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Uptown Market, LLC v. Ohio Security Insurance Co.

United States District Court, D. Oregon

February 8, 2018

UPTOWN MARKET, LLC, Plaintiff,
v.
OHIO SECURITY INSURANCE COMPANY, Defendant.

          FREDERICK M. MILLARD DOUGLAS M. BRAGG Attorneys for Plaintiff.

          JOHN A. BENNETT MATTHEW E. HEDBERG Attorneys for Defendant.

          OPINION AND ORDER

          ANNA J. BROWN, United States Senior District Judge.

         This case comes before the Court on Defendant Ohio Security Insurance Company's Motion (#25) for Summary Judgment or, Alternatively, Motion for Partial Summary Judgment and Plaintiff Uptown Market, LLC's Motion (#27) for Partial Summary Judgment on Defendant's Affirmative Defenses.

         For the reasons that follow, the Court GRANTS Defendant's Motion for Summary Judgment and DENIES as moot Plaintiff's Motion for Partial Summary Judgment.

         BACKGROUND

         The following facts are taken from the Joint Statement of Agreed Upon Facts (#20) and the materials the parties submitted in support of their Motions. Accordingly, these facts are undisputed unless otherwise noted.

         Plaintiff is the sole tenant of a building located at 6620 Southwest Scholls Ferry Road in Tigard, Oregon. The building is owned by Uptown Market Property, LLC (Uptown Property).[1]Plaintiff conducts a beer-brewing and retail-sales business in the leased building.

         The obligations and responsibilities of Plaintiff and Uptown Property are set forth in their Lease and include the following relevant provisions: (1) Uptown Property is required to have standard multi-peril insurance covering the building and other improvements, but that insurance does not include Plaintiff's trade fixtures, improvements, and other property on the leased premises; (2) Uptown Property is not liable for injury to “goods, stock, merchandise, or any other property” of Plaintiff and is required to have its own insurance to cover risks to Plaintiff's property; (3) any improvements, alterations, and other work performed on the property are considered the property of Uptown Property with the exception of Plaintiff's trade fixtures; and (4) Uptown Property is responsible for “structural repairs and maintenance and repairs necessitated by structural disrepair or defects, ” repair and maintenance of the “foundation of the Building, ” and repair of “floors, and floor coverings when such repairs are made necessary because of failure of [Uptown Property] to keep the structure in repair.”

         As noted, Uptown Property is the owner of the building. The loan for purchase of the building is secured by an installment note, and the building is the collateral for the loan. Uptown Property also granted a Deed of Trust to the bank “to all real property” located at 6620 S.W. Scholls Ferry Road. Pursuant to the loan agreement, Uptown Property was required to provide the bank “with evidence of insurance coverage” to ensure that the bank did not have to purchase insurance to protect its own interests in the building.

         Plaintiff is a guarantor of the loan on the property, and Plaintiff granted to the bank “a security interest in all property in which [Plaintiff] has an ownership interest which is now or in the future in the possession of [the] [b]ank to secure payment under the [Guaranty] Agreement.”

         Defendant issued a Commercial Package Insurance Policy to Plaintiff as the named insured for the period of January 22, 2014, to January 22, 2015. Uptown Property is not named as an insured under Defendant's Policy. On November 18, 2014, a policy-change endorsement added U.S. Bank as a loss payee for business personal property under the Loss Payable Provisions of the Policy.

         Subject to its terms, conditions, limitations, and exclusions, Defendant's Policy provides:

A. Coverage
We will pay for direct physical loss or damage to Covered Property at the premises described in the Declarations [6620 S.W. Scholls Ferry Road] caused by or resulting from any Covered Cause of Loss.

         Under the “Building and Personal Property Coverage Form” of the Policy, “Covered Property” is described in Section A as “Building, meaning the building or structure described in the Declarations, ” “Your Business Personal Property located in or on the building described in the Declarations, ” and “Personal Property of Others.” The “Property Not Covered” is listed in Section A.2. of the Policy and includes, among other things, “[f]oundations of buildings, structures, machinery or boilers.” Under a Custom Protector Plus Endorsement, “Foundations” is deleted from the “Property Not Covered” under Section A.2. and instead is included within the “Coverage Extensions” of Section A.5. of the Policy.

         Under the “Causes of Loss - Special Form” of the Policy, “Covered Causes of Loss” means “Risks Of Direct Physical Loss” unless the loss is excluded. Section B.1. of the Policy sets out the following exclusions:

1. We will not pay for loss or damages caused directly or indirectly by any of the following. Such loss or damages is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
* * *
b. Earth Movement
* * *
(4) Earth sinking (other than sinkhole collapse, ) rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing, erosion, ...

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