American Hallmark Insurance Company of Texas v. American Family Mutual Insurance Company et al
Filing
112
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)
IN THE UNITED STATES DISTRICT
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
Page 1 - OPINION AND ORDER
LLP
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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