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Colony Insurance Co. v. Victory Construction LLC

United States District Court, D. Oregon

March 9, 2017


          Andrew C. Lauersdorf MALONEY LAUERSDORF REINER, PC Attorney for Plaintiff

          Christopher B. Rounds ROUNDS LAW OFFICE PC Attorney for Defendants

          OPINION & ORDER

          MARCO A. HERNÁNDEZ United States District Judge

         Plaintiff Colony Insurance Company ("Colony Insurance") and Defendants Victory Construction LLC, dba Premier Pools and Spas of Oregon; and Vitaly Shavlovskiy (collectively "Victory Construction") bring cross-motions for summary judgment on the issue of whether Colony Insurance has a duty to defend and indemnify Victory Construction in two state court personal injury lawsuits. The parties submitted briefs and the Court held oral argument on March 8, 2017.

         The outcome of this case hinges upon whether carbon monoxide is a "pollutant" as defined in the parties' Commercial General Liability Insurance Policy ("Policy"), such that the Policy's "Hazardous Materials Exclusion" (hereinafter, "pollution exclusion") serves to exclude coverage for claims arising from alleged carbon monoxide poisoning. The Court concludes that the plain meaning of "pollutant, " as defined in the Policy, includes carbon monoxide. Thus, the Policy unambiguously excludes coverage for harm caused by carbon monoxide.

         Because the state court lawsuits are based on alleged carbon monoxide poisoning, Colony Insurance does not have a duty to defend and indemnify Victory Construction. The Court grants Colony Insurance's motion for summary judgment and denies Victory Construction's motion for summary judgment.


         I. State Court Actions

         Two lawsuits were filed in Clackamas County Circuit Court against Victory Construction. See Compl. Exs. A, B; ECF 1-1, 1-2. The lawsuits stem from the same incident. Id. The state court plaintiffs allege negligence in the installation and ventilation of a natural gas swimming pool heater and negligence in failing to warn of the risks of carbon monoxide poisoning associated with operating the heater in an insufficiently ventilated area. Id. The state court plaintiffs allege that, as a result of Victory Construction's negligence, excessive carbon monoxide filled the home and caused the plaintiffs to be sick. Id. The state court complaints allege damages resulting from the release of carbon monoxide from the heater. Id.

         II. The Policy

         Colony Insurance issued the Policy to Victory Construction. Defs.' Mot. Summ. J. Ex. B, ECF 15. The Policy includes a pollution exclusion clause which modifies the Policy. Id. at 12. The pollution exclusion provides that the Policy does not apply to:

(1) "Bodily injury, " "property damage, " or "personal and advertising injury" which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "hazardous materials" at any time.

Id. at 12. The pollution exclusion further defines "hazardous materials" as: "'pollutants, ' lead, asbestos, silica and materials containing them." Id. The Policy defines "pollutants" as: "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." Id. at 27. Thus, the Policy excludes coverage for injury or damage caused by "irritants" or "contaminants."


         Summary judgment is appropriate if 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). The moving party bears the initial responsibility of informing the court of the basis of its motion, and identifying those portions of'"the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, ' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)).

         Once the moving party meets its initial burden of demonstrating the absence of a genuine issue of material fact, the burden then shifts to the nonmoving party to present "specific facts" showing a "genuine issue for trial." Fed. Trade Comm'n v. Stefanchik, 559 F.3d 924, 927-28 (9th Cir. 2009) (internal quotation marks omitted). The nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Bias v. Moynihan, 508 F.3d 1212, 1218 (9th Cir. 2007) (citing Celotex, 477 U.S. at 324).

         The substantive law governing a claim determines whether a fact is material. Suever v. Connell 579 F.3d 1047, 1056 (9th Cir. 2009). The court draws inferences from the facts in the light most favorable to the nonmoving party. Earl v. Nielsen Media Research. Inc.. 658 F.3d 1108, 1112 (9th Cir. 2011).

         If the factual context makes the nonmoving party's claim as to the existence of a material issue of fact implausible, that party must come forward with more persuasive evidence to support his claim than would otherwise be necessary. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).


         The parties disagree about whether the pollution exclusion relieves Colony Insurance from its duty to defend and indemnify Victory Construction in the underlying state court lawsuits.[1]The only plausible interpretation of the Policy's terms results in the conclusion that carbon monoxide is a pollutant. Thus, the pollution exclusion applies to damages caused by carbon monoxide and, therefore, Colony Insurance has no duty to defend or indemnify Victory Construction.

         I. Oregon Law

         Oregon law governs this Court's construction of the Policy and, thus, Colony Insurance's duty to defend and indemnify. Larson Constr. Co. v. Or. Auto. Ins. Co., 450 F.2d 1193, 1195 (9th Cir. 1971); Allstate Ins. Co. v. Morgan, 123 F.Supp.3d 1266, 1272 (D. Or. 2015). The insured bears the burden of proving coverage while the insurer has the burden of proving exclusion from coverage. Id. (citing ZRZ Realty Co. v. Beneficial Fire & Cas. Ins. Co.. 349 Or. 117, 127, 241 P.3d 710 (2010)). If the insurer can establish that the insured is precluded from coverage, it has neither the duty to defend nor the duty to indemnify the insured. Id.

         "Whether an insurer has a duty to defend presents a question of law, which is determined by comparing the terms of the insurance policy with the allegations of the complaint against the insured." Drake v. Mut. of Enumclaw Ins. Co., 167 Or.App. 475, 478, 1 P.3d 1065, 1068 (2000).

Even if the complaint alleges some conduct outside the coverage of the policy, the insurer may still have a duty to defend if certain allegations of the complaint, without amendment, could impose liability for conduct covered by the policy. Any ambiguity in the complaint with respect to whether the allegations could be covered is resolved in favor of the insured.

Ledford v. Gutoski, 319 Or. 397, 400, 877 P.2d 80, 82 (1994) (citation omitted). Conversely, "[i]f the complaint does not contain allegations of covered conduct..., then the insurer has no duty to defend." Abrams v. Gen. Star Indem. Co., 335 Or. 392, 400, 67 P.3d 931, 935 (2003); see also Siltronic Corp. v. Employers Ins. Co. of Wausau, No. 3:11-CV-1493-ST, 2015 WL 181785, at *4 (D. Or. Jan. 14, 2015). The Court must construe exclusion clauses narrowly. Am. Econ. Ins. Co. v. Hughes, 121 Or.App. 183, 186, 854 P.2d 500, 501 (1993).

         The Oregon Supreme Court has explained that "the primary and governing rule of the construction of insurance contracts is to ascertain the intention of the parties." Hoffman Constr. Co. of Alaska v. Fred S. James & Co. of Or., 313 Or. 464, 469, 836 P.2d 703, 706 (1992). Courts must determine the intention of the parties based on the terms and conditions of the insurance policy. Id. (citing Or. Rev. Stat. § (O.R.S.) 742.016). Courts begin with the wording of the policy, "applying any definitions that are supplied by the policy itself and otherwise presuming that words have their plain, ordinary meanings." Tualatin Valley Hous. Partners v. Truck Ins. Exch., 208 Or.App. 155, 159-60, 144 P.3d 991, 993 (2006) (citing Hoffman, 313 Or. at 469-70, 836 P.2d at 703). "If, from that vantage point, [the Court] find[s] only one plausible interpretation of the disputed terms, [the Court's] analysis goes no further." Id.

         On the other hand, if the disputed terms are susceptible to more than one plausible interpretation, then the Court examines the terms in the broader context of the policy as a whole. Id. If the Court's consideration of the policy's broader context fails to resolve the ...

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