United States District Court, D. Oregon, Pendleton Division
OPINION AND ORDER
PATRICIA SULLIVAN, United States Magistrate Judge
Anthony and Kimberly Hilton purchased an insurance policy
from defendant Indemnity Insurance Company of North America,
covering, inter alia, a horse arena on their La
Grande, Oregon property. After a windstorm damaged the arena,
including by blowing off two metal roof panels, plaintiffs
filed a claim for replacement of the roof. Defendant declined
to cover replacement of the entire roof and claimed the
policy required paying to repair only the damage to the two
panels. The replacement cost of the two panels and a
temporary fix of some of the screws on the roof was below the
policy's deductible. Plaintiffs filed a claim for breach
of the insurance contract. The Court has removal diversity
jurisdiction under 28 U.S.C. §§ 1332 and 1441.
Defendant has moved for summary judgment (Docket No. 13),
which plaintiffs oppose (Docket No. 22). Defendant has also
moved to strike the testimony of plaintiffs' expert John
Lackey (Docket No. 15), which plaintiffs oppose in part
(Docket No. 20). The Court heard oral argument on March 20,
2017. (Docket No. 35). After review of the parties'
arguments and submissions, the Court DENIES defendant's
Motion for Summary Judgment, and GRANTS IN PART AND DENIES IN
PART, without prejudice, defendant's Motion to
own a house with several outbuildings in La Grande, Oregon.
One outbuilding is a horse arena with open sides and a metal
roof. Clark Decl. (Docket No. 14) ¶ 3, Ex. B (Docket No.
14-1), at 12-14. Defendant issued plaintiffs a farmowners
insurance policy that insured the main house and
outbuildings, with a policy period of December 5, 2014, to
December 5, 2015. Hilton Decl. (Docket No. 23) ¶ 2;
Clark Decl. (Docket No. 14) ¶ 2, Ex. A (Docket Nos. 14-8
& 14-9), at 8-11 (the insurance policy). The arena was
subject to a $1, 000 deductible. Id. at 9. The
policy covered the horse arena with "broad" form
covered causes of loss, id. at 8 & 9, which
included coverage for windstorm damage, id. at 111
B.2. Broad form coverage did not explicitly list as included,
nor did it explicitly state as excluded, damage from faulty
workmanship or construction defects. See Pis.'
Resp. (Docket No. 22), at 7(x).
April 15, 2015, a windstorm damaged the arena and blew off
two metal roof panels. Pis.' Resp. (Docket No. 22), at 2
(plaintiffs' statement of "Undisputed material facts
provided in defendant's summary judgment motion").
Defendant agreed to cover only the damage to these two
panels. Id. at 3. Because defendant's adjuster
estimated the cost of the work at $952.98, less than the $1,
000 deductible, defendant refused to pay for replacement.
Clark Decl. (Docket No. 14) ¶ 3, Ex. B (Docket No.
14-1), at 2, & ¶ 6, Ex. E (Docket No. 14-4), at
had an insurance adjuster and an engineer investigate the
damage. Clark Decl. (Docket No. 14) ¶¶ 3 & 4,
Ex. B (Docket No. 14-1) (adjuster report) & Ex. C (Docket
No. 14-2) (engineer report). Both concluded that the roof had
been improperly constructed, for several reasons. The
adjuster reported that roofing screws were drilled through
the oriented strand board ("OSB, " similar to
particle board) sheathing only, instead of into joists,
allowing the screws to come loose and leave holes in the
sheathing. Clark Decl. (Docket No. 14) ¶ 3, Ex. B
(Docket No. 14-1), at 1. Water was able to penetrate the roof
at these holes. Id. The engineer reported three
construction defects with the roof: overdriven
(overtightened) fasteners, inadequate fastener penetration
depth, and lack of felt paper underlayment between the panels
and the OSB sheathing. Clark Decl. (Docket No. 14) ¶ 4,
Ex. C (Docket No. 14-2), at 6-7. These defects, plus weakened
sheathing at fastener locations, allowed wind at otherwise
"non-damaging" speeds to pull the fasteners loose.
Id. at 6. Overdriven fasteners also allowed water
engineering expert and a construction expert plaintiffs hired
disagreed with defendant's experts regarding the roof
damage. Leslie Tipton, plaintiffs' engineering expert,
reported that the two metal roofing panels' displacement
during the windstorm "appeared to have been caused
mainly by wind pulling the roofing screws up and out of the
OSB" sheathing which underlay the metal roofing, and
which was fastened directly to the purlins (horizontal
roofing beams). Williams Decl. (Docket No. 25) ¶ 3, Ex.
2 (Docket No. 25-1), at 2 I.B.2-3 (Tipton expert report). He
concluded that "it is apparent . . . there are other
metal roofing panels in jeopardy of blowing off the same roof
in a windstorm." Id. at 2 I.C; see
also Williams Decl. (Docket No. 25) ¶ 6, Ex. 5
(Docket No. 25-1), Tipton Dep. 10:21-24 ("Once the
roofing starts to blow off, then it's very likely that
more panels would get blown off. And if these two panels had
gotten blown off, there is the likelihood that more panels
would get blown off"). This is because the "metal
roofing panels are subject to significant expansion and
contraction, " specifically at the fastening screws, and
"over time, will likely result in a looser connection
with the screw threads in the OSB." Williams Decl.
(Docket No. 25) ¶ 3, Ex. 2 (Docket No. 25-1), at 2 I.C.
Additionally, moisture could enter the screw threads,
softening the OSB and making screws easier to pull out.
Id. Installing screws into sawn lumber (instead of
into OSB) and installing an underlayment of building paper
beneath the metal roof panels to keep moisture out would
prevent these problems. Id. Tipton disputed that the
screws were fastened to an insufficient depth, based on his
reading of an apparent contradiction in the metal roofing
panel installation guide, which stated a required minimum
penetration into wood of 5/8 inches, but also allowed for
installation into 1/2 inch wood panels, suggesting that
shallower fastener penetration was acceptable. Id.
at 3 I.C; see also Clark Decl. (Docket No. 14)
¶ 7, Ex. F (Docket No. 14-5), at 10. At deposition,
Tipton testified that the roofing panels could be fastened
directly to the OSB, and that fastening to the purlins,
though "probably recommended, " was not
"required." Williams Decl. (Docket No. 25) ¶
6, Ex. 5 (Docket No. 25-1), Tipton Dep. 12:18-22. Tipton
concluded his report by saying that preventing additional
panels from blowing off would require removing the existing
panels, installing building paper over the OSB sheathing, and
fastening new panels with screws through the OSB into the
purlins (instead of just into the OSB). Williams Decl.
(Docket No. 25) ¶ 3, Ex. 2 (Docket No. 25-1), at 3 I.C.
construction expert, Bret Wheeler, reported that
"[t]here were several roof panels that have blown off
completely and others that appear to have been bent from
wind." Williams Decl. (Docket No. 25) ¶ 4, Ex. 3
(Docket No. 25-1), at 2 I.B.I (Wheeler expert report). He
stated that "[t]he installation of the metal roofing is
typical of how this product is installed in our area and
appears to be installed per the manufacture specifications .
. . ." Id. at 2 LB.2. He repeated Tipton's
analysis of the required screw penetration depth and reported
that the screws were properly installed. Id. At his
deposition, Wheeler conceded that some fasteners were
overtightened, damaging the washers, but testified that a
majority were not overtightened. Williams Decl. (Docket No.
25) ¶ 5, Ex. 4 (Docket No. 25-1), Wheeler Dep.
12:16-13:7; see also Williams Decl. (Docket No. 25)
¶ 4, Ex. 3 (Docket No. 25-1), at 2 I.B.3
("Generally the fasteners do not appear to be over
tightened or under tightened."). Wheeler testified at
deposition that the roofing panels could be installed
directly into plywood (i.e., OSB), and that installation
guidelines did not require attachment to the purlins.
Williams Decl. (Docket No. 25) ¶ 5, Ex. 4 (Docket No.
25-1), Wheeler Dep. 15:2-7. Wheeler's report also stated
that he "did not observe any workmanship that appeared
to be defective or substandard." Williams Decl. (Docket
does not address whether it must pay for replacement of these
bent roof panels in addition to the two displaced panels;
defendant argues it must pay only for the two damaged panels,
and plaintiff argues that defendant must pay to replace the
entire roof. 25) ¶ 4, Ex. 3 (Docket No. 25-1), at 2
I.B.4. In his Conclusions section, Wheeler stated that, to
his knowledge, there was no "prior damage" to the
roof before the April 2015 wind event. Id. at 2 I.C.
He continued, "there is no way to determine which panels
were compromised by the wind event." Id. He
stated that the "manufacturer recommended installation
specifications for fastening the panels in this application
were inadequate." Id. Like Tipton, he stated
that the "only long term fix" was to completely
replace the metal roofing panels, with screws fastened
directly to the purlins, at a depth greater than the
manufacturer's specifications. Id. at 2-3 I.C.
defendant's asserted construction defects, the only one
plaintiffs arguably acknowledge is the lack of underlayment
building paper. Pis.' Resp. (Docket No. 22), at
6(s).But plaintiffs argue, based on Tipton's
deposition, that this paper underlayment too was "not
typically required, only recommended, " for the purpose
of facilitating expansion and contraction of the metal
roofing panels and preventing water penetration. Id.; see
also Williams Decl. (Docket No. 25) ¶ 6, Ex. 5
(Docket No. 25-1), Tipton Dep. 13:16-14:20 (testifying that
felt or building paper was probably not required, only
recommended, for easing expansion and contraction and
preventing water penetration).
on their expert reports that state that all the metal roofing
panels must be replaced, plaintiffs seek to have defendant
pay to replace the entire arena roof. Wheeler estimated the
replacement cost at $123, 903.53. Williams Decl. (Docket No.
25) ¶ 4, Ex. 3 (Docket No. 25-1), at 7. Defendants'
insurance adjuster estimated that the replacement cost (which
he described as the "long-term fix for the roof) would
exceed $60, 000, without overhead or profit. Clark Decl.
(Docket No. 14) ¶ 3, Ex. B (Docket No. 14-1), at 2.
Plaintiffs' Claims for Relief
their Complaint, plaintiffs originally brought two claims for
relief under Oregon state law: (1) breach of contract, for
defendant's failure to pay for plaintiffs' claim for
water damage to roof sheathing, which damage was revealed
when wind blew a roof panel off; and (2) breach of contract,
for defendant's failure to pay plaintiffs' claim for
windstorm damage to the arena roof. Notice of Removal (Docket
No. 1) ¶ 3, Ex. A (Docket No. 1-1). The first breach of
contract claim incorporated an allegation that "a
construction defect was the cause of the water damage to the
roof, " id. ¶ 6, but the second cause of
action excluded any allegation of construction defect. In
their Response to defendant's Motion for Summary