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American Hallmark Insurance Company of Texas v. Journey Built Homes, LLC

United States District Court, D. Oregon

December 30, 2014

JOURNEY BUILT HOMES, LLC, an Oregon limited liability company; and JENNIFER WERNER, an individual, Defendants.


MICHAEL J. McSHANE, District Judge.

Plaintiff American Hallmark Insurance Company of Texas ("American Hallmark") moves for summary judgment, arguing it has no duty to indemnify its insured, Journey Built Homes, LLC. ("Journey Built"). Because the policy exclusions at issue do not entirely preclude coverage, American Hallmark's motion for summary judgment, ECF No. 47, is GRANTED in part.


Defendant Jennifer Werner hired Journey Built as a general contractor to perform fairly substantial additions and renovations to Werner's home. Several decisions during construction led to significant damages. The parties are intimately familiar with the facts, and I need not go into too much detail here as to the damage to Werner's home.

The addition consisted of an added guest suite, guest bathroom, front entryway, screened porch, and garage. (Rossmiller Decl. ¶ 2, Ex. 1). Jennifer Werner had construction plans drawn up and gave these plans to Journey Built. Journey Built had no involvement with the original design of the addition. (Roberts Decl. ¶ 2, Ex. 1). Journey Built deviated from Werner's original plans. Journey Built changed the foundation system from the concrete slab called for in the original plans to a post and pier system, and though Journey Built contacted Hill & Dale Engineering to receive approval, he did not receive a reworked construction plan or new engineering calculations for the post and pier foundation. (Rossmiller Decl. ¶ 4, Ex. 2). The redesigned foundation system built by Journey Built proved insufficient to support the residence, causing a depression in the guest suite floor and in the marble tile floor in the guest suit bathroom. (Rossmiller Decl. at ¶ 5, Ex. 4).

Journey Built also installed trusses to support the roof in the guest suite and garage. During construction, Journey Built discovered a wellhead near the residence and had to alter the location of the addition's outer wall to avoid it; therefore, Journey Built requested that the trusses be redesigned and reengineered. (First Journey Built Dep. At 47:11049:13). The altered truss design caused the trusses to bear unequal loads, and in combination with the inadequate foundation, caused cosmetic cracks to appear in the ceiling of the addition. (Rossmiller Decl. ¶ 6, Ex. 5). In altering the location of the outer wall, Journey Built also requested that Hill & Dale reengineer the support for the entryway. Rossmiller Decl. ¶ 7, Ex. 6). After Hill and Dale did so, Journey Built installed a girder truss in place of the beam called for in the original plan for the addition. The engineering of the substituted girder truss was not properly done, causing the truss to separate from the wall and crack, damaging the finishes below the front entry hallway. (Rossmiller Decl. ¶ 5, Ex. 4).

Werner filed a complaint against Journey Built in state court. American Hallmark defended Journey Built in that case, subject to a reservation of rights. The case went to binding arbitration. Ultimately, the arbitrator found for Werner and awarded $262, 652.16 in damages.

American Hallmark then brought this action, arguing that under certain exclusions in the policy, it has no duty to indemnify Journey Built. Werner argues genuine questions of material fact preclude summary judgment.


The court must grant summary judgment if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). An issue is "genuine" if a reasonable jury could return a verdict in favor of the non-moving party. Rivera v. Phillip Morris, Inc., 395 F.3d 1142, 1146 (9th Cir. 2005) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A fact is "material" if it could affect the outcome of the case. Id. The court reviews evidence and draws inferences in the light most favorable to the non-moving party. Miller v. Glenn Miller Prods., Inc., 454 F.3d 975, 988 (9th Cir. 2006) (quoting Hunt v. Cromartie, 526 U.S. 541, 552 (1999)). When the moving party has met its burden, the nonmoving party must present "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (quoting Fed.R.Civ.P. 56(e)).


This case turns on the interpretation of an insurance policy. Therefore, I must ascertain the intention of the parties to the policy. Hoffman Constr. Co. of Alaska v. Fred S. James & Co. of Oregon, 313 Or. 464, 469 (1992). I first turn to the language of the policy. Id. (citing ORS 742.016 (except in cases not relevant here, "every contract of insurance shall be construed according to the terms and conditions of the policy.")). If the terms and conditions of the policy are ambiguous following a plain meaning review, the court considers the terms and conditions in the particular context used and then, if necessary, in the context of the policy as a whole. Id. at 470. If any ambiguity remains-meaning if two or more plausible interpretations of the term remain-the court resolves the ambiguity against the drafter and in favor of the insured. Id. Courts examine the policy language from the perspective of the ordinary purchaser of insurance. North Pacific Ins. Co., v. American Mfrs. Mut. Ins. Co., 200 Or.App. 473, 478 (2005).

The insurer has the burden of proof to show any loss is excluded. Stanford v. Am. Guar. Life Ins. Co., 280 Or. 525, 527 (1977). "[A]ny ambiguity in an exclusionary clause is strictly construed against the insurer." Id.

The policy states American Hallmark "will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury' or property damage' to which this insurance applies." Policy, § 1 - Coverages, 1(a). As noted, the arbitrator awarded Werner $262, 652.16 in damages against Journey Built. That amount is a ceiling of sorts, as it is the amount Journey Built is legally obligated ...

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