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Coelsch v. State Farm Fire and Casualty Co.

Court of Appeals of Oregon

June 19, 2019

Leo W. COELSCH and Krista L. Coelsch, husband and wife, Plaintiffs-Appellants,
v.
STATE FARM FIRE AND CASUALTY COMPANY, Defendant-Respondent.

          Argued and submitted September 19, 2018.

          Sherman County Circuit Court 16CV14586 Janet L. Stauffer, Judge.

          Martin E. Hansen argued the cause for appellants. Also on the brief were Christopher J. Manfredi and Francis Hansen & Martin LLP.

          Douglas F. Foley argued the cause for respondent. Also on the brief were Vernon Finley and Douglas Foley & Associates, PLLC.

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

         Case Summary:

         Plaintiffs appeal from a judgment dismissing their breach of contract action seeking coverage under an insurance policy for damage to plaintiffs' combine. The damage occurred when the combine rolled down a hill at a high rate of speed with its engine off, causing components to fail because they were not being lubricated with oil. State Farm denied the claim, asserting that the loss was subject to the policy's exclusion for "mechanical breakdown." The trial court agreed and granted State Farm's motion for summary judgment. On appeal, plaintiffs contend that the damage did not occur during a mechanical breakdown, as that term is commonly understood by the ordinary purchaser of insurance. Held: The court explained that the term "mechanical breakdown," as used in the policy, would have been understood by plaintiffs to describe a breakdown in the machinery during its regular functioning. That is, a breakdown during its normal operation, and not a breakdown that occurs as a result of other movement. Because the combine was not performing its normal operation [298 Or.App. 208] at the time the damage occurred, the trial court erred in determining that the "mechanical breakdown" exclusion applied.

         [298 Or.App. 209] TOOKEY, J.

         Plaintiffs sought coverage under their policy of insurance with defendant, State Farm, for damage to plaintiffs' combine that occurred when the combine rolled down a hill at a high rate of speed with its engine off, causing components to fail because they were not being lubricated with oil. State Farm denied the claim, asserting that the loss was subject to the policy's exclusion for "mechanical breakdown." Plaintiffs then brought this action for breach of contract. On the parties' cross-motions for summary judgment, the trial court granted State Farm's motion, denied plaintiffs' motion, and dismissed the claim, concluding that the loss was subject to the mechanical breakdown exclusion. Plaintiffs appeal. We conclude that the trial court erred in determining that plaintiffs' claim was subject to the mechanical breakdown exclusion and in granting State Farm's motion and denying plaintiffs' motion for summary judgment; we therefore reverse and remand.

         On review of the trial court's rulings on cross-motions for summary judgment, we view the record in the light most favorable to the party opposing the motion for whether there are any disputed issues of material fact and whether either party was entitled to judgment as a matter of law. Eden Gate, Inc. v.D & L Excavating & Trucking, Inc., 178 Or.App. 610, 622, 37 P.3d 233 (2002).

         The facts are largely undisputed. Plaintiffs' employee was operating a combine on steep terrain when he accidentally drove into a drainage ditch, causing the combine to tip forward and its back wheels to lift off the ground. The operator, wanting to assess the situation and concerned for his safety, turned off the engine and climbed down. The combine then rolled down the hill, coming to a stop at the bottom.

         Because the engine had been turned off before the combine rolled down the hill, the combine's hydraulic pump and motor sustained damage as the combine rolled down the hill, a result of metal-to-metal components moving against each other without lubrication. Morrow County [298 Or.App. 210] Grain Growers, which repaired the combine, described the damage:

"The hydraulic drive system on this type of machine is hydrostatically controlled which is powered by the engine and uses pressurized hydraulic oil to drive the machine at very low speeds. Since the machine went down the hill without the engine running the hydraulic drive system was not functioning and not being supplied with oil internally. To keep the parts and pieces lubed without the oil being able to be flushed throughout the system, the metal to metal components failed almost immediately while going down hill at a high rate of speed. The hydraulic pump and motor had both failed and were removed from the machine by a technician and were disassembled in the shop for further investigation. After the pump and motor were disassembled it was very obvious the pump and motor failed from the accident of the machine traveling down the hill the way the customer explained the scenario to us."

         Plaintiffs had an endorsement in their State Farm policy for "accidental direct physical loss" to their "unscheduled farm personal property," including the ...


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