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Leander Land & Livestock, Inc. v. American Economy Insurance Co.

United States District Court, Ninth Circuit

November 1, 2013


Leander Land & Livestock, Inc., c/o Mary L. Sparacino, Bandon, Oregon, Pro se plaintiff.

John A. Bennett, Andrew E. Passmore, Bullivant Houser Bailey, P.C., Portland, Oregon, Attorneys for defendant.


ANN AIKEN, District Judge.

Defendant American Economy Insurance Company ("American") filed a second motion for summary judgment on plaintiff Leander Land & Livestock, Inc.'s ("Leander") breach of contract claim pursuant to Fed.R.Civ.P. 56. For the reasons set forth below, American's motion is granted and this case is dismissed.


In 2007, Mary Sparacino incorporated Leander under Oregon law. William Hollingsworth, with whom Sparacino was romantically involved at all relevant times, assisted in the creation of Leander. In March 2008, Leander purchased a commercial property ("Building") located in North Bend, Oregon, for $425, 000, from Exclusive Transport, Inc. Sparacino, the sole shareholder of Leander, was informed about the Building by Hollingsworth, whose sister was associated with Exclusive Transport, Inc. Hollingsworth was also renting an office from and living at the Building prior to its transfer to Leander.

In March 2009, Leander obtained an "Ultra Select Policy No. 02-BP-809149-1" ("Policy") from American, which insured Leander against any direct physical loss of or damage to the Building. In early May 2009, Leander listed the Building for sale for $550, 000. On May 24, 2009, the Building was destroyed by a fire ("Fire") that was intentionally ignited by an unknown individual. Thereafter, Leander tendered a claim to American. After investigating the Fire, American denied Leander's claim based on the "Concealment, Misrepresentation or Fraud Provision" ("Misrepresentation Clause"[1]) and the "Vacancy Provisions" ("Vacancy Exception"[2]) of the Policy.

On November 28, 2011, Leander filed a contract claim in the Lane County Circuit Court, alleging that American's non-payment for Building damage caused by the Fire constituted breach of the Policy. On December 30, 2011, American removed Leander's action to this Court. On December 31, 2012, American moved for summary judgment under the Policy's Vacancy Exception. On March 7, 2012, the parties tried unsuccessfully to settle their case. On April 21, 2013, this Court granted in part and denied in part American's motion. In relevant part, the Court held that the Building was vacant for 60 days prior to the Fire; central to this determination was the Court's application of the sham affidavit rule to Sparacino's inconsistent sworn statements concerning Building tenancy.

On July 10, 2013, American filed a second motion for summary judgment pursuant to the Misrepresentation Clause. On July 29, 2013, the parties stipulated to allow Leander additional time to oppose American's motion. On August 16, 2013, Leander's counsel moved to withdraw as attorney of record. On September 23, 2013, this Court granted counsel's motion to withdraw and extended the deadline for Leander to respond to American's motion until October 15, 2013, in order to allow Leander time to obtain new counsel if desired. As of the date of this decision, the court notes that Leander has neither filed an opposition to American's second motion for summary judgment nor procured substitute counsel. The court will therefore assume plaintiff intends to proceed pro se in this matter.


Summary judgment is appropriate if the pleadings, depositions, affidavits, answers to interrogatories, 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. P. 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 a dispute. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986).

The moving party has the burden of establishing the absence of a genuine issue of material fact. 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 are 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.


American contends that the Misrepresentation Clause applies, thereby voiding the Policy, because "[a]t different times during the adjustment of the claim and this litigation, [Sparacino] has represented that the building had no tenants prior to the fire, had eighteen tenants prior to the fire, and had three tenants prior to the fire." Def.'s Mem. in Supp. of Second Mot. Summ. J. 10. As a result of Sparacino's alleged material misrepresentations, American asserts that it was required to spend additional time and resources investigating Leander's claim, such that it is now entitled to summary judgment.

"A misrepresentation after the loss as to a single material fact will forfeit the entire insurance contract." Henricksen v. Home Ins. Co. , 237 Or. 539, 542 n.1, 392 P.2d 324 (1964) (citation omitted). Thus, in order to avoid coverage under both the Misrepresentation Clause and Oregon law, the insurer must establish, by a preponderance of the evidence, that: (1) the insured misrepresented or concealed a material fact; (2) the insured did so knowingly or recklessly; and (3) the insurer detrimentally relied on the misrepresentation or concealment. See Allstate Ins. Co. v. Breeden, 216 Fed.Appx. 655, 658 (9th Cir. 2007) (citing Or. Rev. Stat.ยง 742.208); Mut. of Enumclaw Ins. Co. v. McBride , 295 Or. 398, 400, 667 P.2d 494 (1983).

I. Misrepresentation or Concealment of a Material Fact

The record contains four relevant and inconsistent sources of testimony from Sparacino regarding whether the Building was vacant prior to the Fire: the April 7, 2010 Examination Under Oath ("EUO"); the April 11, 2011 "Corrections to the EUO"; the September 9, 2011 EUO; and Leander's interrogatory response, dated June 1, 2012.

In April 2010, American deposed Sparacino. See Am. Passmore Decl. Ex. A. "During the deposition, Sparacino was represented by counsel and was expressly notified that she must give truthful answers under oath because a false answer or misrepresentation or concealment may nullify coverage under the Policy and any contrary testimony could be used against her at trial." Leander, 2013 WL 1786348 at *3 (citations and internal quotations omitted). In pertinent part, Sparacino provided testimony regarding who was occupying the Building prior to Leander's acquisition of it in March 2008:

Q: So when you visited the building, [d]id you ever see any other people in the building besides Mr. Hollingsworth?
A: No.
Q: Did Mr. Hollingsworth ever tell you, prior to January 2008, that any other businesses were renting ...

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