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American Hallmark Insurance Company of Texas v. Oregon Interiors, Inc.

United States District Court, D. Oregon

December 11, 2018

AMERICAN HALLMARK INSURANCE COMPANY OF TEXAS, a foreign corporation, Plaintiff,
v.
OREGON INTERIORS, INC., an Oregon corporation; AARON ENSLEY, an individual; and BROOKE ENSLEY, an individual, Defendants.

          OPINION AND ORDER

          STACIE F. BECKERMAN, UNITED STATES MAGISTRATE JUDGE.

         American Hallmark Insurance Company of Texas (“Plaintiff”) brings this action against Oregon Interiors, Inc. (“Oregon Interiors”), an Oregon corporation, Aaron Ensley (“Mr. Ensley”), president of Oregon Interiors, and Brooke Ensley (“Ms. Ensley”), an Oregon Interiors employee and Mr. Ensley's daughter (collectively, “Defendants”). Plaintiff seeks a declaratory judgment pursuant to 28 U.S.C. § 2201 (ECF No. 23), and Defendants assert a breach-of-contract counterclaim (ECF No. 24).

         Plaintiff and Defendants now move for summary judgment (ECF Nos. 37 and 40, respectively) pursuant to Fed.R.Civ.P. 56 on the following question of law: whether Plaintiff has a duty under either of two insurance policies to defend any of the Defendants in an underlying lawsuit. All parties consent to the jurisdiction of a U.S. Magistrate Judge pursuant to Fed.R.Civ.P. 73(b). (ECF No. 36.) The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332. For the reasons explained below, the Court grants Plaintiff's motion for summary judgment and denies Defendants' motion for summary judgment.

         BACKGROUND

         Negotiation and Purchase of Insurance Policies and Exclusion of Named Driver

         In early 2016, Elliott, Powell, Baden & Baker, Inc. (“EPBB”) and its employee Noah Baker (“Baker”) acted as insurance agency and agent, respectively, for Oregon Interiors. (Perucca Decl. ¶¶ 1-4.) On February 26, 2016, Iza Padron (“Padron”), an underwriter at Hallmark Commercial Insurance Solutions, emailed a draft insurance policy for Oregon Interiors to Baker and Jeanette Simmons (“Simmons”), a commercial account manager at EPBB. (Decl. David P. Rossmiller Supp. Pl.'s Resp. Defs.' Mot. Summ. J. ¶ 3, ECF No. 44 (hereinafter “Rossmiller Resp. Decl.”), Ex. 2, at 12.) Padron requested “confirmation that we have a complete drivers list” and stated that “we will need to pull MVRs for all employees regardless of if they are drivers or not[.]” (Id. Ex. 2, at 12.) MVRs are motor vehicle reports, also known as driving records.

         That same morning, Padron emailed Simmons the same request, stating “I would love to get this over for issuance today” and “I cannot issue this without running MVRs.” (Id. at 11-12.) Simmons sent Padrone the MVRs later that morning, and Padron then responded, asking for “specifics of the two accidents [Ms. Ensley] was involved in, ” namely, whether Ms. Ensley was “at fault[.]” (Id. at 11.) Still that same morning, Simmons emailed Padron that she would “find out about [Ms. Ensley's] two accidents and get back to [him].” (Id. at 10; seeDecl. David. P. Rossmiller Supp. Pl.'s Mot. Summ. J. ¶ 2, ECF No. 38 (hereinafter “Rossmiller MSJ Decl.”), Ex. 1, at 1-2 (showing Ms. Ensley's driving record history).)

         On March 2, 2016, Padron emailed Simmons, asking for “any news on [Ms. Ensley's] accidents?” (Rossmiller Resp. Decl. Ex. 2, at 9.) On March 11, 2016, Padron forwarded the prior email to Simmons and wrote, “Following up on the below; please advise ASAP.” (Id.) Still that morning, Simmons forwarded the email to Baker, who responded to Padron that the May accident “was a very small fender bender” where “[Ms. Ensley] lightly rear-ended someone[, ]” and the October accident “was not [Ms. Ensley's] fault.” (Id. at 7-8.) Later that day, Debi Holl (“Holl”), a commercial multi-line underwriter for Plaintiff (Holl Decl. ¶ 1), emailed Baker the following:

I'm afraid we cannot cover [Ms. Ensley]. First, we'll need proof that the October accident was not her fault (police report?) but I don't think it's going to matter. She has an excessive speeding ticket that is enough to exclude her as far as I'm concerned. We will be processing an endorsement to exclude her; we will need it signed and returned asap.

(Rossmiller Resp. Decl. Ex. 2, at 7.)

         On March 16, 2016, Holl emailed Baker a copy of the Named Driver Exclusion (the “NDE Endorsement”), writing “[i]t's in the quote also. Please get it signed & returned to us.” (Id. at 5-6.) Baker responded that afternoon, asking whether the “exclusion exclude[s] Brook (sic) from non-owned liability[.]” (Id. at 4.) Holl responded later that afternoon, “Yes. It excludes from covered vehicles and covered vehicles would be those specified, those that are non-owned and those that are hired.” (Id.) That same day, Baker emailed Mr. Ensley the NDE Endorsement for signature with the following message:

Unfortunately due to [Ms. Ensley's] heavily checkered motor vehicle record and young age [Plaintiff] has excluded her from your auto policy. This means [Ms. Ensley] will not be able to drive company vehicles moving forward (once the exclusion is signed.) We can readdress this exclusion once the speeding ticket (over 25mph) falls off her record. This will be in September of 2017. I have set myself a reminder.
I'm not sure what role [Ms. Ensley] has in your business. If [Ms. Ensley] doesn't drive often in the course of business then this isn't a large issue. Just make sure she rides with another employee when she does need a ride.
However if [Ms. Ensley] needs to drive a vehicle on a regular basis then there are ways we can work around this. I will give you a call this afternoon to go over your options.
I will need you to sign the attached driving exclusion and return to me at (sic) as soon as you can.

(Perucca Decl. Ex. 1, at 1-4.)

         On March 18, 2016, Baker emailed Holl, “I am working on getting the exclusion signed…hopefully will get it to you today.” (Rossmiller Resp. Decl. Ex. 2, at 1.) On March 22, 2016, Baker emailed Mr. Ensley again, writing “I will need the attached driving exclusion signed and returned soon. Otherwise [Plaintiff] will set up your account for cancellation.” (Perucca Decl. Ex. 1, at 6.) Mr. Ensley sent the signed NDE Endorsement to Baker that day. (Id. at 5-8.) Still that day, Baker emailed the signed NDE Endorsement to Holl. (Id. at 5.)

         Relevant Policy Terms

         Oregon Interiors purchased from Plaintiff two insurance policies with itself as named insured: policy number 44-CL-490548-00 (the “Business Auto Policy”) and policy number 44-CU-490549-00 (the “Umbrella Policy”) (collectively, the “Policies”). (SeeRossmiller MSJ Decl. ¶¶ 3-4, Ex. 2, Ex. 3.) Both policies had effective dates of February 25, 2016, to February 25, 2017. (Id. Ex. 2, at 2; Ex. 3, at 2.)

         The Business Auto Policy provides liability coverage and exclusions as follows, in pertinent part:

We will pay all sums an ‘insured' legally must pay as damages because of ‘bodily injury' or ‘property damage' to which this insurance applies, caused by an ‘accident' and resulting from the ownership, maintenance or use of a covered ‘auto'.

(Id. Ex. 2 at 11.) The term “insureds” includes “[y]ou for any covered ‘auto'[, ] . . . [a]nyone else while using with your permission a covered ‘auto' you own, hire or borrow except . . . [t]he owner or anyone else from whom you hire or borrow a covered ‘auto'.” (Id.) “The words ‘you' and ‘your' refer to the Named Insured shown in the Declarations.” (Id. at 10.) The Named Insured is Oregon Interiors. (Id. at 2.)

         The Umbrella Policy provides two types of liability coverage: (1) Coverage A, referred to as excess liability coverage (“Umbrella Coverage A”); and (2) Coverage B, referred to as extended liability coverage (“Umbrella Coverage B”). (Id. Ex. 3, at 7-9.)

         Umbrella Coverage A provides liability coverage and exclusions as follows, in pertinent part:

We will pay those sums, in excess of the amount payable under the terms of any ‘underlying insurance,' that the insured becomes legally obligated to pay as damages because of ‘injury' or damage to which this insurance applies, provided that the ‘underlying insurance' also applies, or would apply but for the exhaustion of its applicable limits of insurance . . . .
We will have the right to participate in the defense of claims or suits against the insured seeking damages because of ‘injury' or damage to which this insurance may apply. We will have a duty to defend such claims or suits when the applicable limit of insurance of the ‘underlying insurance' has been used up by payment of judgments, settlements and any cost or expense subject to such limit.”
This insurance is subject to the same terms, conditions, agreements, exclusions and definitions as the ‘underlying insurance' . . .
The exclusions applicable to the ‘underlying insurance' also apply to this insurance.

(Id. at 7.) The Business Auto Policy is listed on the Schedule of Underlying Insurance. (Id. at 3.)

         Umbrella Coverage B provides liability coverage and exclusions as follows, in pertinent part:

We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘injury' to which this insurance applies. This insurance applies only to ‘injury' which occurs during the policy period. The ‘injury' must be caused by an ‘occurrence.' This insurance applies only to ‘injury' which occurs in the ‘coverage territory.'
This insurance does not apply to . . . ‘[i]njury' that is the subject of the insurance policies shown in the Schedule of ...

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