Ionian Corp. v. Country Mut. Ins. Co.

IONIAN CORP., an Oregon corporation, Plaintiff,

v.COUNTRY MUTUAL INSURANCE COMPANY, a foreign corporation, Defendant/ Interpleader Plaintiff,

v.IONIAN CORP., an Oregon corporation,PRECISION SEED CLEANERS INC., an Oregon corporation, Interpleader Defendants.

No. 3:10-cv-0199-HZ

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON PORTLAND DIVISION

Dated: July 17, 2012

OPINION & ORDER

Gordon T. Carey

Attorney at Law

Portland, Oregon 97205

Attorney for Plaintiff

Frederick M. Millard

Douglas M. Bragg

MILLARD & BRAGG

Attorneys for Interpleader Defendant Precision Seed Cleaners, Inc.

HERNANDEZ, District Judge:

At stake in this interpleader action is the right to insurance proceeds deposited with the Court by Country Mutual Insurance Company. Country Mutual paid the proceeds as a result of an August 25, 2009 fire which destroyed a building Country Mutual insured at the time and which Ionian had leased to Precision Seed Cleaners (PSC). Presently, PSC moves for summary judgment on the limited issue of whether Ionian, assuming it was named as an additional insured in the insurance policy issued by Country Mutual to PSC, is limited to liability coverage only. For the reasons explained below, I grant the motion.

STANDARDS

Summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party bears the initial responsibility of informing the court of the basis of its motion, and identifying those portions of "'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absenceof a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed. R. Civ. P. 56(c)).

Once the moving party meets its initial burden of demonstrating the absence of a genuine issue of material fact, the burden then shifts to the nonmoving party to present "specific facts" showing a "genuine issue for trial." Fed. Trade Comm'n v. Stefanchik, 559 F.3d 924, 927-28 (9th Cir. 2009) (internal quotation omitted). The nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Celotex, 477 U.S. at 322-23.

The substantive law governing a claim determines whether a fact is material. Suever v. Connell, 579 F.3d 1047, 1056 (9th Cir. 2009). The court draws inferences from the facts in the light most favorable to the nonmoving party. Long v. City & County of Honolulu, 511 F.3d 901, 905 (9th Cir. 2007).

If the factual context makes the nonmoving party's claim as to the existence of a material issue of fact implausible, that party must come forward with more persuasive evidence to support his claim than would otherwise be necessary. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

DISCUSSION

During the pendency of this case, all parties, including Country Mutual, have assumed that if Ionian was an additional insured on the insurance policy in effect at the time of the fire, Ionian had a claim to the proceeds of the policy. Much of the litigation has focused on whether Ionian was an additional insured under the policy. As explained in Judge Stewart's September 27, 2011 Finding & Recommendation (dkt #125), which I adopted in a December 2, 2011 Order¹ (dkt #133), there is a factual dispute requiring resolution by a jury as to whether PSC consented to Ionian becoming an additional insured on the policy. Trial is set for September 11, 2012.

PSC assumes for the purposes of its motion that Ionian is an additional insured under the policy. Nonetheless, PSC argues that the plain language of the policy limits Ionian to liability coverage only and does not include coverage for the property damage at issue in this case.

The "question of [insurance] policy interpretation is one of law, and [the court's] task is to determine the intent of the parties[.]" Groshong v. Mut. of Enumclaw Ins. Co., 329 Or. 303, 307, 985 P.2d 1284, 1287 (1999); see also Hoffman Constr. Co. of Alaska v. Fred S. James & Co. of Or., 313 Or. 464, 469, 836 P.2d 703, 706 (1992) ("[T]he primary and governing rule of the construction of insurance contracts is to ascertain the intention of the parties.") (internal quotation marks and brackets omitted). The court determines the parties' intent "from the terms and conditions of the policy." Groshong, 329 Or. at 307, 985 P.2d at 1287. Where the contract unambiguously expresses the intent to provide coverage or to not provide coverage, the contract language is controlling. See Allstate Ins. Co. v. State Farm Mut. Auto. Ins. Co., 67 Or. App. 623, 627, 679 P.2d 879, 881 (1984) (where contract language is unambiguous, courts will "apply those terms and will not create coverage where none was intended by the contract.").

PSC relies on a policy endorsement entitled "Additional Insured - Multiple Interests." Ex. 1 to Dale Hussemann Affid. at p. 147.² This endorsement provides that "Who is an Insured" is amended "to include as an insured any person(s) or organization(s) shown in the Schedule, butonly with respect to liability arising out of your operations or premises . . . leased, or rented by you, subject to the following." Id. It continues: "If the person(s) or organization(s) shown in the Schedule . . . [i]s an owner . . . from whom you have leased land, this insurance is limited to their liability arising out of the ownership, maintenance or use of the premises or land leased to you[.]" Id.

Both Ionian and PSC agree that the endorsement amends the Commercial General Liability Coverage Form so that as to liability coverage, an additional insured is protected for liability to a third party for damages arising out of the additional insured's ownership of premises or land leased to the insured. PSC argues that because this policy endorsement limits coverage for an additional insured to liability only, there is no coverage for an additional insured resulting from property damage to the additional insured's own property.

In response, Ionian notes that the "Additional Insured - Multiple Interests" endorsement applies to and amends only the Commercial General Liability Coverage³ , and does not apply to the commercial property coverage which is a separate part of the policy. Ionian contends that its right to the insurance proceeds at issue here is under the Building and Personal Property Coverage portion of the policy and thus, the "Additional Insured - Multiple Interests" endorsement is irrelevant to Ionian's claim.

As seen in the Common Policy Declarations, the policy in its entirety has three coverage parts: (1) commercial property coverage; (2) commercial general liability coverage; and (3) commercial inland marine coverage. Id. at p. 43. The "Named Insured" for all parts is PSC andthe policy period is from July 24, 2009 to January 8, 2010. Id. The Schedule of Forms and Endorsements segregates the various parts of the policy into four parts: (1) common policy forms and endorsements; (2) property forms and endorsements; (3) general liability forms and endorsements; and (4) inland marine forms and endorsements. Id. at pp. 45-47. The Schedule of Locations includes the location of the premises leased by PSC from Ionian. Id. at p. 49 (including 8765 Pueblo Avenue, Brooks, Oregon 97305 as one of the scheduled locations); see also Ex. 2 to Kyle Sturm Decl. (lease between Ionian and PSC for premises located at 8765 Pueblo Avenue in Brooks, Oregon) (dkt #16).

The "Additional Insured - Multiple Interests" endorsement falls under the forms and endorsements for liability coverage. Ex. 1 to Hussemann Affid. at p. 45. The endorsement clearly amends only the general commercial liability coverage provided by Country Mutual to PSC, and does not affect the separate coverage for commercial property. I agree with Ionian that the limitation provided by the "Additional Insured - Multiple Interests" endorsement is not a limitation on the commercial property coverage part of the policy.

The Building and Personal Property Coverage Form, under which Ionian claims coverage, states that "[t]hroughout this policy the words 'you' and 'your' refer to the Named Insured shown in the Declarations." Id. at p. 79. The grant of coverage under this form provides that Country Mutual "will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss." Id. Accordingly, under the plain language of the policy, there must be (1) direct physical loss or damage, (2) to covered property, (3) at the premises described in the declarations, which is (4) caused by or resulting from a covered cause of loss. Neither Ionian nor PSC, nor Country Mutualfor that matter, raise an issue as to any of these conditions of coverage. Thus, it appears undisputed that there was direct physical loss to covered property at the premises described which was caused by a covered loss. Ionian argues that because the Building and Personal Property Form provides coverage for the fire loss in this case and does not exclude "additional insureds," but instead excludes only certain causes of loss such as earth movement, governmental action, nuclear hazards, floods, and the like, the loss is covered and payable to Ionian.

PSC points out that the "Additional Insured - Multiple Interests" endorsement is the only time "additional insureds" are mentioned in the entire policy. No part of the Building and Personal Property Coverage Form mentions "additional insureds." The only language regarding payment appears in Section 4 which primarily addresses Country Mutual's right to determine whether it will pay the value of the lost or damaged property or pay the cost of repairing or replacing that lost or damaged property. Id. at p. 88. Subsection 4d includes the word "you," previously defined to be the Named Insured, in stating that Country Mutual "will not pay...