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Campbell Global, LLC v. American Economy Insurance Co.

United States District Court, D. Oregon, Portland Division

August 30, 2017

CAMPBELL GLOBAL, LLC, a Delaware limited liability company; and BASCOM SOUTHERN, LLC, a Delaware limited liability company, Plaintiffs,
v.
AMERICAN ECONOMY INSURANCE COMPANY, an Indiana corporation; GENERAL INSURANCE COMPANY OF AMERICA, a New Hampshire corporation; and FIRST NATIONAL INSURANCE COMPANY OF AMERICA, a New Hampshire corporation, Defendants.

          OPINION AND ORDER

          MICHAEL W. MOSMAN Chief United States District Judge.

         Plaintiffs-insureds bring this action against Defendants-insurers for breach of contract on the basis that Defendants allegedly breached their duty to indemnify Plaintiffs (Claim One), and for negligent claims handling on the basis that Defendants failed to timely indemnify Plaintiffs after an arbitration award was entered against them (Claim Two). By Order (#15) issued January 27, 2017, the Court granted the parties' joint request to proceed only as to Claim One in the first stage of this litigation, and, if necessary, to proceed to discovery and dispositive motions on Claim Two only after resolving dispositive motions on Claim One.

         On May 19, 2017, Defendants filed a Motion (#22) for Partial Summary Judgment on Count One of Plaintiffs' Complaint. On May 23, 2017, Plaintiffs filed a Corrected Motion (#27) for Summary Judgment on Stage One Claims.[1]

         For the reasons stated below, the Court GRANTS Defendants' Motion (#22) for Partial Summary Judgment and DENIES Plaintiffs' Corrected Motion (#27) for Summary Judgment on Stage One Claims.

         BACKGROUND

         The following facts are undisputed and taken from the record on summary judgment.

         In 1968 Plaintiffs' predecessor organization leased approximately 11, 000 acres of forest land in Alabama from the Gray family and related organizations (referred to collectively as “the Grays”) for a term of 45 years. Defendants provided liability insurance to Plaintiffs beginning in the early-2000s through the termination of the lease.

         Among other provisions, the lease required Plaintiffs to return the land to the Grays in “good condition” upon the termination of the lease. The lease also contained an attorney fees provision that required the non-prevailing party to pay the attorney fees of the prevailing party in any action to enforce the lease. Declaration of Margaret M. Van Valkenburg (#23) Ex. 2, at 14.

         An agent of the Grays surveyed the land in 2009 in anticipation of the lease's 2013 expiration, and identified for Plaintiffs several deficiencies in the condition of the land that, in the Grays' view, needed to be remedied. When the lease expired in 2013, however, the Grays still found the condition of the land to be inadequate. Accordingly, the Grays filed an arbitration action against Plaintiffs for, inter alia, breach of contract and negligence. Defendants provided a defense to Plaintiffs in the arbitration action under a reservation of rights.

         On August 17, 2016, after a six-day arbitration in July 2016, the arbitrators found Plaintiffs (Respondents in the arbitration) to be jointly and severally liable for $3, 506, 214.00 in damages, which included $907, 714.00 in attorney fees and costs incurred by the Grays (Claimants in the arbitration). The arbitrators concluded the claims that were not based on negligence or breach of contract were unfounded. Van Valkenburg Decl. (#23) Ex. 7, at 2. With respect to negligence and breach of contract, however, the arbitrators found:

As to the Claimants' remaining claims for negligence and breach of contract, the Respondents' Motion for Judgment as a Matter of Law is DENIED, and the Arbitrators hereby find as follows:
a. The Respondents were required to surrender the “Lands” to the Claimants in “good condition” as of March 31, 2013.
b. The “Lands” were not in “good condition” as of March 31, 2013.
c. The Claimants have suffered damages due to the “Lands” not being in “good condition” as of March 31, 2013.
d. The “Lands” include the following specific items for which Claimants are awarded damages:
i. Stocking - Damages for overstocked stands and understocked stands are reasonably assessed in ...

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