Ionian Corp. v. Country Mutual Insurance Company
Filing
190
OPINION & ORDER: PSC's motion for summary judgment 171 is granted. See 13-page opinion & order attached. Signed on 7/17/2012 by Judge Marco A. Hernandez. (mr)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION
IONIAN CORP., an Oregon corporation,
Plaintiff,
v.
COUNTRY MUTUAL INSURANCE
COMPANY, a foreign corporation,
No. 3:10-cv-0199-HZ
Defendant/ Interpleader
Plaintiff,
v.
OPINION & ORDER
IONIAN CORP., an Oregon corporation,
PRECISION SEED CLEANERS INC., an
Oregon corporation,
Interpleader Defendants.
///
///
1 - OPINION & ORDER
Gordon T. Carey
Attorney at Law
1020 S.W. Taylor Street
Portland, Oregon 97205
Attorney for Plaintiff
Frederick M. Millard
Douglas M. Bragg
MILLARD & BRAGG
6650 S.W. Redwood Lane, Suite 330
Portland, Oregon 97224
Attorneys for Interpleader Defendant Precision Seed Cleaners, Inc.
HERNANDEZ, District Judge:
At stake in this interpleader action is the right to insurance proceeds deposited with the
Court by Country Mutual Insurance Company. Country Mutual paid the proceeds as a result of
an August 25, 2009 fire which destroyed a building Country Mutual insured at the time and
which Ionian had leased to Precision Seed Cleaners (PSC). Presently, PSC moves for summary
judgment on the limited issue of whether Ionian, assuming it was named as an additional insured
in the insurance policy issued by Country Mutual to PSC, is limited to liability coverage only.
For the reasons explained below, I grant the motion.
STANDARDS
Summary judgment is appropriate if there is no genuine dispute as to any material fact
and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The
moving party bears the initial responsibility of informing the court of the basis of its motion, and
identifying those portions of "'the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence
2 - OPINION & ORDER
of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting
Fed. R. Civ. P. 56(c)).
Once the moving party meets its initial burden of demonstrating the absence of a genuine
issue of material fact, the burden then shifts to the nonmoving party to present "specific facts"
showing a "genuine issue for trial." Fed. Trade Comm'n v. Stefanchik, 559 F.3d 924, 927-28
(9th Cir. 2009) (internal quotation omitted). The nonmoving party must go beyond the pleadings
and designate facts showing an issue for trial. Celotex, 477 U.S. at 322-23.
The substantive law governing a claim determines whether a fact is material. Suever v.
Connell, 579 F.3d 1047, 1056 (9th Cir. 2009). The court draws inferences from the facts in the
light most favorable to the nonmoving party. Long v. City & County of Honolulu, 511 F.3d 901,
905 (9th Cir. 2007).
If the factual context makes the nonmoving party's claim as to the existence of a material
issue of fact implausible, that party must come forward with more persuasive evidence to support
his claim than would otherwise be necessary. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986).
DISCUSSION
During the pendency of this case, all parties, including Country Mutual, have assumed
that if Ionian was an additional insured on the insurance policy in effect at the time of the fire,
Ionian had a claim to the proceeds of the policy. Much of the litigation has focused on whether
Ionian was an additional insured under the policy. As explained in Judge Stewart's September
27, 2011 Finding & Recommendation (dkt #125), which I adopted in a December 2, 2011 Order1
1
The case was reassigned from Judge Stewart to me on December 13, 2011.
3 - OPINION & ORDER
(dkt #133), there is a factual dispute requiring resolution by a jury as to whether PSC consented
to Ionian becoming an additional insured on the policy. Trial is set for September 11, 2012.
PSC assumes for the purposes of its motion that Ionian is an additional insured under the
policy. Nonetheless, PSC argues that the plain language of the policy limits Ionian to liability
coverage only and does not include coverage for the property damage at issue in this case.
The "question of [insurance] policy interpretation is one of law, and [the court's] task is to
determine the intent of the parties[.]" Groshong v. Mut. of Enumclaw Ins. Co., 329 Or. 303, 307,
985 P.2d 1284, 1287 (1999); see also Hoffman Constr. Co. of Alaska v. Fred S. James & Co. of
Or., 313 Or. 464, 469, 836 P.2d 703, 706 (1992) ("[T]he primary and governing rule of the
construction of insurance contracts is to ascertain the intention of the parties.") (internal
quotation marks and brackets omitted). The court determines the parties' intent "from the terms
and conditions of the policy." Groshong, 329 Or. at 307, 985 P.2d at 1287. Where the contract
unambiguously expresses the intent to provide coverage or to not provide coverage, the contract
language is controlling. See Allstate Ins. Co. v. State Farm Mut. Auto. Ins. Co., 67 Or. App. 623,
627, 679 P.2d 879, 881 (1984) (where contract language is unambiguous, courts will "apply
those terms and will not create coverage where none was intended by the contract.").
PSC relies on a policy endorsement entitled "Additional Insured - Multiple Interests."
Ex. 1 to Dale Hussemann Affid. at p. 147.2 This endorsement provides that "Who is an Insured"
is amended "to include as an insured any person(s) or organization(s) shown in the Schedule, but
The entire policy is appended to Hussemann's Affidavit, although it was docketed in
two parts: Docket #103 and Docket #103-1. Because the pages continue from #103 to #103-1
without interruption, I simply refer to the specific page number of the exhibit without noting the
docket number.
2
4 - OPINION & ORDER
only with respect to liability arising out of your operations or premises . . . leased, or rented by
you, subject to the following." Id. It continues: "If the person(s) or organization(s) shown in the
Schedule . . . [i]s an owner . . . from whom you have leased land, this insurance is limited to their
liability arising out of the ownership, maintenance or use of the premises or land leased to you[.]"
Id.
Both Ionian and PSC agree that the endorsement amends the Commercial General
Liability Coverage Form so that as to liability coverage, an additional insured is protected for
liability to a third party for damages arising out of the additional insured's ownership of premises
or land leased to the insured. PSC argues that because this policy endorsement limits coverage
for an additional insured to liability only, there is no coverage for an additional insured resulting
from property damage to the additional insured's own property.
In response, Ionian notes that the "Additional Insured - Multiple Interests" endorsement
applies to and amends only the Commercial General Liability Coverage3, and does not apply to
the commercial property coverage which is a separate part of the policy. Ionian contends that its
right to the insurance proceeds at issue here is under the Building and Personal Property
Coverage portion of the policy and thus, the "Additional Insured - Multiple Interests"
endorsement is irrelevant to Ionian's claim.
As seen in the Common Policy Declarations, the policy in its entirety has three coverage
parts: (1) commercial property coverage; (2) commercial general liability coverage; and (3)
commercial inland marine coverage. Id. at p. 43. The "Named Insured" for all parts is PSC and
It also applies to and amends three other types of coverage which are not part of this
particular insurance policy.
3
5 - OPINION & ORDER
the policy period is from July 24, 2009 to January 8, 2010. Id. The Schedule of Forms and
Endorsements segregates the various parts of the policy into four parts: (1) common policy
forms and endorsements; (2) property forms and endorsements; (3) general liability forms and
endorsements; and (4) inland marine forms and endorsements. Id. at pp. 45-47. The Schedule of
Locations includes the location of the premises leased by PSC from Ionian. Id. at p. 49
(including 8765 Pueblo Avenue, Brooks, Oregon 97305 as one of the scheduled locations); see
also Ex. 2 to Kyle Sturm Decl. (lease between Ionian and PSC for premises located at 8765
Pueblo Avenue in Brooks, Oregon) (dkt #16).
The "Additional Insured - Multiple Interests" endorsement falls under the forms and
endorsements for liability coverage. Ex. 1 to Hussemann Affid. at p. 45. The endorsement
clearly amends only the general commercial liability coverage provided by Country Mutual to
PSC, and does not affect the separate coverage for commercial property. I agree with Ionian that
the limitation provided by the "Additional Insured - Multiple Interests" endorsement is not a
limitation on the commercial property coverage part of the policy.
The Building and Personal Property Coverage Form, under which Ionian claims coverage,
states that "[t]hroughout this policy the words 'you' and 'your' refer to the Named Insured shown
in the Declarations." Id. at p. 79. The grant of coverage under this form provides that Country
Mutual "will pay for direct physical loss of or damage to Covered Property at the premises
described in the Declarations caused by or resulting from any Covered Cause of Loss." Id.
Accordingly, under the plain language of the policy, there must be (1) direct physical loss or
damage, (2) to covered property, (3) at the premises described in the declarations, which is (4)
caused by or resulting from a covered cause of loss. Neither Ionian nor PSC, nor Country Mutual
6 - OPINION & ORDER
for that matter, raise an issue as to any of these conditions of coverage. Thus, it appears
undisputed that there was direct physical loss to covered property at the premises described
which was caused by a covered loss. Ionian argues that because the Building and Personal
Property Form provides coverage for the fire loss in this case and does not exclude "additional
insureds," but instead excludes only certain causes of loss such as earth movement, governmental
action, nuclear hazards, floods, and the like, the loss is covered and payable to Ionian.
PSC points out that the "Additional Insured - Multiple Interests" endorsement is the only
time "additional insureds" are mentioned in the entire policy. No part of the Building and
Personal Property Coverage Form mentions "additional insureds." The only language regarding
payment appears in Section 4 which primarily addresses Country Mutual's right to determine
whether it will pay the value of the lost or damaged property or pay the cost of repairing or
replacing that lost or damaged property. Id. at p. 88. Subsection 4d includes the word "you,"
previously defined to be the Named Insured, in stating that Country Mutual "will not pay you
more than your financial interest in the Covered Property." Id. Section 4 also provides that
Country Mutual has the discretion to "adjust losses with the owners of lost or damaged property
if other than you." Id. If Country Mutual pays the owners, "such payments will satisfy your
claims against us for the owners' property." Id. I do not read this language to provide coverage
for an additional insured. Rather, it simply states that Country Mutual will not pay for the loss
twice.
Other forms and endorsements related to the commercial property coverage also fail to
mention coverage for additional insureds or to include a definition of "you" or "insured" capable
of providing coverage to additional insureds. See id. at p. 93 (Commercial Property Conditions);
7 - OPINION & ORDER
pp. 95-100 (Equipment Breakdown Coverage); pp. 101-06 (Commercial Property Plus
Endorsement); pp. 109-17 (Causes of Loss - Special Form); pp. 119-22 (Value Reporting Form).
Several supplemental declarations to the commercial property coverage also fail to
include coverage for additional insureds or to include a definition of "you" or "insured" capable
of providing coverage to additional insureds. Id. at pp. 11-36, 77-78. Similarly, the two
endorsements containing "Oregon Changes" which amend the commercial property coverage
otherwise provided in the policy, do not create coverage for an additional insured. Id. at pp. 5759 (Oregon changes generally); pp. 61-62 (Oregon changes regarding cancellation and renewal).
I agree with PSC that Ionian's argument runs contrary to Oregon law regarding the
construction of insurance contracts. Where the terms of the policy are unambiguous, the court's
function is to enforce the contract according to those terms. See Garrett v. State Farm Mutual
Ins. Co., 112 Or. App. 539, 544-45, 829 P.2d 713, 715-16 (1992). "[C]ourts may not find
coverage where the unambiguous terms of a contract exclude coverage." Northwest Pipe Co. v.
RLI Ins. Co., 734 F. Supp. 2d 1122, 1136 (D. Or. 2010).
Without an explicit grant of coverage to, or inclusion of, additional insureds in the
commercial property forms and endorsements, or in the generally applicable provisions of the
policy, additional insureds are not entitled to coverage. Outside of the liability provision
discussed above, the policy includes no provisions for coverage to additional insureds. There is
no ambiguity because the plain language of the policy is clear. Generally, "the coverage
provisions of an insurance policy define the universe of claims that are covered by the policy; the
exclusions constitute a subset of claims that, although within that universe of covered claims, are
nonetheless excluded." ZRZ Realty Co. v. Beneficial Fire & Cas. Ins. Co., 222 Or. App. 453,
8 - OPINION & ORDER
472-73, 194 P.3d 167, 178 (2008), aff'd in part, rev'd in part on other grounds, 349 Or. 117, 241
P.3d 710 (2010). Thus, without coverage being expressly extended to additional insureds, it does
not exist. Ionian argues that because the property section of the policy does not exclude coverage
for additional insureds, Ionian a proper payee. However, Ionian's view is contrary to basic
precepts of insurance contract law.
Based on the plain language of the policy, the intent of the parties to this insurance
contract, Country Mutual and PSC, was to provide insurance to protect PSC's insurable interest
in the building, whatever that may be. Even if Ionian were an additional insured, the parties'
intent was to grant additional insureds certain coverage for third-party claims, but not for damage
to the additional insured's own property.
The disputed fact remaining in the case is whether Ionian was an additional insured under
the insurance policy. Assuming it was, the policy provided Ionian only with liability coverage,
not with coverage for damage to its building. Thus, Ionian may not obtain the proceeds of the
insurance policy as an additional insured.
Alternatively Ionian argues that PSC should be judicially estopped from arguing that
Ionian, even as an additional insured, is not entitled to insurance coverage under the policy for
the loss in this case. I disagree.
Generally, the doctrine of judicial estoppel prevents a party from gaining an advantage
based on one theory and then seeking a future advantage by pursuing an incompatible theory.
New Hampshire v. Maine, 532 U.S. 742, 749 (2001); see also Hamilton v. State Farm Fire &
Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001) ("Judicial estoppel is an equitable doctrine that
precludes a party from gaining an advantage by asserting one position, and then later seeking an
9 - OPINION & ORDER
advantage by taking a clearly inconsistent position."). A court "invokes judicial estoppel not only
to prevent a party from gaining an advantage by taking inconsistent positions, but also because of
general considerations of the orderly administration of justice and to protect against a litigant
playing fast and loose with the courts. Id. (internal quotation marks omitted).
In determining whether to apply judicial estoppel, the court must first determine if a
party's later position is "clearly inconsistent" with its earlier position and "whether the party has
succeeded in persuading a court to accept that party's earlier position[.]" New Hampshire, 532
U.S. at 750. "A third consideration is whether the party seeking to assert an inconsistent position
would derive an unfair advantage or impose an unfair detriment on the opposing party if not
estopped." Id. at 751. The court may also consider other pertinent factors. Id.
Ionian argues that the record contains numerous statements and admissions by PSC that
Ionian is covered under the Building and Personal Property Coverage Form. Ionian notes that
Country Mutual deposited $372,750 with this Court on February 23, 2011 pursuant to the
property coverage provisions and no party to the case has ever considered that the money was for
liability coverage. Ionian further notes that this Court has already awarded $10,000 of the
$372,750, related to cleanup costs, to Ionian. See Sept. 27, 2011 Findings & Rec. at pp. 24, 26;
Dec. 2, 2012 Ord. Adopting Sept. 27, 2011 Findings & Rec. at p. 12. Ionian also cites to various
discovery responses in which PSC admitted to Ionian having been, at some point between June
30, 2005 through early 2009, an additional insured, loss payee, or third-party beneficiary under
any insurance obtained by PSC on the warehouse. Finally, Ionian points to statements PSC has
made in various filings which Ionian asserts demonstrate PSC's acknowledgment that Ionian has
an insurable interest in the building.
10 - OPINION & ORDER
I do not view PSC's current argument regarding Ionian's lack of coverage to be "clearly
inconsistent" with its prior representations. Ionian's Interrogatory Number 6 asked PSC to state
"how long plaintiff Ionian had been an additional insured, loss payee or third-party beneficiary
under any insurance obtained by defendant Precision Seed on the warehouse. Ex. 9 to June 14,
2012 Carey Affid. at p. 2 (dkt #185). PSC responded "[f]rom approximately June 30, 2005
through early 2009." Id. Notably, PSC made no mention of what coverage Ionian was entitled to
if indeed Ionian was an additional insured and furthermore, the time period indicated by PSC
ended before the commencement of the policy in effect at the time of the fire.
In response to Ionian's Request for Admission Number 1, PSC admitted that before the
insurance policy was canceled for nonpayment and before PSC sought to have the policy re-done,
it informed Country Mutual that Ionian should be listed as an additional insured and mortgagee.
Ex. 10 to June 14, 2012 Carey Affid. at p. 3. This is not an admission that Ionian was an
additional insured on the policy in effect at the time of the fire, and more importantly, is not an
admission as to what type of coverage should be afforded to Ionian as an additional insured.
The other discovery responses cited by Ionian similarly fail to admit or state that PSC believed
Ionian was an additional insured on the policy in effect at the time of the fire or that as such,
Ionian was entitled to coverage under the commercial property insurance part of the policy.
As to statements made in various filings by PSC in this case, PSC admits that it, along
with Country Mutual and Ionian, was "mistakenly of the belief that being an 'additional insured'
provided Ionian Corp. a legal basis to the insurance proceeds." PSC Reply Mem. at p. 8; see also
id. at p. 9 ("Precision admits that it did previously argue that the issue of whether Ionian Corp.
was an additional insured was determinative of whether Ionian Corp. had a right to recover
11 - OPINION & ORDER
insurance proceeds."). However, as PSC notes, it entered the case only after Country Mutual and
Ionian litigated the "additional insured" issue while assuming that should this Court conclude that
Ionian was an additional insured, the policy provided coverage for an additional insured for this
particular loss. While the issue was revisited in subsequent motion practice, PSC's point is that
all parties litigated the case under the assumption that the policy provided commercial property
coverage to additional insureds, and this assumption was established early on by Country Mutual
and Ionian. Thus, all three parties were mistaken regarding the provisions of the policy and this
Court has not previously been requested to address the coverage issue. Under these
circumstances, I do not find that PSC's previous assumption about coverage is "clearly
inconsistent" with the position it takes now.
Second, other than awarding Ionian the $10,000 in cleanup costs, this Court has not
expressly held that Ionian is entitled to coverage and is entitled to some portion of the
interpleaded funds. The $10,000 cleanup cost award was based on PSC's concession that Ionian
was entitled to this sum. Sept. 27, 2011 Findings & Rec. at p. 24. PSC's concession was based
on its assumption that there was property damage coverage for Ionian. In making the $10,000
award, this Court simply assumed, as did all parties at that point, that the determinative issue was
whether Ionian was an additional insured, not that the language of the policy did not include
additional insureds in the property coverage. There were no competing arguments on the
coverage issue and no adoption by this Court of one party's position over another party's contrary
position.
Third, PSC derives no unfair advantage if not estopped. The insurance policy language
has not changed. The interpretation of the policy is a matter of law. The policy either entitles
12 - OPINION & ORDER
Ionian to property loss coverage as an additional insured or it does not. To award proceeds when
the policy does not provide for such an award has no support in the law. In the absence of
estopping PSC, Ionian suffers no detriment because, again, it was never entitled to the proceeds
of this policy. While Ionian may be entitled to damages for the destruction of the building, that is
a separate question and not related to whether it had insurance coverage as an additional insured
on the policy that was in effect at the time of the fire. The application of judicial estoppel is not
warranted here.
CONCLUSION
PSC's motion for summary judgment [171] is granted.
IT IS SO ORDERED.
DATED this
day of
MARCO A. HERNANDEZ
United States District Judge
13 - OPINION & ORDER
, 2012.
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