State Farm Fire And Casualty Company v. Silver et al
Filing
47
OPINION & ORDER: State Farm's motion for summary judgment 43 is granted. See 7-page opinion & order attached. Signed on 6/26/2013 by Judge Marco A. Hernandez. (mr)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
STATE FARM FIRE AND
CASUALTY COMPANY,
an Illinois Corporation,
No. 03:12-cv-00903-HZ
Plaintiff,
OPINION & ORDER
v.
ROBERT SILVER and JOCELYN
SILVER, individuals, et al.,
Defendants.
David P. Rossmiller
Elissa M. Boyd
DUNN CARNEY ALLEN HIGGINS & TONGUE, LLP
851 SW Sixth Avenue, Suite 1500
Portland, OR 97204
Attorneys for Plaintiff
Robert Silver
Jocelyn Silver
20700 Parry Road
Fall City, OR 97344
Pro se Defendants
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1 - OPINION & ORDER
HERNANDEZ, District Judge:
State Farm Fire and Casualty Company (“State Farm”) brings this declaratory action
against Robert and Jocelyn Silver (“the Silvers”) seeking a declaration that it owes no duty to
defend or indemnify the Silvers, State Farm’s insureds, in underlying litigation. State Farm
moves for summary judgment on these issues. Because I agree with State Farm, I grant the
motion.
BACKGROUND
On April 26, 2012, Defendants Brian and Susan Heite1 (“the Heites”) filed a lawsuit
against their neighbors the Defendants Silvers in Polk County Circuit Court. In their complaint,
the Heites allege the following facts: Around 2004, the Silvers moved to a twenty acre parcel of
land adjacent to the Heites’ property, with a shared access road. Compl. Ex. 3 ¶ 4. Beginning in
2005, the Silvers procured twenty-five alpacas and began running an alpaca breeding operation.
Id. Ex. 3 ¶ 5. The Silvers’ breeding operation continued to grow, reaching 265 alpacas in 2012,
with plans to add an additional 100 alpacas by summer 2012. Id. Based on complaints of
“noise, odor and waste generated by [the Silvers’] alpacas,” which allegedly resulted in damage
to the shared access road, caused a fly infestation, and interrupted daily activities because of
offensive odors, the Heites sued the Silvers for nuisance, nuisance per se, and trespass. Id. Ex. 3
¶¶ 6-8, 19-36.
The Silvers then tendered a claim to State Farm for defense and indemnification, pursuant
to their homeowner’s (“HO”) and personal liability umbrella insurance (“PLUP”) policies.
Compl. ¶¶ 11-14. This action by State Farm ensued.
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1
The Heites were also named as Defendants in this action, but failed to respond to State Farm’s Summons and
Complaint. An Order of Default was entered against them on July 30, 2012 (Dkt. #22).
2 - OPINION & ORDER
STANDARD
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 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 marks 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 & Cnty. 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).
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3 - OPINION & ORDER
DISCUSSION
I.
Duty to Defend
A. HO Policy
State Farm argues that under the “business pursuits” exclusion in the HO policy, it has no
duty to defend the Silvers in the underlying litigation brought by the Heites. To determine if an
insurer has a duty to defend, a court looks only to the facts in the complaint to evaluate whether
“the complaint could, without amendment, impose liability for conduct covered by the policy.”
Ledford v. Gutoski, 877 P.2d 80, 82 (Or. 1994). If the complaint provides “any basis for which
the insurer provides coverage,” an insurer is obligated to defend. Id. at 83. Further, “[a]n insurer
should be able to determine from the face of the complaint whether to accept or reject the tender
of the defense of the action.” Id. at 82. As such, a court’s review is limited to the four corners of
the complaint and the insurance policy.
State Farm argues that the underlying complaint does not create a duty to defend because
it alleges the Silvers engaged in a business operation, an activity excluded by the policy
language. State Farm is correct. The relevant portion of the policy provides that “[c]overage . . .
do[es] not apply to . . . property damage arising out of business pursuits of any insured[.]”
Compl. Ex. 1 at 18. The underlying complaint does not expressly refer to the Silvers’ alpaca
operation as a business, but two factors lead to the conclusion that it is one. First, the underlying
complaint uses the word “operation” to describe the activity, implying that it is a business. As
noted by State Farm, courts commonly use the term “operation” to describe business activities.
See City of Corvallis v. Hartford Acc. & Indem. Co., No. 89–294–JU, 1991 WL 523876 (D. Or.
May 30, 1991); Garvison v. St. Paul Fire & Marine Ins. Co., 771 P.2d 310, 312 (Or. App. 1989).
Used in conjunction with some other activity such as farming, the term “operation” connotes a
4 - OPINION & ORDER
business-like purpose. When used to describe a large breeding program, the only logical
conclusion is that the operation is a business pursuit.
Second, the sheer number of alpacas allegedly owned by the Silvers at the time the Heites
filed suit, coupled with the Silvers’ desire to increase the size of their herd by 100 alpacas, leads
to the conclusion that the Silvers engaged in a business purpose. I agree with State Farm that
“[i]t is unreasonable to infer that 365 alpacas were intended to be pets.” Mot. Summ. J. 6. The
allegations in the underlying complaint assert without question that the Silvers are engaged in a
business pursuit.
State Farm also argues that the HO policy’s exception to the “business pursuits”
exclusion does not apply. While the Silvers’ HO policy excludes “property damage arising out
of business pursuits of any insured,” the exclusion does not apply to “activities which are
ordinarily incident to non-business pursuits[.]” Compl. Ex. 1 at 18. Because the business
operation here is an alpaca breeding operation, the act of breeding alpacas cannot be considered
incident to a non-business pursuit. Moreover, care and ownership of alpacas is necessary to
maintain an alpaca breeding operation. Because there are no activities incident to non-business
pursuits, the exception does not apply. The underlying complaint alleges that the Silvers are
engaged in a business pursuit, an activity the HO policy excludes from coverage. Accordingly,
there is no duty to defend under the HO policy.
B. PLUP
State Farm contends that the Silvers’ PLUP does not impose a duty to defend because it
also excludes business activities. The language of the policy excludes coverage for “loss arising
out of . . . business pursuits of any insured, unless . . . [the] required underlying insurance applies
to the loss[.]” Compl. Ex 2 at 9. Because the underlying HO policy does not provide coverage
5 - OPINION & ORDER
here, this condition cannot be satisfied and the PLUP does not apply. There is no duty to defend
under the PLUP.
II.
Duty to Indemnify
A. HO Policy
State Farm argues it has no duty to indemnify the Silvers because their alpaca breeding
operation is a business pursuit, and is therefore excluded by the HO policy. Unlike the duty to
defend, the duty to indemnify is not based only on the allegations in the complaint. Ledford, 877
P.2d at 84. Rather, the duties are independent of each other and the duty to indemnify is
determined by the facts proven at trial. Id.
The Silvers have not raised an issue of material fact with respect to their alpaca breeding
operation. First, the Silvers failed to respond to State Farm’s Requests for Admission on the
issue of whether their operation is a business. Rossmiller Decl. at ¶¶ 2-6; Ex. 1. Thus, the
request is deemed admitted. See Fed. R. Civ. P 36(a)(3). Second, State Farm provides
substantial evidence demonstrating that the alpaca breeding operation is a business. For
example, State Farm submits evidence showing that the Silvers registered their business with the
Oregon Secretary of State. Rossmiller Decl. Ex. 2. State Farm also submits evidence
demonstrating the Silvers maintain and utilize a website to sell alpacas and alpaca-related
products. Id., Ex. 1 at 11-20; Ex. 3. In short, there is no material issue of fact in light of the
Silvers’ admission and the abundant evidence showing that the alpaca breeding operation is a
business within the meaning of the policy exclusion.2
Because the operation is a business, the exclusion in the HO policy applies. Additionally,
as described above, the exception to the “business pursuits” exclusion does not apply.
2
The Silvers were provided a Pro Se Party Summary Judgment Advice Order on September 24, 2012 (Dkt. #36).
Nonetheless, they failed to respond to this motion.
6 - OPINION & ORDER
B. PLUP
State Farm argues that, as with the duty to defend, the PLUP does not apply to the duty to
indemnify. I agree. Because the PLUP does not provide coverage unless and until the
underlying HO policy applies, State Farm has no duty to indemnify.
CONCLUSION
State Farm’s motion for summary judgment [#43] is granted.
IT IS SO ORDERED.
Dated this
day of June, 2013.
MARCO A. HERNANDEZ
United States District Judge
7 - OPINION & ORDER
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