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Bighorn Logging Corp. v. Truck Insurance Exchange

Court of Appeals of Oregon

January 30, 2019

BIGHORN LOGGING CORPORATION, an Oregon corporation, Plaintiff-Respondent,
v.
TRUCK INSURANCE EXCHANGE, a reciprocal inter-insurance exchange, Defendant-Appellant, and FARMERS INSURANCE EXCHANGE, a reciprocal inter-insurance exchange, Defendant.

          Argued and submitted April 13, 2018

          Multnomah County Circuit Court 15CV21058; Stephen K. Bushong, Judge.

          Lindsey H. Hughes argued the cause for appellant. Also on the briefs were Hillary A. Taylor and Keating Jones Hughes, P.C.

          Seth H. Row argued the cause for respondent. Also on the brief were Iván Resendiz Gutierrez, Miller Nash Graham & Dunn LLP, Rima L. Ghandour, and Ghandour Law, LLC.

          Before Armstrong, Presiding Judge, and Tookey, Judge, and Shorr, Judge.

         Case Summary: This appeal arises from an action for defense costs and indemnity by Bighorn Logging Corporation (Bighorn) against its insurer, Truck Insurance Exchange (Truck). After a landowner sued Bighorn for timber trespass, Bighorn tendered defense of the suit to Truck pursuant to its insurance policy. Truck concluded that it was not obligated to defend or indemnify Bighorn under the terms of the policy. The landowner obtained a verdict and judgment against Bighorn following a jury trial. Bighorn then brought this action against Truck for breach of contract. The trial court granted Bighorn's motion for summary judgment and denied Truck's cross-motion. Truck challenges those rulings [295 Or.App. 820] on appeal. Held: The trial court did not err. With respect to the duty to defend, Truck did not prove that one or more policy exclusions unambiguously apply to the allegations in the landowner's complaint. With respect to the duty to indemnify, Bighorn proved that it was found liable for damages that are covered by the insurance policy; conversely, Truck did not prove that one or more policy exclusions unambiguously apply based on the jury's verdict and the judgment for the landowner.

         Affirmed.

         [295 Or.App. 821] SHORR, J.

         This appeal arises from an action for defense costs and indemnity brought by Bighorn Logging Corporation (Bighorn) against Truck Insurance Exchange (Truck). Bighorn was the defendant in a timber trespass lawsuit filed by Paul Ater. In April 2012, Bighorn had approached Ater requesting a limited license to use up to three Douglas fir trees on Ater's property (the Ater property) as "tail hold trees" that would be used to secure "yarder lines" in connection with a logging operation on an adjacent property owned by Dr. Edney (the Edney property).[1] Bighorn explained to Ater that it would use only two or three trees and take specific precautions to ensure that there was no or minimal damage to Ater's trees. Under those proposed conditions, Ater granted Bighorn a limited license to use the indicated trees.

         In his complaint, Ater alleged that, contrary to its representations, Bighorn failed to effectively employ methods designed to minimize damage to Ater's trees. Instead, Bighorn used a chainsaw to "girdle" the trees and create wedge-shaped cuts to keep the steel yarder lines in place. In total, Bighorn cut down or severely damaged 18 Douglas fir and alder trees as well as numerous shrubs and small trees on Ater's property. The Ater lawsuit went to trial, and Bighorn was found liable by a jury for "intentionally or recklessly" damaging Ater's trees.

         Bighorn tendered defense of Ater's claim to Truck pursuant to a commercial general liability (CGL) insurance policy that Bighorn had purchased from Truck. Truck concluded that it was not obligated to defend or indemnify Bighorn because, in its view, Ater's complaint alleged conduct for which the policy did not provide coverage and, in the event that there was coverage, Bighorn's alleged conduct was subject to exclusions in the insurance policy.

         After Truck refused to defend or indemnify Bighorn, Bighorn brought a breach of contract action against Truck. The trial court entered summary judgment for Bighorn and denied Truck's cross-motion for summary judgment. On [295 Or.App. 822] appeal, Truck assigns error to those rulings and reprises its arguments that it was not obligated under the insurance policy to defend Bighorn against Ater's timber trespass claim or to indemnify Bighorn against the liability that resulted from that claim. For the reasons explained below, we affirm.

         I. BACKGROUND

         Before discussing Truck's duty to defend and indemnify Bighorn in the Ater case, we turn to a more detailed explanation of the factual and procedural background leading to this appeal. The following material facts are undisputed.

         A. Insurance Policy Provisions

         The insurance policy that Truck sold to Bighorn provided that Truck would defend and indemnify Bighorn in certain lawsuits. Regarding those duties, the policy provided, in relevant part, that

"[Truck] will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. [Truck] will have the right and duty to defend the insured against any 'suit' seeking those damages."

         The policy applies to "property damage" only if the damage was "caused by an 'occurrence' that takes place in the 'coverage territory'" and "during the 'policy period.'"

         The policy contains several exclusions, three of which are relevant to this appeal. Exclusion 2(a) excludes coverage for property damage "expected or intended" by the insured. Exclusion 2(j)(5) excludes coverage for "property damage" to "that particular part of real property on which you * * * are performing operations, if the 'property damage' arises out of those operations." Exclusion 2(j)(6) excludes coverage for "property damage" to "that particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it."

         The policy also defines several terms. The term "occurrence" as used to describe the kind of property damage covered by the policy means "an accident, including continuous or repeated exposure to substantially the same [295 Or.App. 823] general harmful conditions"; the policy does not further define the term "accident." "Property damage" means "physical injury to tangible property, including all resulting loss of use of that property." "Your work" as used in exclusion 2(j)(6) means "work or operations performed by [Bighorn]." The policy does not further define the term "operations" as used in exclusion 2(j)(5) and the definitional language in exclusion 2(j)(6) or what it means for property damage to be "expected or intended" as used in exclusion 2(a).

         B. Ater's Complaint Against Bighorn

         In 2013, Ater filed a timber trespass action against Bighorn. In the original complaint, Ater alleged that Bighorn had "willfully" and "intentionally" trespassed on Ater's property, resulting in timber damage. In the first amended complaint, Ater specifically alleged both "intentional" and "negligent" timber trespass, ORS 105.810; ORS 105.815. Ater relied on the same factual allegations to support both claims, namely, Ater alleged that Bighorn had exceeded the limited license granted by Ater when it used a chainsaw to cut and girdle numerous trees on Ater's property in lieu of using the promised methods designed to minimize tree damage. With respect to the intentional trespass claim, Ater alleged that Bighorn had "blatantly violated the limited license granted by plaintiff and willfully, intentionally and without ...


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