Opinion
3:21-cv-01524-JR
03-23-2023
WARD WHITE, Plaintiff, v. UNITED HERITAGE PROPERTY & CASUALTY COMPANY, Defendant.
FINDINGS AND RECOMMENDATION
Jolie A. Russo United States Magistrate Judge
Plaintiff Ward White moves for partial summary judgment pursuant to Fed.R.Civ.P. 56 in this insurance dispute. Defendant United Heritage Property and Casualty Company cross-moves for summary judgment as to all claims. For the reasons set forth below, the parties' motions should be granted in part and denied in part.
The Court generally cites to plaintiff's evidence except when referring to the non-duplicative information produced by defendant.
At all relevant times, plaintiff held a Home and Family Property Policy (“Policy”) with defendant in regard to the 10-unit apartment building he owned at 335 S.E. 80th Avenue in Portland, Oregon (“Property”). See generally Gower Decl. Ex. 1 (doc. 27-1). The Policy insured against the named peril of fire, among others.
On April 18, 2021, the Portland Fire Department (“PFD”) was called out to fight an arson fire at 408 S.E. 79th Avenue in Portland, Oregon, diagonally adjacent to the Property. Gower Decl. Ex. 2, at 1-2 (doc. 27-2). The PFD was unable to successfully extinguish the fire due to its size, such that it shifted to a containment strategy. Id.; Gower Decl. Ex. 4, at 16-17 (doc. 27-4). Water used in the fire suppression efforts and smoke ultimately flowed into the Property.
Plaintiff promptly reported a loss under the Policy. Defendant hired an independent adjuster - i.e., Ryan Blanchard from Intermountain Claims (“Intermountain”) - who met with plaintiff two days after the fire to inspect the Property. The Intermountain report states:
The cause of direct damage to the insured property is water . . . used by the fire department to extinguish the fire[.] The fire department water flowed towards the insured's property with about a foot of water flowing around it on both sides. The water filled the insured's eight-foot basement along with the 18-inch crawlspace that runs under most of the building [and left] a noticeable debris line on the bottom of the exterior siding. There is a mild smoke odor in the hallway of the apartment building, but the owner believes it will dissipate on its own . . . No damage from fire or embers was discovered to any part of the building.Gower Decl. Ex. 7, at 1-2 (doc. 27-7).
On April 23, 2021, defendant sent plaintiff a letter denying his claim because the damage was not caused by any named peril but instead by “surface water flooding,” and inviting him to submit “any additional information, documentation, or authorities that . . . you believe will in any way help support your claim or that you wish us to know.” Gower Decl. Ex. 5, at 2-3 (doc. 27-5). Plaintiff's attorney responded to defendant's letter on May 25, 2021, requesting reconsideration and explaining that the water's presence was the direct result of the PFD's fire suppression efforts. Gower Decl. Ex. 9, at 3-4 (doc. 27-9).
On July 15, 2021, defendant affirmed its previous denial of coverage - this time on the alternative grounds that: (1) “the fire is not a ‘loss' because property insured by the Policy was not damaged by fire” and (2) the Policy's water damage exclusion applied because the water from the fire suppression efforts “migrated along the surface and eventually seeped into the Insured Location.” Gower Decl. Ex. 12, at 2-3 (doc. 27-10). On September 15, 2021, plaintiff's counsel replied, arguing water released by the PFD is not “surface water” or “subsurface water” within the meaning of any exclusion, and that “the efficient proximate cause of Mr. White's Loss was the result of fire and efforts to mitigate that fire.” Gower Decl. Ex. 13, at 3-6 (doc. 27-13).
On September 29, 2021, defendant issued its final denial of coverage, resolving that there was no “loss” as this term is defined in the Policy, as the fire was at an adjacent building and the Property was not directly damaged by that fire. Gower Decl. Ex. 14, at 1-3 (doc. 27-14).
Plaintiff initiated this action on October 18, 2021, alleging claims for breach of contract/the implied duty of good faith and fair dealing, and negligence per se under Or. Rev. Stat. § 746.230. Plaintiff seeks $100,000 in economic damages related to the Property and $500,000 in emotional distress damages.
STANDARD OF REVIEW
Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, affidavits, and admissions on file, if any, show “that 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). Substantive law on an issue determines the materiality of a fact. T.W. Elec. Servs., Inc. v. Pac. Elec. Contractors Ass'n, 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 determines the authenticity of the 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. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 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 a summary judgment motion: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the 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. Elec., 809 F.2d at 630.
DISCUSSION
The parties cross-move for summary judgment as to plaintiff's breach of contract claim based on water damage. In addition, defendant seeks summary judgment on plaintiff's negligence per se claim, and plaintiff seeks summary judgment on his claims of loss emanating from smoke and vehicle damage.
I. Evidentiary Objections
Before reaching the substantive merits of the parties' motions, the Court must resolve defendant's evidentiary objection as to the report of plaintiff's expert, Paul Moreland, as well as plaintiff's evidentiary objection to Mr. Blanchard's declaration. Although permitted by Local Rule 56
A. Defendant's Objection
Defendant objects to “Mr. Moreland's opinion as to the interpretation of the United Heritage policy,” as well as his “speculation that the concrete slab adjacent to plaintiff's Building was damaged by the weight of a fire truck.” Def.'s Reply to Mot. Summ. J. 6 (doc. 44).
Defendant is correct that the Court is not bound by Mr. Moreland's legal conclusions concerning what events the Policy does or does not cover. See Cascadia Wildlands v. Bureau of Land Mgmt., 2012 WL 6738275, *3 n.6 (D. Or. Dec. 21, 2012) (“this Court is not bound by [the expert declarant's] legal conclusions”) (citation omitted); see also Pellegrini v. Gooder, 2012 WL 12893745, *2 (C.D. Cal. Dec. 6, 2012) (“[a]n expert's legal conclusions are unhelpful to the jury because they provide no information other than the witness's view of how the verdict should be read”) (citation and internal quotations omitted); Bogner v. R & B Sys., Inc., 2011 WL 1832750, *3 (E.D. Wash. May 12, 2011) (disputed issues of material fact can “not [be] created by simply averring that an act ‘was [a legal violation or]' declaring that one's versions of events is ‘consistent' with one's theory of the case . . . declarations [must only be considered] for the facts contained therein”).
As addressed in greater detail below, defendant is likewise correct that the portions of Mr. Moreland's report addressing smoke and the concrete pad pose too large an analytical leap. See Boydstun v. U.S. Bank Nat'l Assoc., 187 F.Supp.3d 1213, 1216 (D. Or. 2016) (court must act as “a gatekeeper” in regard to “the soundness of [the expert's] methodology” to ensure that it “meets the threshold established by Rule 702”); Gen. Elec. v. Joiner, 522 U.S. 136, 146 (1997) (“nothing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence that is connected to existing data only by the ipse dixit of the expert”); see also British Airways Board v. Boeing Co., 585 F.2d 946, 952 (9th Cir. 1978) (nonmoving party cannot rely on speculation or conjecture in meeting its burden of production). Defendant's evidentiary objection is granted.
B. Plaintiff's Objection
Plaintiff objects to “Mr. Blanchard's newly discovered expert opinions regarding damages to the concrete slab” because they “were not submitted by United in its rebuttal expert disclosures in this case” and “lack any indication of trustworthiness.” Pl.'s Reply to Mot. Partial Summ. J. 11 (doc. 45).
As an initial matter, Fed.R.Civ.P. 56 necessitates the type of evidentiary response proffered by defendant. See, e.g., Celotex, 477 U.S. at 322-24. And it is well established that the court may consider evidence, even new evidence, that rebuts arguments raised by the plaintiff in his motion for or opposition to the defendant's summary judgment motion. See, e.g., United States v. Taibi, 2012 WL 553143, *4 (S.D. Cal. Feb. 21, 2012).
Furthermore, a witness's specialized knowledge does not automatically invoke Rule 702 and, by extension, the expert disclosure requirements. See Bank of China v. NBM LLC, 359 F.3d 171, 181 (2d Cir. 2004) (“[t]he fact that [the witness] has specialized knowledge, or that he carried out the investigation because of that knowledge, does not preclude him from testifying pursuant to 701, so long as the testimony was based on the investigation and reflected his investigatory findings and conclusions, and was not rooted exclusively in his expertise”). Where an individual with specialized knowledge provides percipient testimony about matters that are “‘common enough to require . . . a limited amount of expertise,” such testimony qualifies as that of a lay witness. United States v. Figueroa-Lopez, 125 F.3d 1241, 1245 (9th Cir. 1997) (citations and internal quotations omitted).
While Mr. Blanchard's professional background may qualify him as an expert, his declaration is limited to his work for defendant investigating plaintiff's claim of loss related to the adjacent building fire. In other words, Mr. Blanchard's personal, first-hand observations form the basis of his opinion. Blanchard Decl. ¶¶ 3-12 (doc. 41). As a result, there is no basis to exclude this evidence on the grounds defendant failed to disclose Mr. Blanchard as a rebuttal expert or that his opinion “lack[s] trustworthiness.” Cf. Morin v. State Farm Fire & Cas. Co., 453 F.Supp.2d 173, 175-76 (D. Me. 2006) (witness with specialized knowledge could testify as to the “facts he observed during the course of his investigation” under Rule 701).
This is especially appropriate considering that plaintiff was not prejudiced by the purportedly late-disclosure of Mr. Blanchard's opinion. Plaintiff had the opportunity to address Mr. Blanchard's declaration via his summary judgment reply brief. Additionally, given the defects in Mr. Moreland's opinion, this evidence does not change the Court's analysis. See Perez-Denison v. Kaiser Found. Health Plan of the Nw., 868 F.Supp.2d 1065, 1088-89 (D. Or. 2012) (denying an evidentiary objection as moot where “the evidence moved against does not change the [court's] recommendation” regarding summary judgment). Plaintiff's evidentiary objection is denied.
II. Breach of Contract Claim as to Water Damage
Plaintiff argues summary judgment is warranted in regard to his breach of contract claim because “[t]he adjective ‘direct' in the Policy phrase “direct physical ‘loss' to property described in Coverage A caused by fire' unambiguously modifies the word ‘loss,' and there can be no colorable argument that it can reasonably be understood as an adverb modifying the past participle ‘caused.'” Pl.'s Mot. Partial Summ. J. 9-10 (doc. 26) (internal ellipses and brackets omitted).
In contrast, defendant asserts “[p]laintiff's breach of contract claim fails because plaintiff's claimed property damage is not covered under the insurance contract.” Def.'s Am. Mot. Summ. J. 2 (doc. 33). In particular, defendant acknowledges that “[t]he Policy covers a ‘loss' to the insured Building caused by one of the seven named perils” but contends there is no coverage because “[p]laintiff agrees that his Building did not suffer any fire damage.” Id. at 8.
Essentially, the parties agree that water could be both a “loss” and the cause of “loss,” but disagree about the significance of this distinction depending on the location of the named peril. Defendant maintains that water damage is only entitled to coverage as the cause of the “loss” when the fire occurred at the insured property. According to plaintiff, the location of the fire is irrelevant provided that the resulting damage to the insured property is proximately caused by a named peril.
A. Relevant Policy Terms
The Policy specifies that defendant will “insure against direct physical ‘loss,' to the property described in Coverage A and B, caused by a peril listed below . . . unless ‘we' exclude the ‘loss' under the peril or in Section I - Exclusions.” Gower Decl. Ex. 1, at 12 (doc. 27-1). The Policy then goes on to name the following relevant perils and exclusions: (1) “Fire and lightning”; (2) “Vehicles. ‘We' do not cover ‘loss' caused by a vehicle owned or operated by an ‘insured,' an ‘insured's' employees or by a resident of the premises”; and (3) “Smoke, meaning sudden and accidental damage from smoke. ‘We' do not cover ‘loss' caused by smoke from agricultural smudging or industrial operations.” Id. at 12-13.
“Loss” is further defined as “[a]ccidental ‘loss' of or damage to the insured property.” Id. at 10. And the “Coverage A” and “Coverage B” provisions state that defendant will “cover” the “dwelling on the ‘residence premises' shown in the Declarations including structures attached to the dwelling” and other structures, fences, utility poles, and on-site construction materials designated for repairs or improvements, respectively. Id. at 12. “Residence premises,” in turn, means “[t]he dwelling as described on the Declarations and grounds, including other structures, which is shown as the ‘residence premises' in the Declarations.” Id. at 11; see also id. at 10-11 (defining the “Insured Location” as the “residence premises”).
B. Contract Interpretation
In interpreting an insurance contract under Oregon law, the court first determines whether the provision at issue is ambiguous. Allianz Global Risks U.S. Ins. Co. v. Ace Prop. & Cas. Ins. Co., 367 Or. 711, 734, 483 P.3d 1124 (2021). In doing so, the court applies “any definitions contained in the policy and otherwise giv[es] words their plain, ordinary meanings.” Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 237 Or.App. 468, 476, 240 P.3d 67 (2010), rev. denied, 349 Or. 602, 249 P.3d 123 (2011). A contractual term is ultimately ambiguous “if it has no definite significance or if it is capable of more than one sensible and reasonable interpretation.” Batzer Const., Inc. v. Boyer, 204 Or.App. 309, 313, 129 P.3d 773, rev. denied, 341 Or. 366, 143 P.3d 239 (2006) (citation and internal quotations omitted). For potentially ambiguous or flexible terms, “the court considers the context in which the term appears and then the context of the policy as a whole.” Allianz, 367 Or. at 734. “[I]f ambiguity remains, the term is construed against the drafter.” Id.
The insured generally bears the initial burden of proving that the underlying claim is within the insuring clause of the policy. ZRZ Realty Co. v. Beneficial Fire & Cas. Ins. Co., 349 Or. 117, 127, 241 P.3d 710, 716 (2010) (as modified); see also Prudential Prop. & Cas. Ins. Co. v. Lillard-Roberts, 2002 WL 31495830, *9 (D. Or. June 18, 2002) (the insured bears the burden invoking a named peril). The insurer, in turn, bears the burden of proving the existence of any applicable exclusion, restriction, or limitation once coverage is demonstrated. ZRZ Realty Co., 349 Or. at 127.
The Court finds the “named peril” provision unambiguous. That is, under the Policy, defendant was expressly required to cover any “damage to the insured property” from fire.Defendant could have added language to modify this direct statement of coverage but elected not to. There is simply nothing in the Policy limiting coverage based on the location of the named peril or otherwise indicating that a triggering event must occur directly on-site. And no other language alters or amends the “named peril” provision.
Significantly, defendant concedes that had the fire occurred at the Property, water damage from fire suppression efforts would be covered. Def.'s Resp. to Mot. Partial Summ. J. 7 (doc. 38). There is likewise no meaningful dispute that “the efficient proximate cause of the water damage [was] the fire.” Id. at 4. Further, although defendant asserts that water was never sprayed directly on the Property, the cited evidence merely demonstrates that the deposed firefighters - i.e., Michael Pollard and Dustin Miller - did not witness any fire suppression efforts aimed anywhere other than the burning building. Id. at 9-10; see also May Decl. Ex. 2, at 6-7, 9 (doc. 33-6) (Mr. Pollard testifying that he “stayed in the engine” so did “not have personal knowledge of water going anywhere except for the fire building but I mean it is possible”); May Decl. Ex. 5, at 6-8 (doc. 339) (Mr. Miller testifying that he was not observing the suppression efforts “the entire time” but did not see any water sprayed on any of the adjacent properties). In any event, plaintiff “never asserted that the PFD sprayed water on [the Property] in connection with the parties' cross-motions” due to “ the lack of certainty” and the fact that whether “the PFD sprayed water on White's building is entirely irrelevant to the court's coverage analysis.” Pl.'s Reply to Mot. Partial Summ. J. 2-3 (doc. 45).
Defendant's attempts to interject ambiguity into the Policy are unpersuasive. It is axiomatic that unequivocal terms must be read in accordance with their plain meaning. The fact that defendant proffers an interpretation of the “named peril” provision that is not grounded in its express language - indeed, defendant does not engage in any direct textual analysis. does not provide the necessary grounds for the Court to grant summary judgment in its favor. See, e.g., Def.'s Am. Mot. Summ. J. 8-9 (doc. 33). Notably, even if the Court were to accept defendant's proffered interpretation as plausible, that would merely necessitate construing the Policy against the drafter. Cf. Hoffman Constr. Co. of Ala. v. Fred S. James & Co., 313 Or. 464, 469-71, 836 P.2d 703 (1992) (“given the breadth and flexibility of the English language, the task of suggesting plausible alternative meanings is no challenge to capable counsel”); see also Fred Shearer & Sons, 237 Or.App. at 476 (court's first inquiry surrounds the term or provision in question; if “that examination yields only one plausible interpretation of the disputed terms, our analysis goes no further”); N. Pac. Ins. Co. v. Hamilton, 332 Or. 20, 29, 22 P.3d 739 (2001) (“[i]t is the insurer's burden to draft exclusions and limitations that are clear [and would be understood by] the ordinary purchaser of insurance”).
Defendant's claims specialist agrees that, for coverage to exist, “there must be 1) direct physical damage to Mr. White's Building; and 2) the damage to Mr. White's building must be caused by one of the seven perils listed above,” and that “[f]ire is a named peril.” Pfeifer Decl. ¶ 3 (doc. 40).
In sum, no word or phrase in the “named peril” provision is inherently flexible, open to more than one reasonable interpretation, or otherwise drafted so broadly so as to be “obscure to the point of being incomprehensible.” Hamilton, 332 Or. at 29. Because it is undisputed that the Property sustained water damage from the PFD's fire suppression efforts, defendant breached the Policy by refusing to provide coverage for plaintiff's claim.
The Court's conclusion is consistent with Oregon's formulation of “direct physical loss” and “efficient proximate cause.” Specifically, a “loss” is “direct” and “physical” under Oregon law if “it damaged the [property].” Farmers Ins. Co. v. Trutanich, 123 Or.App. 6, 10-11, 858 P.2d 1332 (1993); see also NUE, LLC v. Or. Mut. Ins. Co., 558 F.Supp.3d 1000, 1009-10 (D. Or. 2021) (“Oregon courts have construed the phrase ‘direct physical loss of or damage to property' and similar phrases to require some degradation in the condition of the property to invoke coverage”) (collecting cases); Zeco Dev. Grp., LLC v. First Mercury Ins. Co., 2022 WL 444400, *2 (D. Or. Feb. 14, 2022) (“the plain meaning of ‘direct physical loss of or damage to' property requires dispossession or physical alteration to the property”). Stated differently, a “distinct and demonstrable physical change to [the insured property]” qualifies as a “direct physical loss.” Columbiaknit, Inc. v. Affiliated FM Ins. Co., 1999 WL 619100, *5 (D. Or. Aug. 4, 1999).
Concerning causation, “[i]t is an established rule of insurance law that where a peril specifically insured against sets other causes in motion which, in an unbroken sequence and connection between the act and final loss, produces the result for which recovery is sought, the insured peril is regarded as the proximate cause of the entire loss.” Naumes, Inc. v. Landmark Ins. Co., 119 Or.App. 79, 82, 849 P.2d 554 (1993) (quoting Gowans v. Nw. Pac. Indem. Co., 260 Or. 618, 621, 489 P.2d 947 (1971)). As such, “[t]he 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.” Id. (citation and internal quotations omitted); see also Villella v. Pub. Emps. Mut. Ins. Co., 106 Wash.2d 806, 815, 725 P.2d 957 (1986) (“[w]here a peril specifically insured against sets other causes in motion which, in an unbroken sequence and connection between the act and final loss, produce the result for which recovery is sought, the insured peril is regarded as the ‘proximate cause' of the entire loss”) (citation and internal quotations omitted).
While both parties acknowledge that Oregon courts have not applied the Naumes proximate cause rule in this specific context, other jurisdictions evaluating analogous claims have held that “[f]ire insurance is intended to cover every loss, damage, or injury proximately caused by fire, and every loss necessarily following directly and immediately from such peril or from the surrounding circumstances [such as] mold damage caused by [water used to suppress a] fire.” Liristis v. Am. Family Mut. Ins. Co., 204 Ariz. 140, 145, 61 P.3d 22 (2002) (citation and internal quotations omitted); see also Emp'rs Liability Assurance Corp. v. Morse, 261 Minn. 259, 265-66, 111 N.W.2d 620 (1961) (“[w]ater used in extinguishing a fire is only incidental to the fire itself. The real or proximate cause of the damage is the fire . . . Damage caused by water poured on the fire was as much attributable to the fire as that caused by combustion or by soot and smoke . . . In contracts of fire insurance, water damage is considered to be part of the damage caused by fire”); Cuevas v. Quandt's Foodservice Distribs., Inc., 6 A.D.3d 973, 974, 775 N.Y.S.2d 429 (2004) (in a negligence action involving virtually identical facts, “it is irrelevant that the flames did not reach plaintiff's property. Smoke and water damage to adjacent property are foreseeable consequences of a fire, and plaintiff may recover for such damage if he establishes defendants' breach of duty and proximate cause”).
Moreover, the Ninth Circuit has denied an insurer's motion for summary judgment where a wildfire destroyed all the vegetation on a nearby hillside and the insureds' home was subsequently damaged by flooding and mudslides. See generally Stankova v. Metro. Prop. & Cas. Ins. Co., 788 F.3d 1012 (9th Cir. 2015). Significantly, the fire in Stankova did not reach the insureds' property and the water damage occurred one month after the fire was suppressed. Id. at 1013. The Ninth Circuit nonetheless held “[a] reasonable factfinder could conclude that the destruction of the house was caused by the fire, which likely caused the mudslide,” because the insureds “produced some evidence that no mudslides or flooding had ever occurred on that property before, that wildfires commonly cause mudslides as a result of deforestation and erosion, and that the rains were not unusually heavy that year.” Id. at 1016-17. In so finding, the Ninth Circuit articulated causation in the context of a fire insurance policy in accordance with the cases cited above. See id. at 1015-16 (“the damage for which fire insurers are liable is not confined to loss by actual burning and consuming, but they are liable for all losses which are the immediate consequences of fire or burning, or for all losses of which fire is the proximate cause”) (citations and internal quotations omitted).
Accordingly, as plaintiff denotes, “[t]here is simply no support in the case law for interpretation of the insurance policy phrase ‘direct physical loss' as requiring the causal agent to have been present on the same tax lot (as opposed to an adjacent one) where the damage occurred.” Pl.'s Mot. Partial Summ. J. 20 (doc. 26). Rather, the aforementioned precedent makes clear that an insurer is responsible for any damages emanating from a fire, irrespective of whether that fire occurred at the insured's property or otherwise, provided the fire proximately or directly caused those damages. Plaintiff's motion should be granted, and defendant's motion should be denied, as to plaintiff's breach of contract claim related to water damage.
III. Plaintiff's Remaining Claims of Breach
Apart from his water damage claim, plaintiff argues summary judgment is appropriate on the grounds that defendant: (1) “was aware of the existence of direct physical loss due to smoke as a result of the fire at the adjacent property [but] took no action to estimate the damages”; and (2) “has never offered any grounds for failure to cover damage to the [concrete pad on the] Property caused by the Fire Department's vehicles.” Pl.'s Mot. Partial Summ. J. 8-9 (doc. 26).
Initially, neither the dispositive complaint nor plaintiff's correspondences with defendant (through counsel no less) mention any form of loss beyond water damage. See Wasco Prods., Inc., v. Southwall Techs., Inc., 435 F.3d 989, 992 (9th Cir. 2006) (summary judgment “is not a procedural second chance to flesh out inadequate pleadings”) (citation and internal quotations omitted); see also Navajo Nation v. U.S. Forest Serv., 535 F.3d 1058, 1080 (9th Cir. 2008) (where “the complaint does not include the necessary factual allegations to state a claim, raising such claim in a summary judgment motion is insufficient to present the claim to the district court”); McClellan v. I-Flow Corp., 2009 WL 3448871, *1 (D. Or. Oct. 22, 2009) (declining to consider the plaintiffs' “claims [on summary judgment] that are not yet pled”).
Thus, while a duty of inquiry arises once a claim is submitted, here defendant investigated plaintiff's reported loss within two days of the fire, and neither that investigation nor any of plaintiff's subsequent correspondences revealed damage to the Property associated with smoke or a PFD vehicle. See Pfeifer Decl. ¶¶ 10, 15-16 (doc. 40) (during the adjustment process, plaintiff “did not claim that there was any smoke damage or damage to a concrete parking pad”); Blanchard Decl. ¶¶ 4-6 (doc. 41) (during the physical inspection of the Property, plaintiff “did not mention to me at any time that there was damage to the concrete slab”; although there was a “mild odor from the fire both inside and outside the building,” there was no other evidence of direct fire damage and plaintiff “told me he believed the smoke smell inside the building would pass”). It is simply impossible for the Court to conclude that defendant breached the Policy in regard to claims that were not pursued prior to these proceedings.
In any event, concerning plaintiff's allegations related to smoke damage, there is no evidence in the record from which the Court could infer that the Property sustained a “direct physical loss.” Damage determinations are somewhat contextual:
what may constitute damage in the retail clothing industry might not constitute damage to the personal property of a homeowner. For example, if an article of retail clothing has an odor strong enough that it must be washed to remove it, (and the garment therefore cannot be sold as new) it has sustained physical damage and would be covered under an “all-risk” property insurance policy. The same piece of clothing in an individual's wardrobe, for example a shirt worn around a smokey campfire, would not be said to be physically damaged if a mere washing would remove the odor.Columbiaknit, 1999 WL 619100 at *6. Nevertheless, as addressed in Section I(B), the insured still bears the “burden of showing [a] distinct and demonstrable physical change” as a result of the named peril. id. at *7. Specifically in odor cases, “the physical damage is demonstrated by the persistent, pervasive odor. In the absence of such odor, no physical damage could be found. The mere adherence of molecules to porous surfaces, without more, does not equate physical loss or damage.” id.
Here, plaintiff makes much of the deposition testimony of defendant's corporate designee, Robert Aldridge. See, e.g., Pl.'s Resp. to Mot. Summ. J. 3, 9-10 (doc. 43). But an independent review of Mr. Aldridge's testimony does not lend support to plaintiff's claim. In particular, Mr. Aldridge testified that “[p]revalent smoke odor that has damaged physical property” can qualify as smoke damage. Gower Decl. Ex. 8, at 16 (doc. 27-8). He also agreed that “the presence of ash and soot on covered property, regardless of the smell, is a covered loss” because “[i]t's a physical evidence of an event.” Id. at 16-17, 52. Yet plaintiff has not presented any evidence concerning the presence of soot/ash, a prevalent or lingering smoke odor, or an inability to inhabit the Property. In fact, the only evidence plaintiff cites - i.e., the Intermountain report - describes the smoke odor two days after the fire as scant and reflects plaintiff's statement (which he does not contest as inaccurate or otherwise attempt to clarify or expand upon in his own declaration) that it would “dissipate on its own.” Gower Decl. Ex. 7, at 1-2 (doc. 27-7).
Likewise, there is insufficient evidence regarding plaintiff's allegations of vehicle damage. That is, assuming plaintiff has adequately established damage to his concrete pad, there is no indication that damage was proximately caused by the peril of fire. Although both plaintiff and his property manager stated there were “mirror cracks” on the concrete parking slab until “the fire [after which] the parking slab had substantial new damage,” there are no witness accounts of a PFD vehicle (or any other vehicle for that matter) parked there at any point. Coleman Decl. ¶¶ 45 (doc. 28); White Decl. ¶¶ 4-5 (doc. 29). In fact, Mr. Moreland assumed vehicle damage was sustained based on a conversation with plaintiff, as opposed to any independent investigation, and the images attached to his report documenting his “on-site visual observations” merely depict a parking slab with cracks that may or may not have existed prior to the fire. Moreland Decl. ¶ 10 (doc. 30); Moreland Decl. Ex. (doc. 30-2); see also Blanchard Decl. ¶¶ 6, 12 (doc. 41) (“[t]here were old cracks in this concret[e] slab, but none that appeared to have been only a couple days old at the time of my inspection”).
The Google Maps image attached to Mr. Moreland's report is of poor quality and an unclear time/origin, but nonetheless does seem to intimate fewer or no cracks.
Plaintiff's briefing is wholly silent as to causation. Absent such argument and evidence tying the damage to the fire itself or the PFD's suppression efforts, the Court would be impermissibly forced to speculate. Cf. Griffin v. K.E. McKay's Market of Coos Bay, Inc., 125 Or.App. 448, 450-52, 865 P.2d 1320 (1993) (speculation and guesswork are not permissible means by which a jury may find negligence); see also Peltier v. Dahlke, 248 Or. 512, 518, 434 P.2d 457 (1967) (“[t]he mere fact that plaintiff was injured is not sufficient” to impose liability); Sims v. Dixon, 224 Or. 45, 48, 355 P.2d 478 (1960) (“[i]t is well established that . . . [t]he proof of the material issue [of causation] must have the quality of reasonable probability”).
While these cases concern negligence, both parties recognize that, in the insurance context, “Oregon follows the tort standard of proximate cause.” Def.'s Am. Mot. Summ. J. 9 (doc. 33); Pl.'s Resp. to Mot. Summ. J. 8 (doc. 43).
Therefore, there is nothing in the record to establish the presence of a “direct physical loss” from smoke or a PFD vehicle, such that plaintiff has failed to carry his summary judgment burden. See Slover v. Or. State Bd. of Clinical Soc. Workers, 144 Or.App. 565, 570, 927 P.2d 1098 (1996) (articulating the elements of a breach of contract claim, including “damages to the plaintiff”); see also Celotex, 477 U.S. at 322 (summary judgment should be entered against “a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden on proof at trial”); Hernandez v. Spacelabs Med. Inc., 343 F.3d 1107, 1116 (9th Cir. 2003) (“conclusory allegations, unsupported by facts, are insufficient to survive a motion for summary judgment”). Plaintiff's motion should be denied as to his claims of smoke and vehicle damage.
Because summary judgment is not proper in regard to these claims as discussed herein, the Court declines to address defendant's argument that these claims are “untimely.” Def.'s Resp. to Mot. Partial Summ. J. 11-12 (doc. 38). This is especially appropriate considering that defendant implicitly seems to acknowledge that plaintiff can present these claims at a later date. See id. at 13 (concluding only that “United Heritage should not be subject to attorney fee exposure under ORS 742.061” due to “[p]laintiff's failure to present either of these claims [previously or] to mention either claim in at his deposition response to questions from counsel”).
IV. Negligence Per Se Claim
Defendant contends that “[p]laintiff's negligence per se claim fails as a matter of law because: (1) purported violations of the Unfair Claims Settlement Practices Act (Or. Rev. Stat. § 746.230) are not independently actionable under established Oregon law; and (2) [he] cannot establish a right to recover damages for emotional distress because he has not suffered physical harm.” Def.'s Am. Mot. Summ. J. 2 (doc. 33).
Plaintiff counters that negligence per se claims under Or. Rev. Stat. § 746.230 have been recently sanctioned by Moody v. Or. Cmty. Credit Union, 317 Or.App. 233, 505 P.3d 1047, rev. allowed, 369 Or. 855, 512 P.3d 446 (2022). Regarding emotional distress damages, plaintiff argues “a physical impact is not required” pursuant to Moody, as well as Philibert v. Kluser, 360 Or. 698, 358 P.3d 1038 (2016), and I.K. v. Banana Republic, LLC, 317 Or.App. 249, 505 P.3d 1078 (2022), which “establish a framework for determining whether an exception to the physical impact rule applies based on a violation of a legally protected interest.” Pl.'s Resp. to Mot. Summ. J. 15-20 (doc. 43).
Philibert articulated the “bystander recovery rule,” holding that damages for negligent infliction of emotional distress are available where the plaintiff directly and contemporaneously “witness[es] a sudden, serious physical injury to a third person negligently caused by the defendant” and a negligence per se claim under Or. Rev. Stat. § 746.230: “suffer[s] serious emotional distress,” and “the physically injured person [is] a close family member of the plaintiff.” Philibert, 360 Or. at 713-14. I.K. was decided the same day as Moody and held that, as a matter of first impression, employees had a legally protected interest in not being secretly video-recorded while using a private employee restroom. Importantly, I.K. set forth a three-part test for evaluating negligence-based emotional distress claims: the court must determine whether (1) “the complaint alleges the violation of a legally protected interest”; (2) “such interest is of sufficient importance as a matter of public policy to merit protection from emotional impact”; and (3) “the complaint alleges that the emotional distress was the foreseeable result of the violation of the legally protected interest.” I.K., 317 Or.App. at 255.
Oregon law “prohibits unfair settlement practices and contemplates civil penalties for claims filed against an insurance company by its insured and claims filed against the insured by third parties.” Mayes v. Am. Hallmark Ins. Co. of Tex., 2021 WL 6127887, *4 (D. Or. Nov. 15), adopted by 2021 WL 6125796 (D. Or. Dec. 28, 2021). And plaintiff is correct that, via Moody, the Oregon Court of Appeals recently held that Or. Rev. Stat. § 746.230 provides a negligence per se cause of action.
Defendant nonetheless argues that “Moody is not binding on the district court, as the federal courts are only required to follow the holdings of the state's highest court, here the Farris decision.” Def.'s Am. Mot. Summ. J. 10 (doc. 33) (citing Farris v. U.S. Fid. & Guar. Co., 284 Or. 453, 587 P.2d 1015 (1978); and Triem v. State Farm Fire & Cas. Co., Case No. 3:21-cv-00710-MO, Opinion & Order (D. Or. Feb. 15, 2022)). Yet it is well-settled that, in the absence of a clearly contrary decision by the state supreme court, state appellate decisions are binding. See, e.g., Owen v. United States, 713 F.2d 1461, 1464 (9th Cir. 1983). Thus, the question becomes whether Moody is contrary to existing precedent.
To that end, Moody purported to expressly consider Farris but held that it did not foreclose
Defendant reads too much into [the Oregon Supreme Court's decision in Farris]. In Farris, the plaintiffs brought an action for damages resulting from their insurer's denial of liability insurance coverage. The plaintiffs prevailed at trial and were
awarded economic damages, noneconomic damages for emotional distress, and punitive damages. The defendant insurer appealed . . .
The court began by reviewing the general rule that the breach of a contract resulting in pecuniary loss will not support a claim for emotional distress damages. The court then noted that, nevertheless, such emotional distress damages may be recovered if the claim sounds in tort, rather than contractual liability. In that regard, the court noted that the legislature had enacted ORS 746.230, which prohibits an insurer from unreasonably denying coverage, and that “[i]t is possible to contend that defendant's violation of the statute is a tort, and therefore, plaintiffs are entitled to recovery for emotional distress.” But, the court added, “[i]t is not our understanding that plaintiffs make this contention.” In other words, the plaintiffs in Farris did not make a claim of statutory liability for the defendant's violation of ORS 746.230. For reasons unexplained, the court went ahead and discussed whether that statute could support a claim for statutory liability, which might justify an award of damages for emotional distress. In what was plainly dictum then, the court said that “[t]here is nothing to indicate that the legislature intended, when it prohibited certain claims settlement practices in ORS 746.230, that actions for breach of insurance contracts would be transformed, in all of the covered instances, into tort actions with a resulting change in the measure of damages.” The court noted that another statute provided for an action in the name of the State of Oregon to obtain civil penalties for violations, but that there was no mention of a private right of action. In that context, the court observed that “had the legislature intended” to provide for emotional distress damages, “it would have so provided.”
Assuming for the sake of argument that the court's dictum in Farris answered the question whether ORS 746.230 creates statutory liability for the violation of its provisions, the fact remains that this case poses a different question-namely, whether the statute provides a standard of care for purposes of a claim for negligence per se. Nothing in Farris even mentioned that issue. And defendant errs in assuming that a decision concerning whether an enactment creates statutory liability is dispositive of whether the same statute may supply a standard of care in a negligence per se case. As the Supreme Court took some pains to emphasize in Bob Godfrey Pontiac v. Roloff, 291 Or. 318, 630 P.2d 840 (1981), there is an important distinction between the role of a statute in negligence per se cases and statutory liability cases. In the former cases, the test is whether the plaintiff is a member of the class of persons for whose benefit the legislation was enacted and whether the type of harm suffered was the kind the legislation was intended to prevent. In the latter cases, the test is different; it is whether the legislature intended to create a tort action for statutory liability. Whether the legislature intended its enactment of a law to create direct statutory liability does not preclude courts from determining that it is appropriate to treat the enactment as a standard of care for purposes of stating a claim for negligence per se. Farris, in other words, is not relevant here.Moody, 317 Or.App. at 243-44 (internal citations omitted).
Courts within this District are nonetheless split concerning whether Moody affords a negligence per se claim under the present circumstances. Compare Bryant v. Allstate Indem. Co., ___ F.Supp.3d ___, 2022 WL 1910128, *3 (D. Or. June 3, 2022) (“Moody clearly stands for the proposition that a plaintiff can bring a negligence per se claim pursuant to O.R.S. § 746.230(1), in addition to a breach of contract claim, against an insurance company”), and Owens v. State Farm Fire & Cas. Co., Case No. 2:22-cv-00119-HL, Minute Order (Apr. 4, 2022) (granting the plaintiff's opposed motion to file an amended complaint adding a negligence per se claim under Or. Rev. Stat. § 746.230), with Runyan v. Foremost Ins. Co., Case No. 6:21-cv-01341-MC, Opinion & Order 3 (D. Or. Oct. 26, 2022) (“[w]hile the Moody court assents that they are answering a different question [than Farris], it appears to overturn 40 years of precedent . . . Until the Oregon Supreme Court rules otherwise, negligence per se is unavailable as a cause of action for insurance contract disputes”), and Triem, Case No. 3:21-cv-00710-MO, Opinion & Order at 34 (D. Or. Feb. 15, 2022) (dismissing the plaintiff's negligence per se claim under Or. Rev. Stat. § 746.230 post-Moody, but without addressing or otherwise acknowledging that case).
Regardless, even if this Court were to accept Moody as an extension of Oregon Supreme Court precedent under Farris, emotional distress damages are not recoverable. Under Oregon law, a plaintiff can recover “for emotional distress caused by ordinary negligence, but only if the distress is accompanied by physical impact.” Lowe v. Philip Morris USA, Inc., 207 Or.App. 532, 551, 142 P.3d 1079 (2006), aff'd, 344 Or. 403, 183 P.3d 181 (2008). While neither the Oregon Supreme Court nor the Oregon Court of Appeals “have sought to define the minimum amount of bodily harm necessary to constitute a physical impact,” it is well-settled that this rule requires at least “an act or omission that results in some perceptible physical effect on a plaintiff.” Chouinard v. Health Ventures, 179 Or.App. 507, 515, 39 P.3d 951 (2002) (citations omitted); see also Saechao v. Matsakoun, 78 Or.App. 340, 346 (1986) (physical impact rule requires “a direct accompanying injury to the person who suffers the emotional distress as a prerequisite to its compensability”); Andersen v. Atl. Recording Corp., 2010 WL 4791728, *6 (D. Or. Nov. 18, 2010) (interpreting case law surrounding the physical impact rule to conclude that the plaintiff generally “must establish that she suffered a physical touching that resulted in emotional distress”).
Few exceptions exist to this rule. See Rathgeber v. Hemenway, Inc., 335 Or. 404, 414, 69 P.3d 593 (2003) (“Oregon allows recovery for emotional distress without accompanying physical injury under narrow circumstances”). Relevant to this case, a plaintiff may recover for an exclusively psychic injury where “the defendant's conduct infringed on some legally protected interest apart from causing the claimed distress, even when that conduct was only negligent.” Hammond v. Cent. Lane Commc'ns Ctr., 312 Or. 17, 22-23, 816 P.2d 593 (1991). Not every infringement of a legally protected interest will trigger the exception but rather “only those that are of sufficient importance as a matter of public policy to merit protection from emotional impact.” Philibert, 360 Or. at 705 (internal citations omitted, emphasis added).
Oregon courts have repeatedly held that plaintiffs seeking emotional distress damages in the context of an insurance dispute do not qualify for one of the Hammond exceptions. Collver v. Salem Ins. Agency, Inc., 132 Or.App. 52, 66, 887 P.2d 836 (Or. 1994) (emotional distress damages are not available in association with an insurer's denial of coverage - and the plaintiff's related loss of a driver's license - because “the invaded interest is chiefly an economic one” that resulted in nothing more than “the inconvenience and distress typically associated with interference with property interests”); Mayes, 2021 WL 6127887 at *5 (dismissing emotional distress damages premised on the insurer's negligence in denying the plaintiff's claim because “[i]t appears that Plaintiff was at most ‘frustrated' and experienced ‘unnecessary distress' due to Hallmark's conduct”).
And cases involving this precise inquiry post-Moody have reached the same conclusion:
[Plaintiff] argues that the Oregon Court of Appeals' recent decision in Moody establishes that an insurer's violation of the standard of care set forth at Or. Rev. Stat. § 746.230(1) can give rise to a claim for negligence per se in connection with which an affected insured may seek emotional distress damages. Defendant disagrees, arguing that Moody is silent on whether a negligence per se claim based on O.R.S. § 746.230(1) allows a plaintiff who suffered no physical injury to recover emotional distress damages.
After a careful review, the court agrees with defendant's reading of the case . . . while Moody clearly stands for the proposition that a plaintiff can bring a negligence per se claim pursuant to O.R.S. § 746.230(1), in addition to a breach of contract claim, against an insurance company, it is silent on whether that claim disturbs the physical impact rule described above. In the absence of such instruction from either the Oregon Supreme Court or Oregon Court of Appeals, this court must use its own best judgment in predicting how the state's highest court would decide the case. And given the vast amount of Oregon Supreme Court caselaw that has repeatedly upheld the physical impact rule and the three Hammond exceptions, this court must apply reasoning that recognizes both the physical impact rule and Moody. Thus, this court concludes that . . . a plaintiff must still demonstrate either physical injury or a Hammond exception to receive damages for emotional distress.
Plaintiff disagrees with this interpretation, arguing that Moody unambiguously stands for the proposition that an insured who suffers emotional distress as a result of an insurer's violation of the standard of conduct codified at Section 746.230(1) may recover damages for that emotional distress in the absence of physical injury. She specifically points to the Moody court's remarks that the two issues raised on appeal-(1) whether the plaintiff could maintain a separate negligence per se claim with a breach of contract action, and (2) whether the plaintiff's claim for emotional distress damages was viable-were necessarily intertwined. That much is true: the Moody plaintiff's claim for emotional distress damages stemmed from her negligence per se claim, and thus, the two issues were linked together on appeal. But just because the claims relate to each other does not mean that the physical impact rule and Hammond exceptions are invalidated.Bryant, 2022 WL 1910128 at *3-4; see also Runyan, Case No. 6:21-cv-01341-MC, Opinion & Order at 4-5 (D. Or. Oct. 26, 2022) (rejecting virtually identical arguments under Moody, Philibert, and I.K. to hold that “emotional distress damages will remain unavailable even with a valid negligence per se claim” if the plaintiff “cannot show actual physical injury or qualification through one of the three exceptions outlined in Hammond”).
Although Bryant and Runyan are not binding, the Court finds their reasoning persuasive, especially in the absence of any contrary authority. The invoked Hammond exception is therefore inapplicable to this case. In other words, the legally protected interest at issue - i.e., having a first-party insurance claim timely resolved and in good faith - is no corollary to those that have historically been held to be of sufficient importance as a matter of public policy to merit protection from emotional impact, such as the interest in avoiding being secretly recorded in a state of undress while using a private restroom or witnessing the negligently caused traumatic injury of a close family member. See I.K., 317 Or.App. at 262 (to determine “whether a given interest is of ‘sufficient importance' . . . courts compare the interest at issue with those that the courts have found to be of sufficient importance in other cases”); see also Bryant, 2022 WL 1910128 at *4 (rejecting the plaintiff's invocation of the third Hammond exception in relation to her negligence per se claim under Or. Rev. Stat. § 746.230, explaining “courts have refused to recognize a variety of other arguably important public interests under the third Hammond exception”) (collecting cases); Runyan, Case No. 6:21-cv-01341-MC, Opinion & Order at 4-5 (D. Or. Oct. 26, 2022) (“[n]either Moody nor Farris discuss how a Plaintiff would be able to recover for emotional distress in an action filed under ORS 746.230 with the physical impact rule still in place” and “Oregon courts have repeatedly held that plaintiffs seeking emotional distress damages through insurance coverage dispute cases did not qualify for one of the Hammond exceptions”).
Plaintiff does not present argument or evidence of a physical injury or impact, perpetuated by defendant, which caused emotional distress. The inverse is true: plaintiff alleges that he suffered stress as a result of defendant's actions. See May Decl. Ex. 1, at 7-8 (doc. 33-5) (plaintiff testifying that, apart from stress, he has not experienced any physical injuries due to the denial of this insurance claim, nor has he sought any medical care related thereto).As a result, emotional distress damages are unavailable. See Andersen, 2010 WL 4791728 at *6-7 (plaintiff's allegations of increased migraines, depression, and stress, as well as poor sleep, were insufficient to satisfy the physical impact rule). Defendant's motion should be granted in this regard.
It is questionable whether plaintiff's passing reference to generalized stress, in the absence of any corresponding physical or mental symptoms or medical treatment, is sufficiently “serious” to sustain a negligence-based emotional distress claim. Philibert, 360 Or. at 713-14.
RECOMMENDATION
For the reasons stated herein, plaintiff's Motion for Partial Summary Judgment (doc. 26) should be granted as to his breach of contract claim premised on water damage and denied in all other respects. Defendant's Amended Motion for Summary Judgment (doc. 33) should be granted as to emotional distress damages, and denied in all other respects. The parties' requests for oral argument are denied as unnecessary. As a result, plaintiff's entitlement to coverage under the Policy is established. The parties shall confer and provide the Court with a Joint Status Report concerning the remaining issues in this case and a proposed case management schedule within 30 days of the District Judge's ruling.
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.