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Great American Alliance Insurance Co. v. Sir Columbia Knoll Associates, Limited Partnership

United States District Court, D. Oregon, Portland Division

September 4, 2019

GREAT AMERICAN ALLIANCE INSURANCE CO., Plaintiff,
v.
SIR COLUMBIA KNOLL ASSOCIATES LIMITED PARTNERSHIP, Defendant. SIR COLUMBIA KNOLL ASSOCIATES LIMITED PARTNERSHIP, Third-Party Plaintiff,
v.
PHILADELPHIA INDEMNITY INSURANCE CO., Third-Party Defendant.

          OPINION AND ORDER

          MARCO A. HERNANDEZ UNITED STATES DISTRICT JUDGE.

         In this action, the parties dispute insurance coverage for water-damaged apartment buildings. The parties now move for summary judgment on whether Oregon or Washington law applies. The owner of the apartment buildings, Defendant and Third-Party Plaintiff SIR Columbia Knoll Associates Limited Partnership (Columbia Knoll), contends that Washington law applies. The two insurers, Plaintiff Great American Alliance Insurance Co. (Great American), and Third-Party Defendant Philadelphia Indemnity Insurance Co. (Philadelphia) (collectively the Insurers), contend that Oregon law applies.

         I conclude that Oregon law applies. I therefore dismiss Columbia Knoll's claims for violations of the Washington Consumer Protection Act and for tortious breach of the implied covenant of good faith and fair dealing because Oregon does not recognize such claims for alleged breaches of an insurance policy.

         BACKGROUND

         The facts relevant to the choice of law analysis are largely undisputed. Columbia Knoll is an Oregon limited partnership domiciled in Oregon. Columbia Knoll owns the apartment buildings at issue, which are adjacent complexes in northeast Portland: The Terrace at Columbia Knoll, which contains 118 income-restricted apartments in nine separate buildings, and The Heights at Columbia Knoll Senior Residence, which contains 208 income-restricted apartments in one four-story building. See Great Am.'s Suppl. Br. 3 (aerial photo of the Property), ECF No. 60.

         One of Columbia Knoll's two general partners, Columbia Grotto Partners, LLC (Columbia Grotto), is an Oregon limited liability company whose principal place of business is Bellevue, Washington. Miller Suppl. Decl. ¶ 2, ECF No. 54. Shelter Investment Resources, LLC (Shelter Investment) "is the 99% member" of Columbia Grotto. Id. Columbia Knoll submits declarations from Mark Miller, who states that he is "a principal in Shelter Investment," and is "primarily responsible for executive-level decisions regarding the operations of Columbia Knoll. Day-to-day operations at Columbia Knoll are handled by on-site property managers. Executive-level decisions, however, including decisions regarding major construction or repair projects, are made by me and my business partners in Bellevue, Washington." Id. ¶ 3.

         Great American is domiciled in Ohio. Philadelphia is domiciled in Pennsylvania. Between 2011 and 2017, the Insurers issued property insurance policies to Evergreen Portfolio, LLLP[1], which is based in Bellevue, Washington. Evergreen Portfolio is not a party to this action.

         Great American issued policies to Evergreen Portfolio that were effective from June 30, 2011 until June 30, 2014.[2] Philadelphia issued policies to Evergreen Portfolio that were effective from June 30, 2014 to June 20, 2019. The policies were negotiated and purchased through an insurance brokerage based in the State of Washington. Columbia Knoll's Resp. 4, ECF No. 40. In addition to the Property at issue, the Insurers' policies covered other properties in Oregon, as well as properties in Washington, Arizona, Texas, Utah, and other states. See Hauser Decl., Exs. A, C, & E (Great American policies); Kirby Decl., Exs. A, B, C, D, & E, ECF Nos. 31-1, 31-2, 31-3, 31-4, & 31.5 (Philadelphia policies). The number of properties covered by the Insurers' policies varied year to year from about 145 to 179 properties. More than half of the insured properties were in Washington. Columbia Knoll's Resp. 4.

         In September 2016, Columbia Knoll brought a lawsuit in Multnomah County Circuit Court against a general contractor and two subcontractors, alleging that the defendants' faulty workmanship on the Property and violations of Oregon building codes had allowed water intrusion, causing extensive damage to the buildings. Hauser Decl., Ex. I (copy of complaint in SIR Columbia Knoll Limited Partnership v. Synergy Constr., `No. 16CV28622 (Multnomah Cty. Cir. Ct.)). In its Multnomah County complaint, Columbia Knoll sought $8 million in damages.[3]

         In October 2016, Columbia Knoll reported the loss to its insurance broker, which then reported the loss to Great American. The loss notice described the loss as '"recently discovered water damage at 2 properties.'" Great Am.'s Compl. ¶ 8, ECF No. 1.

         After receiving Columbia Knoll's loss notice, Great American's senior claim technical director, Donna Szydlo, who was based in Illinois, assigned an independent adjuster to investigate the claim and an engineer to inspect the Property. After visiting the Property several times, the adjuster and engineer reported their findings to Szydlo. Szydlo "made the ultimate decision to deny coverage of Columbia Knoll's claim." Szydlo Decl. ¶ 5, ECF No. 49.

         In April 2018, Columbia Knoll sent Great American a proof of loss statement, estimating the cost of repairs to the Property at more than $14 million. Hauser Decl, Ex. UU. Great American denied Columbia Knoll's claim.

         In May 2018, Great American filed its complaint in this action, seeking declaratory relief. In July 2018, Columbia Knoll filed its answer, asserting counterclaims against Great American for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of the Washington Consumer Protection Act.

         Columbia Knoll also sought coverage under Philadelphia's policies. Philadelphia denied coverage. In September 2018, Columbia Knoll filed a third-party complaint against Philadelphia, asserting the claims it asserts as counterclaims against Great American. ECF No. 14.

         LEGAL STANDARDS FOR SUMMARY JUDGMENT

         The court must grant summary judgment if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). If the moving party shows that there are no genuine issues of material fact, the nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). When parties file cross-motions for summary judgment, the court considers "each motion on its merits." Am. Tower Corp. v. City of San Diego, 763 F.3d 1035, 1043 (9th Cir. 2014).

         DISCUSSION

         I. Choice of Law in Diversity Actions

         "Federal courts sitting in diversity look to the law of the forum state . . . when making choice of law determinations." Nguyen v. Barnes & Noble Inc.,763 F.3d 1171, 1175 (9th Cir. 2014). I therefore apply Oregon "choice of law rules to determine the controlling substantive law." Patton v. Cox,276 F.3d 493, 495 (9th Cir. 2002). "The threshold question in a choice-of-law problem is whether the laws of the different states actually conflict." Spirit Partners, LP v. Stoel Rives LLP,212 Or.App. 295, 301, 157 P.3d 1194, 1198 (2007). "The proponent of applying a different state's law has the obligation to identify a material difference between Oregon law and the law of the other state." Portfolio Recovery Assocs., LLC v. Sanders, 292 Or.App. 463, 468, 425 P.3d 455, 459 (2018) (citing Spirit Partners, 212 Or.App. at 301, 157 P.3d at 1198). "Where no material difference exists between Oregon law and the law of the proposed alternative forum, Oregon courts will apply Oregon law without regard to the relative significance of the relationship between the dispute and the proposed alternative forum." Powell v. System Transp., Inc.,83 F.Supp.3d ...


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