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Navigators Ins. Co. v. Hamlin

United States District Court, D. Oregon

March 10, 2015

NAVIGATORS INSURANCE COMPANY, Plaintiff,
v.
SUNNY HAMLIN, Defendant

Page 1182

For Navigators Insurance Company, Plaintiff, Counter Defendant: Christopher E. Hawk, LEAD ATTORNEY, Gordon & Rees LLP, Portland, OR; Kimberly A. Ashmore, Leland H. Jones, IV, LEAD ATTORNEYS, PRO HAC VICE, Wiley Rein LLP, Washington, DC.

For Sunny Hamlin, Defendant, Counter Claimant: Sean W. Carney, LEAD ATTORNEY, Michael E. Farnell, Parsons Farnell & Grein, LLP, Portland, OR.

Page 1183

OPINION AND ORDER

Michael McShane, United States District Judge.

Plaintiff Navigators Insurance Company (" Navigators" ) and Defendant Sunny Hamlin (" Hamlin" ) each filed motions for summary judgment to determine the availability of insurance coverage for a claim by Hamlin (the " Hamlin Claim" ) against Navigators' insured, Michael A. Blackburn

Page 1184

(" Blackburn" ). Because Blackburn did not act within the scope of his professional services, and because the Personal Profit Exclusion excludes coverage for the Hamlin Claim, Navigators' motion for summary judgment, ECF No. 16, is GRANTED.

BACKGROUND

In 2008, Hamlin hired Blackburn, a certified public accountant (" CPA" ), as part of Hamlin's divorce from her husband of over 30 years. Hamlin and Blackburn remained friends after the divorce proceedings concluded, and Hamlin continued to use Blackburn's services for her tax returns. In 2009, Hamlin contacted Blackburn to see if she could earn a higher return on her money by investing with him. Between April 2009 and June 2011, Hamlin loaned Blackburn $660,000, secured by six separate promissory notes, at progressively higher rates of interest. Hamlin's understanding was that Blackburn would invest the money with local businessmen who needed short-term loans,[1] but Blackburn never invested any of Hamlin's money with a third party. Blackburn eventually defaulted on the promissory notes, and on December 18, 2012, Hamlin filed the Hamlin Claim against Blackburn alleging breach of contract and breach of fiduciary duty. Shortly after being deposed in September 2013, Blackburn committed suicide.

On February 5, 2014, Navigators filed this declaratory judgment action seeking a declaration that it had no duty to defend or indemnify Blackburn in connection with the Hamlin Claim. Hamlin filed a cross-motion for summary judgment seeking a declaration that the professional liability insurance policy provides coverage for the Hamlin Claim. The parties submitted a joint stipulation of facts for purposes of summary judgment. See ECF No. 17.

STANDARDS

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, 106 S.Ct. 2505, 91 L.Ed.2d 202 (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, 119 S.Ct. 1545, 143 L.Ed.2d 731 (1999)). When the moving party has met its burden, the non-moving 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, 106 S.Ct. 1348, 89 L.Ed.2d 538 (quoting Fed.R.Civ.P. 56(e)).

DISCUSSION

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, 836 P.2d 703 (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

Page 1185

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. N. Pac. Ins. Co., v. Am. Mfrs. Mut. Ins. Co., 200 Or.App. 473, 478, 115 P.3d 970 (2005).

Under Oregon law, the initial burden of proving coverage is on the insured. Employers Ins. of Wausau v. Tektronix, Inc., 211 Or.App. 485, 509, 156 P.3d 105 (2007). Conversely, the insurer has the burden of proof to show any loss is excluded. Stanford v. Am. Guar. Life Ins. Co., 280 Or. 525, 527, 571 P.2d 909 (1977). " [A]ny ambiguity in an exclusionary clause is strictly construed against the insurer." Id.

The policy at issue states that Navigators " will pay on behalf of the Insured all sums in excess of the deductible that the Insured shall become legally obligated to pay . . . by reason of an act or omission, including personal injury, in the performance of professional services by the Insured[.]" ECF No. 1; Ex. 1, Sec. I.A. Because Blackburn's conduct fell outside the scope of his professional services, Hamlin cannot satisfy her burden to show that the policy provides coverage for the Hamlin Claim. Even if Blackburn acted in the performance of professional services, the Personal Profit Exclusion absolves Navigators of the duty to indemnify or defend Blackburn in connection with the Hamlin Claim.[2]

I. DUTY TO INDEMNIFY

Under Oregon insurance law, the duty to indemnify is independent of the duty to defend. Ledford v. Gutoski, 319 Or. 397, 403, 877 P.2d 80 (1994). Liability for indemnity, unlike liability under the duty to defend, derives from factual determinations separate from the allegations in the complaint. Am. States Ins. Co. v. Dastar Corp., 318 F.3d 881, 890 (9th Cir. 2003). As a result, Navigators could still have a duty to indemnify even if it did not have a duty to defend. Id. In order ...


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