3

Defendant does not address whether it must pay for replacement of these bent roof panels in
addition to the two displaced panels; defendant argues it must pay only for the two damaged
panels, and plaintiff argues that defendant must pay to replace the entire roof.
Page 5 – OPINION AND ORDER

25) ¶ 4, Ex. 3 (Docket No. 25-1), at 2 I.B.4. In his Conclusions section, Wheeler stated that, to
his knowledge, there was no “prior damage” to the roof before the April 2015 wind event. Id. at
2 I.C. He continued, “there is no way to determine which panels were compromised by the wind
event.”

Id.

He stated that the “manufacturer recommended installation specifications for

fastening the panels in this application were inadequate.” Id. Like Tipton, he stated that the
“only long term fix” was to completely replace the metal roofing panels, with screws fastened
directly to the purlins, at a depth greater than the manufacturer’s specifications. Id. at 2-3 I.C.
Of defendant’s asserted construction defects, the only one plaintiffs arguably
acknowledge is the lack of underlayment building paper. Pls.’ Resp. (Docket No. 22), at 6(s).4
But plaintiffs argue, based on Tipton’s deposition, that this paper underlayment too was “not
typically required, only recommended,” for the purpose of facilitating expansion and contraction
of the metal roofing panels and preventing water penetration. Id.; see also Williams Decl.
(Docket No. 25) ¶ 6, Ex. 5 (Docket No. 25-1), Tipton Dep. 13:16-14:20 (testifying that felt or
building paper was probably not required, only recommended, for easing expansion and
contraction and preventing water penetration).
Based on their expert reports that state that all the metal roofing panels must be replaced,
plaintiffs seek to have defendant pay to replace the entire arena roof. Wheeler estimated the
replacement cost at $123,903.53. Williams Decl. (Docket No. 25) ¶ 4, Ex. 3 (Docket No. 25-1),
at 7. Defendants’ insurance adjuster estimated that the replacement cost (which he described as
the “long-term fix for the roof”) would exceed $60,000, without overhead or profit. Clark Decl.
(Docket No. 14) ¶ 3, Ex. B (Docket No. 14-1), at 2.
4

From plaintiffs’ “Material facts accepted by plaintiffs, but may genuinely be at issue” section.
Pls.’ Resp. (Docket No. 22), at 4-7.
Page 6 – OPINION AND ORDER

PROCEDURAL BACKGROUND
I.

Plaintiffs’ Claims for Relief
In their Complaint, plaintiffs originally brought two claims for relief under Oregon state

law: (1) breach of contract, for defendant’s failure to pay for plaintiffs’ claim for water damage
to roof sheathing, which damage was revealed when wind blew a roof panel off; and (2) breach
of contract, for defendant’s failure to pay plaintiffs’ claim for windstorm damage to the arena
roof. Notice of Removal (Docket No. 1) ¶ 3, Ex. A (Docket No. 1-1). The first breach of
contract claim incorporated an allegation that “a construction defect was the cause of the water
damage to the roof,” id. ¶ 6, but the second cause of action excluded any allegation of
construction defect. In their Response to defendant’s Motion for Summary Judgment, plaintiffs
elect to pursue only their second claim. Pls.’ Resp. (Docket No. 22), at 2. The Court considers
plaintiffs to have abandoned their first cause of action, proceeding only on their second.
II.

Defendant’s Motion to Strike
Defendant filed a Motion to Strike the expert report of John Lackey. A portion of

Lackey’s report includes his opinions on insurance contract interpretation and insurance law.
See Clark Oct. 4, 2016 Decl. (Docket No. 16) ¶ 2, Ex. A (Docket No. 16-1) (Lackey Expert
Witness Report). Lackey’s report comments on the construction of plaintiffs’ horse arena as
well. See id. at 5-6. Defendant moves to strike the Lackey report’s testimony regarding the
interpretation of plaintiffs’ insurance policy. Defendant argues such an interpretation is a
question of law exclusively for the Court’s determination. Def.’s Mot. Strike (Docket No. 15), at
2. In their Response, plaintiffs concede that Lackey cannot “offer legal conclusions as to the
proper interpretation of the policy,” and agree to strike those portions of Lackey’s report and not

Page 7 – OPINION AND ORDER

have Lackey testify thereon. Pls.’ Resp. (Docket No. 20), at 1. However, plaintiffs argue that
the Court should permit Lackey’s testimony regarding construction issues, specifically the need
to repair the entire arena roof, and assert that Lackey is qualified “as an expert in the construction
and repair of metal roofs of the type installed on plaintiffs’ arena.” Id. at 3. Defendant, in its
Reply, questions Lackey’s qualifications to testify on construction issues. However, defendant
states that it would be difficult to adjudicate the admissibility of Lackey’s proffered construction
expert testimony by a motion to strike, and asks instead to defer resolution of the issue until a
later stage of the proceedings. Def.’s Reply (Docket No. 28), at 2. Plaintiffs have agreed to
strike Lackey’s legal opinions and insurance-related testimony.

Defendant has agreed to

withdraw its Motion to Strike as to Lackey’s qualifications and construction-related testimony,
and requests leave to raise its objections at a later time.
Accordingly, the Court GRANTS IN PART defendant’s Motion to Strike Lackey’s report
(Docket No. 15) to the extent it concerns insurance policies, insurance law, or interpretation of
plaintiffs’ insurance policy; and DENIES IN PART, without prejudice, the Motion to Strike
Lackey’s testimony to the extent it concerns construction or engineering. Defendant may renew
its objection to Lackey’s qualifications and testimony at a later stage of the litigation.
LEGAL STANDARD
Summary judgment is appropriate when there is no genuine issue as to any material fact
and the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(a). The
initial burden is on the moving party to point out the absence of any genuine issue of material
fact; once that burden is satisfied, the burden shifts to the opponent to demonstrate through the
production of probative evidence that there remains an issue of fact to be tried. Celotex Corp. v.

Page 8 – OPINION AND ORDER

Catrett, 477 U.S. 317, 323 (1986). On a motion for summary judgment, the evidence is viewed
in the light most favorable to the nonmoving party. Robi v. Reed, 173 F.3d 736, 739 (9th
Cir.1999). “A fact issue is genuine if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th
Cir. 2002) (quotation omitted). “The non-moving party has failed to meet its burden if the record
taken as a whole could not lead a rational trier of fact to find for the non-moving party.” Intel
Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1558 (9th Cir. 1991) (quotation
omitted). In evaluating a motion for summary judgment, the Court must draw all reasonable
inferences in favor of the nonmoving party, and may neither make credibility determinations nor
weigh any evidence. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
DISCUSSION
The court’s goal in construing an insurance policy is to “determine the intent of the
parties . . . from the terms and conditions of the policy.” Groshong v. Mut. of Enumclaw Ins.
Co., 329 Or. 303, 307 (1999) (citations omitted). “[T]he insured . . . has the burden to prove
coverage while the insurer . . . has the burden to prove an exclusion from coverage.” ZRZ Realty
Co. v. Beneficial Fire & Cas. Ins. Co., 349 Or. 117, 127 (2010), adhered to as modified on
reconsideration, 349 Or. 657 (2011). In construing an insurance policy, a court must not add
exclusionary language that the insurer could have, but did not, include. Nw. Agr. Co-op. Ass’n.,
Inc. v. Cont’l Ins. Co., 95 Or. App. 285, 289 (1989).
The April 15, 2015, windstorm damaged the horse arena roof.

The policy defendant

issued to plaintiffs includes wind as a covered peril. Clark Decl. (Docket No. 14) ¶ 2, Ex. A
(Docket No. 14-9), at 111 B.2 (“Windstorm or Hail”). Two roof panels blew off and defendant

Page 9 – OPINION AND ORDER

indicated that plaintiffs’ loss of the two panels was covered. Because the cost to replace the two
panels was below the $1,000 deductible, defendant denied payment. The remainder of the roof
was compromised. Defendant presents evidence that a number of construction defects afflict the
roof, due to faulty initial installation. Plaintiffs present conflicting evidence that there are no
defects, arguing that while each of the alleged defects defendant identifies may contravene
“recommended” installation guidelines, nothing “required” construction in the way defendant
contends, and the roofing was properly installed. Plaintiffs acknowledge that the roof in its
present state may be insufficient for the La Grande weather, and that the roof is susceptible to
future damage. However, whether any allegedly improper installation or faulty construction may
have contributed to the two panels blowing off or any other damage to the roof, the policy
contains no exclusion for faulty or defective construction. Plaintiffs claim that, as insured, they
are covered for damage to the entire roof. Indeed, plaintiffs claim that the wind caused damage
which, if it remains unrepaired, will put the entire roof in jeopardy.
When the cause of a loss is disputed and the cause is potentially a covered peril under an
insurance policy, the issue is that of “efficient proximate cause.”
The “efficient proximate cause” of a loss is the active and efficient cause that sets
in motion a train of events which bring about a result without the intervention of
any force, starting and working actively and efficiently from a new and
independent source. If there are multiple causes of a single loss, the “efficient
proximate cause” is the relevant cause for determining coverage under an
insurance contract.
Naumes, Inc. v. Landmark Ins. Co., 119 Or. App. 79, 82 (1993) (quotation and citations omitted);
Nw. Agric. Coop. Ass’n, 95 Or. App. at 288-89 (“[I]t is well settled that when an efficient cause
nearest the loss is a peril expressly insured against, the insurer is not to be relieved from
responsibility by his showing that the property was brought within that peril by a cause not
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mentioned in the contract.” (quotation omitted)). Typically, efficient proximate cause is a jury
question. Naumes, 119 Or. App. at 82-83.
The policy here covers actual, present, currently-realized damage, including from
windstorm. It does not cover preventative repair to protect against future windstorms. There is
evidence that wind loosened the screws holding the panels to the roof, including the two panels
that blew off. Windstorm, therefore, may be the efficient proximate cause of whatever state the
rest of the roof is in. Plaintiffs’ construction expert, Wheeler, testified that “there is no way to
determine which panels were compromised by the wind event . . . .” Williams Decl. (Docket No.
25) ¶ 4, Ex. 3 (Docket No. 25-1), at 2 I.C. While the rest of the roof may be damaged as a result
of a construction defect, or faulty construction may be the efficient proximate cause, the Court
will not make such a determination on summary judgment.
Plaintiffs have presented evidence that, beyond the two wind-damaged panels, the
windstorm compromised other panels or roofing elements (even if still attached), with
replacement of the entire roof as the only fix.

The evidence offered by plaintiffs’ experts

disputes defendant’s. See, e.g., Williams Decl. (Docket No. 25) ¶ 6, Ex. 5 (Docket No. 25-1),
Tipton Dep. 10:21-22 (“Once the roofing starts to blow off, then it’s very likely that more panels
would get blown off.”). Tipton explained in his expert report that “it is apparent to me there are
other metal roofing panels in jeopardy of blowing off the same roof in a windstorm.” Williams
Decl. (Docket No. 25) ¶ 3, Ex. 2 (Docket No. 25-1), at 2 I.C; see also Williams Decl. (Docket
No. 25) ¶ 6, Ex. 5 (Docket No. 25-1), Tipton Dep. 11:4-8 (“[B]ecause of the OSB being used
underneath and then water getting into the screws, that the screws were weakened, and the wind
blew off the panels because of that.”). Tipton can reasonably be read to have testified that the

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same issues that led to the windstorm’s blowing away the two panels are also present throughout
the remainder of the roof.
Thus, plaintiffs have presented evidence that the April 15, 2015, windstorm “set[] in
motion a train of events,” Naumes, 119 Or. App. at 82, that caused the rest of the roof to be
damaged, and have sufficiently raised questions of fact whether the windstorm or initial faulty
construction was the efficient proximate cause of the roof’s compromised condition. Id. at 82-83
(holding that the trial court erred in granting summary judgment for defendant insurer, because a
genuine issue of material fact existed whether mudflow, a covered peril, or surface waters, an
excluded peril, was the efficient proximate cause of plaintiff’s property damage); Shinrone, Inc.
v. Ins. Co. of N. Am., 570 F.2d 715, 719 (8th Cir. 1978) (holding that, under Iowa law, the district
court properly submitted to the jury the fact question of whether windstorm, a covered cause of
loss, or dampness or temperature extremes, two excluded causes of loss, among other factors,
was the efficient proximate cause, where multiple factors had combined to cause cattle death);
see also Queen Ins. Co. of Am. v. Larson, 225 F.2d 46, 52 (9th Cir. 1955); Estate of Konell v.
Allied Prop. & Cas. Ins. Co., No. 3:10-cv-955-ST, 2013 WL 3791141, at *1-5 (D. Or. July 19,
2013); Koory v. W. Cas. & Sur. Co., 153 Ariz. 412, 416 (1987).
Defendant’s argument that the roof’s allegedly faulty construction absolves it of any
obligation to cover damage to the entire roof is belied by its own actions in agreeing to cover the
replacement cost of the two displaced panels. If only faulty construction was the efficient
proximate cause of the roof damage, including the two panels that blew off, then no coverage to
those panels should have been forthcoming from defendant.

There is evidence that the

windstorm loosened screws on those two panels as well as on the panels on the remainder of the

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roof. Defendant appears to want it both ways by accepting the windstorm as the cause of the
damage to the two panels but claiming faulty construction as the cause of the damage to the rest
of the roof.
In the present case, plaintiffs have presented evidence sufficient to raise fact questions
that damage to the roof, including the two panels, resulted from windstorm and that the policy
they purchased from defendant should cover their loss to the entire roof.
CONCLUSION
For the above reasons, plaintiffs have created a genuine issue of material fact that a
covered cause of loss, such as the April 15, 2015, windstorm, damaged their horse arena roof
beyond the two roof panels, and so have created a genuine issue of material fact that their
insurance policy requires defendant to pay to replace the entire roof. Accordingly, the Court
DENIES defendant’s Motion for Summary Judgment (Docket No. 13). Also, for the reasons
stated above, the Court GRANTS IN PART AND DENIES IN PART, without prejudice,
defendant’s Motion to Strike (Docket No. 15).
IT IS SO ORDERED.
DATED this 6th day of April, 2017.
/s/ Patricia Sullivan
PATRICIA SULLIVAN
United States Magistrate Judge

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