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Bjugan v. State Farm Fire & Cas. Co.

United States District Court, D. Oregon

August 28, 2013


For Plaintiffs: Robert E.L. Bonaparte, Shenker & Bonaparte, LLP, Portland, OR.

For Defendant: Douglas F. Foley, Douglas Foley & Associates, PLLC, Vancouver, WA.

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DENNIS J. HUBEL, United States Magistrate Judge.

This case involves a renter who " maintained," if that is the right word, ninety-five cats and two dogs in a rental house and the manner in which the animals were

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maintained resulted in physical damage to the house. The owner of the rental house seeks coverage under defendant's policy of insurance for the damage to the house. The defendant denies the damage is covered as it is identified in the policy as a " Loss Not Insured."


Plaintiffs Troy and Ashli Bjugan (collectively, " the Bjugans" ) own a rental home located at 21516 S.E. Foster Road, Damascus, Oregon. Defendant State Farm Fire and Casualty Company (" State Farm" ) issued an insurance policy covering the Bjugans' rental home. The policy states that State Farm " insure[s] for accidental direct physical loss to the property described in Coverage A and B, except as provided in Section I -- Losses Not Insured." (Bjugan Decl. Ex. 1 at 1.) The portion of the policy entitled " Section I -- Losses Not Insured" provides, in relevant part: " [State Farm] do[es] not insure for loss to the property described in Coverage A and B either consisting of, or directly and immediately caused by . . . birds, vermin, rodents, insects or domestic animals ." (Bjugan Decl. Ex. 1 at 1) (emphasis added).

In late October 2011, the Clackamas County Sheriff's Office (" CCSO" ) obtained a search warrant for the Bjugans' rental home, which was occupied at the time by Ronnie Sandberg (" Sandberg" or " the renter" ), on the basis of complaints from area residents of animal neglect, firsthand observations and information provided by Damascus city officials. What they discovered in the ensuing search was described as " deplorable and unhealthy conditions." (Foley Decl. Ex. A at 8.) Entering the home required the use of protective clothing and respirators because the interior walls and floors were covered with animal urine and feces. (Foley Decl. Ex. A at 8.) The Oregon Humane Society (" OHS" ) ultimately removed ninety-five cats and two dogs from Sandberg's residence. One dog was nearly blind from a chronic, painful dry eye condition while the other could barely use his hind legs; 30% of the cats were emaciated; 90% of the cats required medical attention or surgical intervention; and 30% of the cats had some type of ocular condition, ranging from ocular discharge to infections so severe that the cats' eye(s) had to be removed under anesthesia.

Not long afterwards, the Bjugans sought to recover the cost of repairing the damage caused by Sandberg from State Farm. Relying on the provision in the insurance policy that excludes from coverage damage caused by " domestic animals," State Farm denied the Bjugans' claim. The Bjugans then brought this diversity action against State Farm on August 7, 2012, alleging breach of their insurance policy and breach of the implied covenant of good faith and fair dealing. State Farm and the Bjugans now move for summary judgment and partial summary judgment, respectively.

Legal Standard

Summary judgment is appropriate " if pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Summary judgment is not proper if factual issues exist for trial. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995).

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, 106 S.Ct. 2548, 91 L.Ed.2d 265 (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 .

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at 324. A nonmoving party cannot defeat summary judgment by relying on the allegations in the complaint, or with unsupported conjecture or conclusory statements. Hernandez v. Spacelabs Medical, Inc., 343 F.3d 1107, 1112 (9th Cir. 2003). Thus, 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 of proof at trial." Celotex, 477 U.S. at 322.

The court must view the evidence in the light most favorable to the nonmoving party. Bell v. Cameron Meadows Land Co., 669 F.2d 1278, 1284 (9th Cir. 1982). All reasonable doubt as to the existence of a genuine issue of fact should be resolved against the moving party. Hector v. Wiens, 533 F.2d 429, 432 (9th Cir. 1976). Where different ultimate inferences may be drawn, summary judgment is inappropriate. Sankovich v. Life Ins. Co. of N. Am., 638 F.2d 136, 140 (9th Cir. 1981).

However, deference to the nonmoving party has limits. The nonmoving party must set forth " specific facts showing a genuine issue for trial." Fed.R.Civ.P. 56(e). The " mere existence of a scintilla of evidence in support of plaintiff's positions [is] insufficient." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Therefore, where " the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (internal quotation marks omitted).

Oregon Insurance Law

Under Oregon law, the insureds (the Bjugans) have the burden to prove a loss comes within a coverage granted by the policy, while the insurer (State Farm) has the burden to prove a loss is within an exclusion of the policy. ZRZ Realty Co. v. Beneficial Fire & Cas. Ins. Co., 349 Or. 117, 127, 241 P.3d 710 (2010); Stanford v. Am. Guaranty Life Ins. Co., 280 Or. 525, 527, 571 P.2d 909 (1977) (insurer has the burden to prove an exclusion); Lewis v. Aetna Ins. Co., 264 Or. 314, 316, 505 P.2d 914 (1973) (insured has the burden to prove coverage).

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. Mutual of Enumclaw Ins. Co., 329 Or. 303, 307, 985 P.2d 1284 (1999) (citation omitted); see also Hoffman Constr. Co. v. Fred S. James & Co., 313 Or. 464, 469, 836 P.2d 703 (1992) (" [T]he primary and governing rule of the construction of insurance contracts is to ascertain the intention of the parties." ) (internal quotation omitted). The court determines the parties' intent " from the terms and conditions of the policy." Groshong, 329 Or. at 307.

A term is ambiguous if two or more plausible interpretations of that term withstand scrutiny, i.e., continues to be reasonable after the interpretations are examined in the light of, among other things, the particular context in which that term is used in the policy and the broader context of the policy as a whole. Hoffman, 313 Or. at 470.

When the policy does not define the terms at issue, the court " resort[s] to various aids of interpretation to discern the parties' intended meaning." Groshong, 329 Or. at 307-08. The court first examines the plain meaning of the term at issue. Id . at 308. If the meaning of the term or phrase at issue is not plain on its face, the court proceeds to its second aid to interpretation:

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" examin[ing] the phrase in light of the particular context in which . . . [it] is used in the policy and the broader context of the policy as a whole." Id . at 312 (internal quotation marks omitted).

If, after application of such analysis, the court determines that the term is ambiguous, the court may then consider extrinsic evidence in interpreting the insurance contract. See Mutual Ins. Co. v. Mitsubishi Silicon Am. Corp., 164 Ore.App. 385, 397-98, 992 P.2d 479 (1999) (court may consider extrinsic evidence in interpreting an insurance contract only if it first finds the policy to be ambiguous). Finally, if there is no relevant extrinsic evidence to consider or the term remains ambiguous, the term is to be construed against the insurer, the party which drafted the policy. Groshong, 329 Or. at 312. As the Hoffman court explained:

[W]hen two or more competing, plausible interpretations prove to be reasonable after all other methods for resolving the dispute over the meaning of particular words fail, then the rule of interpretation against the drafter of the language becomes applicable, because the ambiguity cannot be permitted to survive. It must be resolved.

Id . at 470-71.

On the other hand, 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 Mutual Auto. Ins. Co., 67 Ore.App. 623, 627, 679 P.2d 879 (1984) (where contract language is unambiguous, courts will " apply those terms and will not create cover age where none was intended by the contract." )

Policy Terms

The Bjugans' policy provides, in ...

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