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Scottsdale Insurance Co. v. National Wings & Armor Foundation

United States District Court, D. Oregon

December 22, 2018




         Plaintiff Scottsdale Insurance Co. brings this action seeking a declaration on whether it has either a duty to defend or a duty to indemnify under the commercial liability policy (“the Policy”) it issued to Defendant National Wings & Armor Foundation (National Wings). National Wings is a defendant in a state court lawsuit for personal injuries (“Underlying Lawsuit”). The Underlying Lawsuit stems from the death of Austin Lee, who was killed when he and Steven Todd Preston attempted to fire a projectile from a World War II-era tank destroyer and instead the projectile misfired inside the turret of the tank destroyer. Preston was also killed. Plaintiff names as Defendants' potential claimants against Plaintiff's liability policy (the Policy): National Wings; Robert Lee, as personal representative for the Estate of Austin Lee; the Estate of Steven Todd Preston; the Preston Family Revocable Trust; and Charles Hegele, who was present when the projectile was prepared.

         United States Magistrate Judge Jolie A. Russo issued Findings and Recommendation in this case on November 7, 2018. ECF 60. Magistrate Judge Russo recommended that Plaintiff's motion for summary judgment (ECF 47) be granted as to the duty to defend and denied as to the duty to indemnify and that defendants' cross-motion for summary judgment (ECF 52) should be denied.

         Under the Federal Magistrates Act (“Act”), the Court may “accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate.” 28 U.S.C. § 636(b)(1). If a party files objections to a magistrate judge's findings and recommendations, “the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” Id.; Fed.R.Civ.P. 72(b)(3).

         For those portions of a magistrate judge's findings and recommendations to which neither party has objected, the Act does not prescribe any standard of review. See Thomas v. Arn, 474 U.S. 140, 152 (1985) (“There is no indication that Congress, in enacting [the Act], intended to require a district judge to review a magistrate's report to which no objections are filed.”); United States. v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (holding that the court must review de novo magistrate judge's findings and recommendations if objection is made, “but not otherwise”). Although in the absence of objections no review is required, the Act “does not preclude further review by the district judge[] sua sponte . . . under a de novo or any other standard.” Thomas, 474 U.S. at 154. Indeed, the Advisory Committee Notes to Fed.R.Civ.P. 72(b) recommend that “[w]hen no timely objection is filed, ” the Court review the magistrate judge's recommendations for “clear error on the face of the record.”

         Defendants timely filed an objection, to which Plaintiff responded. Defendants object to the portion of Magistrate Judge Russo's recommendation that Plaintiff has no duty to defend defendants in the Underlying Lawsuit. Neither Plaintiff nor Defendants object to Magistrate Judge Russo's recommendation regarding indemnity coverage, namely that because courts generally determine the duty to indemnify after the underlying liability action has been completed, both Plaintiff's and Defendants' motions for summary judgment regarding indemnity should be denied as premature. See Ohio Cas. Ins. Co. v. Ferrell Devs., LLC, No. 3:10-cv-162-AC, at *5 (D. Or. July 27, 2011).


         A party is entitled to summary judgment if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir. 2001). Although “[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a motion for summary judgment, ” the “mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient . . . .” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255 (1986). “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation and quotation marks omitted).

         “If the complaint is unclear or ambiguous and may be reasonably interpreted to include an incident within the coverage of the policy, the insurer has a duty to defend.” U.S. Fid. & Guar. Co. v. Star Techs., Inc., 935 F.Supp. 1110, 1113 (D. Or. 1996) (citing Oakridge Cmty. Ambulance Serv., Inc. v. United States Fid. & Guar. Co., 278 Or. 21, 24, 563 P.2d 164, 166 (1977)). The Oregon Supreme Court established the steps for insurance policy interpretation in Hoffman Constr. Co. v. Fred S. James & Co., 313 Or. 464, 469-72 (1992). When the parties offer competing interpretations of policy language, the Court first determines whether the competing interpretations are plausible when viewed in isolation. Id. If they are, the Court next views the competing interpretations in light of “the particular context in which that term is used in the policy and the broader context of the policy as a whole.” Id. If only one interpretation continues to be reasonable after contextual review, that interpretation controls. Id. If, however, both interpretations continue to be reasonable, the policy language is deemed legally ambiguous and construed in favor of coverage for the insured. Id.

         The core of the dispute between the parties concerns the Policy's “Special Event Participant Exclusion” (the “Exclusion”). Plaintiff contends that the Exclusion applies, and therefore Plaintiff does not owe a duty to defend. Defendants contend that the Exclusion is ambiguous and that as a matter of law ambiguous policy language must be construed in favor of coverage for the insured; therefore, argue Defendants, the Exclusion should not be read to apply. Defendants further contend that interpreting the Exclusion to apply in this context would render the promise of insurance coverage by the policy “illusory.”

         The Exclusion provides:

This policy does not apply to “bodily injury, ” “property damage” or “personal and advertising injury” to any ...

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