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Muller v. Country Mutual Insurance Co.

United States District Court, D. Oregon

February 8, 2017

STEPHEN and RENA MULLER, Plaintiffs,

          ANDREW C. LAUERSDORF FRANCIS J. MALONEY, III SCOTT A. MACLAREN, Maloney Lauersdorf & Reiner, PC., ROBERT E.L. BONAPARTE Shenker & Bonaparte, LLP., Attorneys for Plaintiffs.

          DANIEL E. THENELL KIRSTEN L. CURTIS Thenell Law Group, P.C., Attorneys for Defendant.


          ANNA J. BROWN United States District Judge.

         This matter comes before the Court on Plaintiffs' Motion (#115) for Partial Summary Judgment as to Defendant's Affirmative Defense of "Concealment/Fraud." For the reasons that follow, the Court GRANTS Plaintiff's Motion.


         This action arises from Defendant Country Mutual Insurance Company's denial of coverage for a fire-loss claim submitted by i Plaintiffs Stephen and Rena Muller. The following facts are taken from the parties' summary-judgment materials and are undisputed unless otherwise noted.[1]

         Plaintiffs own property in La Grande, Oregon. Plaintiffs live on the property and also run an automotive machine business in a large commercial building on the property next to their home.

         Defendant issued three different insurance policies for Plaintiffs'' property, which covered damage to Plaintiffs' home, business structure, business personal property and equipment, personal property, business income, and automobiles.

         On November 18, 2012, a fire destroyed the commercial building and all of its contents. According to Plaintiffs, on the morning of the fire they left their home around 9:00 a.m. to visit friends in Klamath Falls for the Thanksgiving holiday. At approximately 1:15 p.m. while en route, Plaintiffs received a text message from neighbors that there was a fire on their property. Plaintiffs turned around and returned to their home in La Grande. Plaintiffs immediately reported the loss to Defendant.

         On November 20, 2012, the Oregon State Fire Marshal's Office issued an investigation report regarding the fire and concluded the cause of the fire was "undetermined." Also on approximately November 20, 2012, Plaintiffs' claim was referred by Defendant to a Special Investigation Unit (SIU).

         On November 21, 2012, Joe Buckley, Defendant's Claim Representative, conducted a recorded interview of Stephen Muller. On November 28, 2012, Ryan Fields and Nick Flynn, Defendant's special investigators, conducted recorded interviews of both Plaintiffs. On April 5, 2013, an attorney hired by Defendant conducted an examination of Plaintiffs under oath regarding the fire. In each instance Plaintiffs stated they did not know the cause of the fire and that they were not involved in either setting the fire or conspiring with another person to set the fire. At Defendant's reguest, Plaintiffs submitted proof-of-loss documents to Defendant, including repair estimates for the structure, business personal property and personal property inventories, and other supporting documentation regarding their loss from the fire.

         On June 27, 2013, Defendant's investigator issued an Investigation Summary regarding the origin of the fire and its cause. In the Summary Defendant's investigator concluded:

In total some 243 intentional ignition scenarios were considered and virtually all were eliminated except the intentional act. No accidental cause for the fire was found during the extensive examination of the structure. . . . These facts as well as those mentioned above support the opinion of a fire set intentionally by person(s) unknown.

         On July 29, 2013, Defendant issued a Notice of Denial of Coverage letter to Plaintiffs in which Defendant stated:

[Defendant's] investigation concludes that the November 28, 2012, loss was incendiary and that [Plaintiffs] intentionally caused and/or conspired to cause the loss.
Additionally, the policy is void when an insured makes a material misrepresentation. [Plaintiffs'] misrepresentations regarding the cause of the fire and their financial situations at the time of their recorded statements and examinations under oath were material to [Defendant's] investigation.

         On August 21, 2014, Plaintiffs filed a Complaint in this Court and alleged claims for breach of contract and tortious interference with business relationships. On May 29, 2015, Plaintiffs filed an Amended Complaint in which they allege a single claim of breach of contract based on (1) Defendant's failure to pay Plaintiffs' claim and (2) Defendant's alleged breach of the implied covenant of good faith and fair dealing when it failed to investigate the loss properly, to adjust the claim, and to pay Plaintiffs for the losses they sustained as a result of the fire.

         On August 7, 2015, Defendant filed an Answer, Defenses, and Affirmative Defenses to Plaintiffs' First Amended Complaint. Defendant alleges Plaintiffs' fire claim is excluded from coverage based on various terms of the applicable policies. Specifically, ...

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