Opinion
3:21-cv-502-JR
08-15-2022
MT. HAWLEY INSURANCE COMPANY, a foreign corporation, Plaintiff, v. WATERSIDE, LLC, an Oregon limited liability company; VANCE JEANNET, an individual, Defendants.
FINDINGS AND RECOMMENDATION
JOLIE A. RUSSO United States Magistrate Judge
In this insurance coverage lawsuit, plaintiff Mt. Hawley Insurance Company seeks a declaration that it has no duty to indemnify or defend in an underlying action in which defendant Vance Jeannet alleges he sustained injuries while working on construction of the Waterside apartment complex. Plaintiff and defendant Waterside, LLC each move for summary judgment on the issue of plaintiff's duty to defend Waterside in the underlying action. For the reasons stated below, the Court should grant Waterside's motion for summary judgment and deny Mt. Hawley's motion.
BACKGROUND
A. Underlying Complaint
In the Underlying Action, defendant Vance Jeannet alleges he was employed as a laborer and carpenter by SGS Development LLC, the general contractor for the construction of the Waterside Apartments owned by Waterside, LLC. First Amended Complaint (ECF 29-1) at ¶ 2. Jeannet alleges that a dilapidated temporary staircase placed at the Waterside project collapsed while he was standing on it, resulting in a fractured vertebra and paraplegia. Id. at ¶¶ 5, 7, 9, 16.
Jeannet specifically alleges Chet Antonsen, the owner of Waterside, LLC and SGS, previously used a temporary staircase at the Escena apartment complex in Bend, Oregon before moving the temporary staircase to the Waterside project in Portland. Id. at ¶¶ 14, 15. Jeannet asserts Antonsen visited the Waterside project before the stairs collapsed, knew that the staircase was being installed at the project, and reported to the project construction manager that he “didn't like what he saw,” however no changes were made to the temporary staircase until after Jeannet's fall. Id. at ¶ 18.
In the underlying action, Jeannet also brings claims against Baxter Builders, LLC, who allegedly built the temporary staircase when it was first used for the Escena project in Bend, and Mario's, a subcontractor on the Waterside project, who allegedly employed the individual, Fernando Lopez, who purportedly moved the staircase.
Jeannet alleges the following claims: (1) negligence (Id. at ¶¶ 1-30); (2) violation of the employers' liability law-not based on safety codes (Id. at ¶¶ 31-37); (3) violation of the employers' liability law-based on safety codes (Id. at ¶¶ 38-43); (4) negligence per se-Oregon Safe employment act (Id. at ¶¶ 44-49); (5) negligence-premises liability (Id. at ¶¶ 50-53); and (6) employers' liability law-based on safety codes (Id. at ¶¶ 54-57). Jeannet seeks more than $32,000,000 in total damages. Waterside tendered a claim for defense to Mt. Hawley under a commercial general liability (CGL) policy and excess liability insurance policy it obtained from Mt. Hawley in effect at the time Jeannet suffered his injuries. Specific allegations of negligence committed by Waterside, or Mario's, or both include:
a) In failing to determine, prior to allowing employees in general and plaintiff in particular to use the temporary wooden stairs that had been installed in Building A at the Project, that the stairs had sufficient strength and structural integrity to safely support the employees that would be using them;
b) In failing to properly evaluate the work site to determine if employees in general, and plaintiff in particular, could safely perform the assigned work at the upper levels of the Project;
d) In failing to utilize stronger materials, such as newer and stronger wood, or metal, to construct the temporary staircases, in place of the wood that was utilized, which was weathered and splitting and had numerous nail/screw holes from prior use;
e) In failing to ensure that employees in general, and plaintiff in particular, had an appropriate and safe means of egress with which to safely descend from the third floor;
h) In allowing such an unreasonably dangerous condition, i.e., the temporary staircases utilized wood that was weathered and splitting and had numerous nail/screw holes from prior use, to exist on the Project;
j) In failing to properly train and supervise the employees on the job site in general, and plaintiff in particular, about the topic of fall protection, particularly as it applied to the use of the temporary staircases.Id. at ¶ 23.
In his claim for negligence liability asserted against defendant Waterside only, plaintiff alleges:
The location where plaintiff suffered injury, with temporary staircases comprised of weathered and splitting wood and multiple nail/screw holes from prior use, constituted an unsafe and unreasonably dangerous condition. Defendant Waterside knew, or, in the exercise of reasonable care, should have known, of the factors which combined to create an unreasonably dangerous and reasonably foreseeable risk of harm. Defendant Waterside also knew, or, in the exercise of reasonable care, should have known, of the reasonably foreseeable risk of harm which the unreasonably dangerous condition of the temporary staircases posed to business invitees on the premises in general, and plaintiff in particular, as a business invitee on the premises.
Defendant Waterside ... breached the duty of reasonable care to [Jeannet] in one or more of the following ways:
a) In failing to maintain reasonably safe temporary staircases;
b) In failing to protect plaintiff so that he could obtain reasonably safe access to, and egress from, the third level, the absence of which created a reasonably foreseeable and unreasonably dangerous risk of harm;
c) In failing to adequately inspect the area where work was to be done, which adequate inspection would have discovered the conditions on the premises as set forth above, conditions that created an unreasonably dangerous and reasonably foreseeable risk of harm to business invitees in general and plaintiff business invitee in particular;
d) In failing to provide adequate or any warning to business invitees on the
Project in general, and plaintiff business invitee in particular, of the defects in the temporary staircases described above, at a time when defendant Waterside knew, or in the exercise of reasonable care, should have known, of the reasonably foreseeable and unreasonably dangerous risk of harm created thereby for users of the temporary staircases at the Project in general, and plaintiff in particular;
e) In failing to supply temporary staircases for the Project that were free from defects and/or otherwise did not create a reasonably foreseeable and unreasonably dangerous risk of harm for users.Id. at ¶¶ 51-52.
B. Mt. Hawley Policies
The CGL policy provides:
We shall have no obligation to defend or indemnify any “insured” for any “bodily injury,” “property damage,” and/or “personal and advertising injury” arising directly or indirectly from work by a “contractor” unless each and every one of the following conditions is satisfied:
1. Certificates of insurance are obtained from each and every “contractor” prior to commencement of such “contractor's” work. Such certificates of insurance must list primary commercial general liability coverage in effect at all times the work is performed with limits equal to or greater than $1,000,000 per occurrence for “bodily injury” and “property damage”, $1,000,000 “personal and advertising injury,” $2,000,000 general aggregate, and $1,000,000 products- completed operations aggregate.
2. Written agreements are obtained from each and every “contractor” which hold harmless and indemnify each “insured” under this policy
against whom the claim is made for all injuries, damages, claims, and suits arising directly or indirectly from the “contractor's” work (including any work performed by the “contractor's” subcontractors or sub-subcontractors). Such agreements must expressly provide indemnification to the maximum extent permitted by law.
3. Such agreements must be signed by the parties to the agreement prior to the “occurrence” or offense giving rise to the claim against this policy's “insured(s)”. The written agreements required in condition 2. above must also require that the “contractor” will obtain additional insured coverage under the “contractor's” primary commercial general liability policy for each “insured” under this policy against whom the claim is made. Such agreements must be signed by the parties to the agreement prior to the date of the “occurrence” or offense giving rise to the claim against this policy's “insured(s)”. Such agreements must require limits of additional insured coverage equal to or greater than the limits listed in condition 1 above. Such agreements must state that the additional insured coverage is to be primary and noncontributory.
As used in this endorsement only, “contractor” means any person or entity that any “insured” hires or contracts with for the performance of any work for construction, renovations, maintenance (including, but not limited to, snow removal), or repairs, regardless of where such work is performed, and regardless of whether such person or entity is described as a contractor, construction manager, general contractor, subcontractor, vendor, supplier, materialman, service provider or by any other term.CGL Policy (ECF 1-3 at p. 35) (emphasis added).
The excess policy provides excess coverage of $1,000,000 only after the limits of the CGL policy have been exhausted. Accordingly, unless there is coverage under the CGL policy, there is no coverage under the excess policy.
Both policies name SGS and Waterside as insureds. Mt. Hawley, however, asserts it has no duty to defend or indemnify in the Jeannet action because the same condition of coverage applicable to both obligations is not met, i.e., certificates of insurance and written agreements to hold harmless and indemnify the insureds were not obtained from a “contractor” prior to the work.
DISCUSSION
Plaintiff Mt. Hawley Insurance asserts it has no duty to defend unless the insured, defendant Waterside, obtained: (1) certificates of insurance for each and every contractor on the project; and (2) written hold harmless and indemnity agreements in favor Waterside from each and every contractor on the project. In addition, Mt. Hawley argues each and every contractor on the project must have obtained additional insurance coverage for Waterside under their polices before it has a duty to defend Waterside. Nonetheless, Mt. Hawley asserts the second and third conditions were not met with respect to SGS and Mario's.
A. Policy Interpretation
The interpretation of an insurance policy is a question of law. Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 469, 836 P.2d 703 (1992). The goal in interpreting a policy is to determine the intent of the parties. Id. (citing Totten v. New York Life Ins. Co., 298 Or. 765, 770, 696 P.2d 1082 (1985)). Intent is determined by looking to the terms and conditions of the policy. Or. Rev. Stat. 742.016; Hoffman, 313 Or. at 469, 836 P.2d 703. The policy “must be viewed by its four corners and considered as a whole.” Denton v. International Health & Life, 270 Or. 444, 449-50, 528 P.2d 546 (1974). All parts and clauses of the policy “must be construed to determine if and how far one clause is modified, limited, or controlled by others.” Id. at 450, 528 P.2d 546.
When words of common understanding are used and the meaning is clear and subject to only a single reasonable meaning, no interpretation is necessary, and the words are to be taken in their plain, ordinary and popular sense. It is not permissible to apply a strained meaning to unambiguous language to create an ambiguity where none exists so that interpretation may be indulged to extend coverage.Mortg. Bancorporation v. New Hampshire Ins. Co., 67 Or.App. 261, 264, 677 P.2d 726, 728 (1984).
If a policy term is ambiguous, the court construes the term against the drafter. Hoffman, 313 Or. at 470, 836 P.2d 703.
[A] term is ambiguous in a sense that justifies application of the rule of construction against the insurer only if two or more plausible interpretations of that term withstand scrutiny, i.e., continue[ ] to be reasonable, after the interpretations are examined in the light of, among other things, the particular context in which the term is used in the policy and the broader context of the policy as a whole.Id.
If the ambiguity remains after the court has engaged in those analytical exercises, then “any reasonable doubt as to the intended meaning of such [a] term[ ] will be resolved against the insurance company and in favor of extending coverage to the insured.” Shadbolt v. Farmers Insur. Exch., 275 Or. 407, 411, 551 P.2d 478 (1976); Hoffman, 313 Or. at 470, 836 P.2d 703. In short, when an insurance policy term is ambiguous, the court will interpret that term according to the perceived understanding of an ordinary purchaser of insurance. Joseph v. Utah Home Fire Ins. Co., 313 Or. 323, 328, 835 P.2d 885 (1992).
Waterside has the burden to prove coverage while the Mt. Hawley has the burden to prove an exclusion from coverage. ZRZ Realty Co. v. Beneficial Fire & Cas. Ins. Co., 349 Or. 117, 127, 241 P.3d 710, 716 (2010), opinion adhered to as modified on reconsideration, 349 Or. 657, 249 P.3d 111 (2011). Exclusions to coverage are construed narrowly. § 49:111. Generally, 17 Williston on Contracts § 49:111 (4th ed.).
The insurer has a duty to defend if the complaint provides any basis for which the insurer provides coverage even if the complaint alleges some conduct outside the scope of coverage. Ledford v. Gutoski, 319 Or. 397, 400, 877 P.2d 80, 83 (1994). Generally, the court looks only to the four corners of the underlying complaint and the policy. Id.
Coverage A of the CGL policy provides that Mt. Hawley:
...will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies..
[W]e will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.
This insurance applies to "bodily injury" and "property damage" only if:
(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";
(2) The "bodily injury" or "property damage" occurs during the policy period; and
(3) Prior to the policy period, no insured listed under Paragraph 1. of Section II - Who Is An Insured and no "employee" authorized by you to give or receive notice of an "occurrence"or claim, knew that the "bodily injury" or "property damage" had occurred, in whole or in part. If such a listed insured or authorized "employee" knew, prior to the policy period, that the "bodily injury" or "property damage" occurred, then any continuation, change or resumption of such "bodily injury" or "property damage" during or after the policy period will be deemed to have been known prior to the policy period.CGL Policy (ECF 1-3 at p. 4).
There appears to be no dispute that absent the contractor's conditions of coverage endorsement, the alleged bodily injury coverage applies, and Mt. Hawley must defend the underlying action. Mt. Hawley asserts the contractor's condition of coverage exclusion, however, is a condition precedent that must be fulfilled before its duty to defend is triggered. Waterside asserts the endorsement does not apply to the negligence claims against it, and that even if it does the conditions have been met.
A condition precedent is a contractual condition that is based on an event, not certain to occur, but which must occur, unless its nonoccurrence is excused, before performance under a contract becomes due. Macadam Bay Homeowners Ass'n v. Soyster, 285 Or.App. 841, 848, 397 P.3d 587, 591 (2017). Again, to determine if the hold harmless/insurance requirements are conditions precedent, the Court looks at the parties' intent and employs the same contract construction analysis as above. Id.
The obligation to defend is nullified if certain certificates of insurance and hold harmless agreements are not obtained from contractors where the alleged injury arises “directly or indirectly from work by a ‘contractor.'” CGL Policy (ECF 1-3 at p. 35).
'Contractor' means any person or entity that any “insured” hires or contracts with for the performance of any work for construction, renovations, maintenance (including, but not limited to, snow removal), or repairs, regardless of where such work is performed, and regardless of whether such person or entity is described as a contractor, construction manager, general contractor, subcontractor, vendor, supplier, materialman, service provider or by any other term.Id.
The injury purportedly resulted from the faulty temporary staircase allegedly built by Baxter Builders, LLC, for a previous Waterside project in Bend, Oregon and then allegedly transported by an employee of subcontractor Mario's. While Jeannet alleges claims against Mario's and Waterside, Jeannet alleges certain claims directly against Waterside for its negligence and failure to maintain a safe worksite related to the staircase and training of Jeannet. Regardless of whether a subcontractor played any role in the placement of the staircase, Jeannet can and did assert claims solely against Waterside for its own negligence resulting in bodily injury. A broadly worded claim for negligence encompassing acts of sole negligence against the insured may be sufficient to prevent application of a contractor's condition precedent to coverage. Cf. ProBuilders Specialty Ins. Co. v. Phoenix Contracting, Inc., 2017 WL 11536055, at *2 (D. Or. May 3, 2017), aff'd, 743 Fed.Appx. 876 (9th Cir. 2018) (“It may well be that under certain circumstances, a broadly-worded claim for “negligent supervision” could encompass such acts of sole negligence.”).
In ProBuilders, the insured's negligence was tied to its failure to oversee and check on work done by subcontractors and thus indirectly if not directly from work by a contractor. ProBuilders Specialty Ins. Co., 2017 WL 11536055, at *2 (complaint also narrowly limited Phoenix's liability, alleging that Phoenix was negligent in “[f]ailing to properly oversee and check work done by subcontractors.”). In this case, there are numerous specifications of negligence, resulting in bodily injury, asserted solely against Waterside independent of any contractor's work such as failure to train, inspect, warn, or make safe, and failure to evaluate and maintain the worksite, etc. More importantly the underlying complaint alleges the owner of Waterside wanted to use the “dilapidated” staircases “because he was tired of seeing them in his field in Bend.” First Amended Complaint (ECF 29-1) at ¶ 19. In addition, the Waterside owner allegedly stated the day before the accident that he did not like what he saw on the construction site. Id. at ¶ 18. The complaint alleges claims directed at Waterside for its sole conduct.
It is a plausible interpretation of the policy as a whole, that Mt. Hawley has a duty to defend in the underlying action. Arguably the parties intended the condition precedent regarding contractor's conditions of coverage not to apply for claims asserted directly against the insured Waterside for bodily injury resulting from its sole negligence apart from the work of a subcontractor. Because the underlying complaint alleges claims against Waterside, who is not a “contractor” but rather is the insured, for negligence that is arguably based on its direct fault and not directly or indirectly arising from work by a subcontractor, the condition precedent is not applicable, and Coverage A is implicated triggering a duty to defend. See Underwriters of Int. Subscribing to Pol'y No. A15274001 v. ProBuilders Specialty Ins. Co., 241 Cal.App.4th 721, 734, 193 Cal.Rptr.3d 898, 910 (2015), as modified on denial of reh'g (Nov. 13, 2015):
Oregon Courts do look to foreign jurisdictions when construing other commonly used insurance policy exclusions. Bighorn Logging Corp. v. Truck Ins. Exch., 295 Or.App. 819, 831, fn. 3, 437 P.3d 287, 295, fn. 3 (2019).
We are not persuaded by ProBuilders's argument, for several reasons. First, the CSC provision on its face applies only to claims against Pacific Trades “in whole or in part based on work performed by independent contractors,” but does not purport to apply to claims against Pacific Trades for its own negligence or other misfeasance. ProBuilders's showing below did not conclusively establish that all of the claims against Pacific Trades in the Aceves lawsuit were limited to claims based
on work performed by independent contractors.
Arguably, the alleged fact that a Mario's employee placed the staircase could constitute “work” from which the bodily injury indirectly arose. However, the complaint alleges work completed solely by Waterside from which the injury arose and the factfinder in the underlying action could find that the mere placement of the staircase was not the reasonably foreseeable cause of the bodily injury in any way, i.e., did not arise from such work.
Of course, “arising from” is generally broader than legal causation. Jordan by Jordan v. Lee, 76 Or.App. 472, 475, 709 P.2d 752, 753 (1985) (the words “arising out of' have a broader meaning than that usually attached to the words “caused by.”). Nonetheless, the bodily injury must originate from, be incident to, or have a connection with the work of placing the staircase. Id. The underlying complaint could be read such that the injury from the fall was not connected to the placement of the staircase as there are no allegations that it was improperly placed. Indeed, the allegations regarding the quality of the staircase, knowledge of its dilapidated nature and concerns about its integrity, and the failure to maintain it and train Jeannet, are directed at Waterside and could be read as the only connection to the bodily injury in the underlying complaint. The underlying complaint provides a basis for which the policy provides coverage even though it may also allege claims excluded under the condition precedent.
To find otherwise may run afoul of Or. Rev. Stat. § 30.140 which prohibits provisions that require a subcontractor or its insurer to indemnify the general contractor for its own negligence that is not the fault of the subcontractor. While the policy only required indemnification “to the maximum extent required by law,” to read the policy as excluding coverage where there is any conceivable connection to the work of a subcontractor runs perilously close to this prohibition.
Mt. Hawley also contends that the bodily injury arises out of SGS's work because it employed Jeannet. However, the bodily injury did not arise from the employment, instead it allegedly arose from maintenance of the staircase. The complaint also indicates it was SGS who in fact owned the staircase, but it also indicates SGS, and Waterside have the same owner, and both are insureds under the policy. Accordingly, Mt. Hawley has a duty to defendant and its motion for summary judgment should be denied and Waterside's motion for summary judgment should be granted.
Because SGS is an insured, the argument that Waterside should have obtained the required agreements from it is redundant. Moreover, SGS obtained an agreement from Mario's that met the conditions with respect to SGS. Accordingly, the only non-insured contractor at issue in the work from which the bodily injury arose provided the appropriate agreements to an insured. The record does not show all subcontractors provided the requisite agreements, but a plausible reading of the condition precedent is that only subcontractors involved in the bodily injury must provide the agreements. Nonetheless, because Waterside is the insured seeking a defense, the failure to obtain the requisite agreements from Mario's benefitting Waterside directly demonstrates a failure of the condition precedent. However, as noted above, the condition precedent is not applicable to all conduct alleged in the complaint, i.e., some conduct comes within Coverage A of the policy and is not excluded.
CONCLUSION
Plaintiff Mt. Hawley's motion for summary judgment (ECF 48) should be denied and defendant Waterside's cross motion for summary judgment (ECF 55) should be granted.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of
Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.