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Stanton v. QBE Insurance Corporation

United States District Court, D. Oregon

November 9, 2017

MICHAEL AND JESSICA STANTON, Plaintiffs,
v.
QBE INSURANCE CORPORATION, a foreign business corporation; COMMUNITY ASSOCIATION UNDERWRITERS OF AMERICA, INC., a foreign business corporation; GREENWICH INSURANCE COMPANY, a foreign business corporation; UNKNOWN INSURERS 1-5, Defendants.

          OPINION AND ORDER

          STACIE F. BECKERMAN UNITED STATES MAGISTRATE JUDGE

         Michael and Jessica Stanton (collectively “the Stantons”) filed a complaint against QBE Insurance Corporation (“QBE”), [1] alleging two state law contract claims arising from QBE's alleged failure to pay the costs necessary to restore the Stantons' townhome to its pre-loss condition. (ECF No. 1.) The parties filed cross-motions for summary judgment on the question of whether the Stantons have standing to bring an action against QBE. The Court heard oral argument on November 6, 2017. For the reasons that follow, the Court denies the Stantons' Motion for Summary Judgment (ECF No. 34) and grants QBE's Motion for Summary Judgment (ECF No. 38).

         BACKGROUND

         The Stantons own a townhome in Portland, Oregon, that is a part of the Renaissance at Peterkort Woods Homeowners Association (“HOA”).[2] The HOA's Declaration of Protective Covenants, Conditions, Restrictions, and Easements (“CC&Rs”) and Bylaws provide for the rights and responsibilities between the HOA and its townhome owners. (Donald E. Templeton Decl. ¶¶ 2 and 3, Ex. 1 and 2, Aug. 4, 2017.) Pursuant to the requirement in the CC&Rs and Bylaws that the HOA provide insurance coverage for its members, including the Stantons, the HOA purchased a Homeowners Association Policy (“HAP”) from QBE. Community Association Underwriters of America (“CAUA”) was a managing general agent for QBE and served as the third-party program administrator of the HAP during the relevant time period. (William Walsh Decl. ¶¶ 2 and 3, Aug. 4, 2017.)

         On June 5, 2015, a fire originating from the garage of an adjoining unit caused damage to the Stantons' townhome. CAUA, who oversaw the adjustment of the HOA's first party damage claim arising from the fire, made all payments from the claim directly to the HOA. (Walsh Decl. ¶ 3.) The HOA chose the contractors to perform the repairs for the loss. (Walsh Decl. ¶ 3.)

         According to the Stantons, a dispute arose as to the cost of repairs and whether the work the contractors performed was sufficient to restore their townhome to its pre-loss condition. In order to recover damages from QBE for covered losses caused by the fire, the Stantons filed this action against QBE to enforce its rights as a third-party beneficiary under the HAP. QBE argues that the Stantons are barred from bringing this action because they have no standing under the HAP.

         STANDARD OF REVIEW

         Summary judgment is appropriate where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). On a motion for summary judgment, the court must view the facts in the light most favorable to the non-moving party, and all reasonable inferences must be drawn in favor of that party. Porter v. Cal. Dep't of Corr., 419 F.3d 885, 891 (9th Cir. 2005) (citations omitted). The court does not assess the credibility of witnesses, weigh evidence, or determine the truth of matters in dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.'” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation omitted).

         DISCUSSION

         The sole issue for the Court is whether the Stantons may enforce the HAP as third-party beneficiaries. The Stantons argue that they are intended third-party beneficiaries of the insurance contract. QBE, however, contends that the Stantons are merely incidental beneficiaries and, as such, have no right of enforcement.

         In Oregon, “a third party's right to enforce a contractual promise in its favor depends on the intention of the parties to the contract.”[3] Sisters of St. Joseph of Peace, Health, & Hosp. Servs. v. Russell, 318 Or. 370, 374 (Or. 1994). There are “three categories of third-party beneficiaries: donee beneficiaries, creditor beneficiaries, and incidental beneficiaries.” Id. at 374- 75. While donee and creditor beneficiaries “are entitled to enforce directly contractual promises intended to be for their benefit, even though they are strangers to the contract[, ]” incidental beneficiaries have no right of enforcement. Id. at 375. Below, the Court considers whether the Stantons qualify as either donee or creditor beneficiaries, i.e., intended beneficiaries, and thus have standing to bring this action against QBE.[4]

         I. INTENDED OR INCIDENTAL BENEFICIARY

         The Stantons assert that they are intended beneficiaries, either donee or creditor, of the HAP. A third party is a donee beneficiary if “it appears from the terms of the contract that the purpose of the promisee in obtaining the promise is ‘to make a gift to the beneficiary or to confer upon him a right against the promisor.'” Stonecrest Prop., LLC v. City of Eugene, 280 Or.App. 550, 557 (Or. App. 2016) (quoting Restatement (First) of Contracts § 133 (1932); Lord v. Parisi, 172 Or.App. 271, 277-78 (Or. App. 2001)). A third party is a creditor beneficiary if “no purpose to make a gift appears from the terms of the promise in view of the accompanying circumstances and performance of the promise will satisfy an actual or supposed or asserted duty of the promisee to the beneficiary.” Lord, 172 Or.App. at 278. Oregon courts examine the intent of the parties to determine “whether a nonparty is more than an incidental beneficiary.” Stonecrest, 280 Or.App. at 557. Finally, although not required to confer beneficiary status, a failure expressly to name a third party as a beneficiary may serve as “an indication that the promisee did not intend to confer a right upon it.” Nw. Airlines v. Crosetti Bros., 258 Or. 340, 346-47 (1971).

         In response, QBE argues that QBE and the HOA never intended to confer a direct right to enforce the relevant terms of the HAP to the individual owners. (Def.'s Resp. 3.) QBE contends that the Stantons are “only incidental beneficiaries” under the HAP Property Coverage provisions. (Def.'s Resp. 3.) In support, QBE recites § 133 of the Restatement (First) of Contracts:

(1) Where performance of a promise in a contract will benefit a person other than the promise, that person is . . .:
(a) a donee beneficiary if it appears from the terms of the promise in view of the accompanying circumstances that the purpose of the promisee in obtaining the promise of all or part of the performance thereof is to make a gift to the beneficiary or to confer upon him a right against the promisor to some performance neither due nor supposed or asserted to be due from the promise to the beneficiary[.]

         QBE concludes that the HOA “obviously did not intend to confer a gift to individual unit owners” and thus the Stantons “clearly do not qualify as donee beneficiaries.” (Def.'s Resp. 4.)

         In support of their respective arguments regarding standing, the parties rely on the HOA Bylaws, the terms of the HAP, and case law.

         A. Bylaws

         In support of their contention that they are intended beneficiaries of the HAP, the Stantons rely first on the HOA Bylaws, which state in part:

7.1 Types of Insurance. For the benefit of the Association and the Owners, the Board of Directors shall obtain and maintain at all times, and shall pay for out of the Operations Fund, the following insurance:
(a) Property Damage Insurance
(1) The Association shall maintain a policy or policies of insurance covering loss or damage from fire, with standard extended coverage and “all risk” endorsements, and such other coverages as the Association may deem desirable.
(2) The amount of the coverage shall be for not less than one hundred percent (100%) of the current replacement cost of the Units and any improvements on the Common Areas . . . .
(3) The policy or policies shall include . . . all fixtures, improvements and alterations comprising a part of each Unit as may be further defined by resolution of the Board of Directors.
(4) Such policy or policies shall name the Association, for the use and benefit of the individual Lot Owners, as insured, and shall provide for loss payable in favor of the Association, as a trustee for each Owner and each such Owner's mortgagee, as their interests may appear.

(Douglas M. Bragg Decl. Ex. 2 at 28-29, Aug. 4, 2017.)

         The Stantons maintain that by express terms the “Bylaws make abundantly clear that the HOA's purpose[, ] in obtaining the QBE policy to insure the Stantons' townhome[, ] was intended to be for the Stantons' benefit, mandated by the Bylaws.” (Pls.' Mot. Summ. J. 4 (noting that the Bylaws required the HAP “be for the ‘use and benefit' of the Owners, with the loss payable being the [HOA] as a trustee for the Owners” (emphasis omitted)).) Additionally, the Stantons contend that “QBE had actual notice of the HOA's obligation to procure insurance of the use and benefit of the Unit Owners . . . .” (Pls.' Mot. Summ. J. 5 (noting that QBE was in possession of the HOA Bylaws and the CC&Rs during the underwriting process).) According to the Stantons, “[f]rom the perspective of the HOA, there can be no doubt that the Owners were intended beneficiaries . . . .” (Pls.' Mot. Summ. J. 5.)

         QBE argues that the terms of the Bylaws support the conclusion that QBE and the HOA did not intend to provide the Stantons with a direct right of enforcement. Relying on the same language in the Bylaws, QBE maintains that the “Bylaws make clear that for the benefit of the [HOA] and the Owners, the [HOA] shall maintain property damage insurance covering the Units and all fixtures, improvements and alterations in each Unit.” (Def.'s Mot. Summ. J. 26.) In addition, while the HAP clearly ...


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