LOWELL E. PATTON, Plaintiff-Appellant,
MUTUAL OF ENUMCLAW INSURANCE COMPANY, a Washington corporation, Defendant-Respondent, and HOPP INSURANCE AGENCY, INC., an Oregon corporation; and RANDY W. HOPP, Defendants
Argued and Submitted: September 13, 2013.
Multnomah County Circuit Court. 031112054. Henry C. Breithaupt, Judge pro tempore.
Helen C. Tompkins argued the cause for appellant. On the briefs was Robert K. Udziela.
Thomas M. Christ argued the cause for respondent. With him on the brief was Cosgrave Vergeer Kester LLP.
Before Armstrong, Presiding Judge, and Nakamoto, Judge, and Egan, Judge.
[266 Or.App. 156] NAKAMOTO, J.
This insurance coverage case comes before us a second time. In the first appeal, Patton v. Mutual of Enumclaw Ins. Co., 238 Or.App. 101, 242 P.3d 624 (2010), rev den, 349 Or. 654, 249 P.3d 542 (2011) ( Patton I ), this court reversed a judgment for plaintiff on his breach of contract claim on a homeowners' insurance policy and remanded for a new trial. On remand, the trial court granted the motion for summary judgment filed by defendant Mutual of Enumclaw Insurance Company (defendant or MOE), ruling that, under the terms of the policy as written, and as interpreted by this court in Patton I, plaintiff's claim was untimely. The trial court then entered a general judgment in defendant's favor. Plaintiff appeals. We review for errors of law and, for the reasons set forth below, reverse and remand.
In addition to basic coverage, and coverage for loss of use and damage to personal property, plaintiff's policy included an endorsement for " guaranteed replacement cost" of the house. Patton I, 238 Or.App. at 103-04. Pursuant to that endorsement, in the event of loss, as an alternative to payment of the basic coverage liability limit, MOE agreed to pay:
" not more than the lesser of:
" 1. The replacement cost of that part of the building damaged for like construction and use on the same premises; or
" 2. The necessary amount required to repair or replace the damaged building."
As relevant to this appeal, the policy contains the following additional terms explaining that covered losses were to be settled as follows:
" (4) We will pay no more than the actual cash value of the damage unless:
[266 Or.App. 157] " (a) actual repair or replacement is complete; or
" (b) the cost to repair or replace the damage is both:
" (i) less than 5% of the amount of insurance in this policy on the building; and
" (ii) less than $2,500.
" (5) You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss or damage to buildings on an actual cash value basis. You may then make claim within 180 days after loss for additional liability on a replacement cost basis."
An additional endorsement, which we refer to as the " no-action" clause, provides that " [n]o action can be brought unless the policy provisions have been complied with and the action is started within two years after the date of loss."
Plaintiff's house burned down on November 8, 2001 (thus giving plaintiff, under the terms of the policy, until November 8, 2003, to bring suit against MOE). Patton I, 238 Or.App. at 105. Plaintiff made a claim under the policy and notified MOE of his intent to invoke the policy's replacement-cost endorsement. Id. In the ensuing months, plaintiff received several estimates for the cost of replacing his home: one for between $3.6 and $4 million, a second for $3.858 million, and a third--obtained by MOE's adjuster from Oregon Home Improvement Company (OHI)--for $1.544 million. Id.
Plaintiff did not begin reconstruction at that time because he was initially unable to
obtain the required building permit. Id. After plaintiff notified MOE of the problem, plaintiff received several letters from MOE's attorney, Smith, reminding plaintiff that he could not recover replacement costs until reconstruction was complete and that he only had two years from the date of the fire to bring any action against MOE. Id. at 106-09. Approximately two months before the second anniversary of the fire, plaintiff entered into a construction contract to rebuild the home at a cost over twice the estimate that MOE had obtained from OHI. Id. at 110.
Shortly before the second anniversary of the fire, plaintiff filed a complaint against MOE. Due to continuing [266 Or.App. 158] delays in the permitting process, plaintiff had not yet begun reconstruction. Plaintiff sought a declaration that, under the policy, MOE was obligated to compensate plaintiff for replacement costs incurred more than two years from the date of loss. Plaintiff further alleged that MOE had breached the policy by refusing to pay replacement costs in excess of the amount of OHI's bid. Id. at 110.
In Patton I, MOE moved for summary judgment on both the breach of contract and declaratory judgment claims. Id. at 117 n 6. With regard to plaintiff's claim for declaratory relief, defendant argued that the policy required completion of construction as a condition for payment of replacement cost benefits and that plaintiff had not yet replaced the home. Id. at 110. Specifically, MOE argued that,
" as a matter of law, the unambiguous terms of the policy did not allow for recovery of replacement costs for work completed more than two years from the date of loss. MOE pointed out that the 'settlement of loss' section of the policy requires that, in order to recover damages in excess of 'actual cash value of the damage,' the actual repair or replacement must be complete. In MOE's view, that requirement is a 'policy provision' that must be complied with in order to recover replacement costs. MOE asserted that, in light of the two-year limitation on filing suit, and in view of the further requirement that '[n]o action can be brought unless the policy provisions have been complied with,' necessarily, the replacement of a residence ...