SECURITY NATIONAL INSURANCE COMPANY, a Texas corporation Plaintiff-Respondent,
v.
SUNSET PRESBYTERIAN CHURCH, an Oregon non-proft corporation, as assignee of Andersen Construction Co., Inc.; an Oregon corporation, Defendant-Appellant.
Argued
and submitted October 6, 2015.
Washington
County Circuit Court C124608CV; D. Charles Bailey, Jr, Judge.
Kevin
S. Mapes argued the cause for appellant. With him on the
briefs were Phillip E. Joseph, James C. Prichard, and Ball
Janik LLP.
Thomas
S. Christ argued the cause for respondent. With him on the
brief was Cosgrave Vergeer Kester LLP.
Before
DeVore, Presiding Judge, and Hadlock, Chief Judge, and James,
Judge.[*]
[289
Or. 194] Case Summary:
This
insurance dispute arises out of construction-defect
litigation involving a church, its general contractor, one of
the subcontractors, and the subcontractor's liability
insurer. In settlement of the underlying litigation, the
general contractor assigned its rights against subcontractors
to the church. In this case, the insurer sought a judgment
declaring that it had had no duty to defend the general
contractor from the church's construction-defect claims
under the policy that the insurer had issued to a particular
subcontractor with an additional-insured endorsement. The
church answered with several counterclaims. The parties fled
cross-motions for summary judgment. The trial court granted
the insurer's motion, denied the church's motion, and
entered a judgment that dismissed the church's
counterclaims. The church assigns error to the trial
court's rulings, arguing that because the underlying
complaint raised the possibility that the general contractor
could be liable to the church for damage arising from the
particular subcontractor's negligence, the insurer had a
duty to defend all claims against the general contractor, its
additional insured, including claims against the general
contractor involving the negligence of other subcontractors.
Held: The trial court erred in granting summary
judgment for the insurer, in dismissing the church's
counterclaims, and in denying the church a limited ruling
declaring the insurer's duty to have defended the general
contractor for its liability for the negligence of the
particular subcontractor's work. The underlying complaint
triggered the insurer's duty to defend the general
contractor. Under ORS 30.140, however, the insurer's duty
to defend under its policy does not extend to defend all
claims. The insurer's duty to defend corresponds to the
general contractor's potential liability that arises out
of the fault of the particular subcontractor.
Reversed
and remanded.
[289
Or. 195]
DeVORE, P. J.
This
insurance dispute arises out of construction-defect
litigation involving a church, its general contractor, one of
the subcontractors, and the subcontractor's liability
insurer. In the underlying litigation, the church had brought
claims against the general contractor, who brought
third-party claims against subcontractors. In settlement of
that case, the general contractor assigned its rights against
subcontractors to the church, Sunset Presbyterian Church
(Sunset). In this case, the insurer, Security National
Insurance Company (SNIC), sought a judgment declaring that it
had had no duty to defend the general contractor, Andersen
Construction Company (Andersen), from the church's
construction-defect claims under the policy that SNIC had
issued to a subcontractor, B&B Tile & Masonry
Corporation (B&B). Sunset, now the assignee of Andersen,
answered with counterclaims seeking recovery of $101, 005 in
prior defense costs and asserting claims for breach of the
duty to defend, equitable contribution, and equitable
subrogation.
The
parties filed cross-motions for summary judgment. Relying on
its prior rulings in the earlier case, the trial court
granted SNIC's motion, denied Sunset's motion, and
entered a judgment that dismissed Sunset's counterclaims
and declared that SNIC had "no financial
obligation" for Andersen's prior defense costs.
Sunset assigns error to the trial court's rulings. For
the reasons that follow, we agree that the court erred in
granting SNIC's motion and in denying a part of
Sunset's motion for partial summary judgment on
SNIC's duty to have defended Andersen for liability from
B&B's work. Accordingly, we reverse and remand.
The
relevant facts are undisputed but complicated. Sunset
contracted with Andersen to construct a main building and
related wings. Andersen subcontracted with B&B for the
work involving masonry. Article 13 of Andersen's
subcontract with B&B provided that B&B was required
to cause its insurer to endorse its liability policies to add
Andersen as an additional-insured for liability arising out
of the operations performed for Andersen by B&B, acts of
Andersen in connection with supervision of B&B, and
claims for injuries [289 Or. 196] to B&B employees
related to the construction. SNIC provided B&B with
liability coverage that included a blanket additional-insured
endorsement that added, as an insured, any person B&B was
required by written contract to add as an insured to the
policy.
Upon
discovering defects and water intrusion, Sunset filed
contract and negligence claims against Andersen in 2010. In
that underlying complaint, Sunset alleged, "Andersen
hired subcontractors and suppliers to furnished [sic] labor,
material, services, supplies or equipment for construction of
* * * the Church." Sunset specified, "Architectural
stone has been used to embellish the lower portions of the
walls around the sanctuary." In a "non-exclusive
list of faulty workmanship, " Sunset alleged, among
other things, "Architectural stone has been terminated
at the level of the finish grade along the base-of-wall at
hard surfaces, contrary to Owens Corning manufacturer
installation instructions." Sunset alleged
"systemic building envelope deficiencies" and
resulting property damage. Andersen tendered the defense of
the Sunset litigation to SNIC, but SNIC refused to assume the
defense of Andersen.
In
2012, Sunset settled with Andersen and took an assignment of
Andersen's rights against its subcontractors. Sunset
settled Andersen's third-party claims against all the
subcontractors except B&B. Sunset asserted Andersen's
rights against B&B under Article 12, an indemnity
provision of the subcontract. On a motion for partial summary
judgment, the trial court concluded that B&B had a
contractual duty to have defended Andersen against
Sunset's claims for liability due to B&B's
negligence, but that the subcontract was partially voided to
the extent that Article 12 required B&B to indemnify
Andersen for the negligence of Andersen or others. According
to the court, the indemnity provision was partly void by
reason of an anti-indemnity statute relating to construction
contracts, ORS 30.140.[1] In [289 Or. 197] a subsequent hearing on
evidence of past defense costs, Sunset, as Andersen's
assignee, contended that it was entitled to recover all of
Andersen's defense costs, not just that portion
attributable to B&B's negligence. Sunset offered no
proof of the B&B portion of Andersen's defense costs.
In the absence of proof of those costs, the trial court
concluded that Sunset had failed to prove entitlement to
damages for B&B's ...