A-1 Sandblasting & Steamcleaning Co., Inc. v. Baiden

• Decision Date: 27 April 1982
• Docket Number: A-1
• Parties: SANDBLASTING & STEAMCLEANING CO., INC., an Oregon corporation, Respondent on review, v. Frank William BAIDEN, Underwriters at Lloyds, and other English companies, Petitioners on review. SC 28131; CA 17975; TC A7902-00834.
• Court: Oregon Supreme Court

Page 1260

643 P.2d 1260

293 Or. 17

A-1 SANDBLASTING & STEAMCLEANING CO., INC., an Oregon

corporation, Respondent on review, v. Frank William BAIDEN, Underwriters at Lloyds, and other

English companies, Petitioners on review.

SC 28131; CA 17975; TC A7902-00834.

Supreme Court of Oregon, In Banc.

Argued and Submitted Feb. 11, 1982.

Decided April 27, 1982.

Robert E. Franz, Jr., Eugene, argued the cause and filed brief for petitioners on review.

Charles R. Mowry, Portland, argued the cause and filed brief for respondent on review. With him on the brief was Dardano & Mowry, Portland.

LINDE, Justice.

Plaintiff, a contractor in the business of cleaning and painting large structures, sued its liability insurer to recover sums that plaintiff had paid to the owners of automobiles damaged by plaintiff in the course of spray painting a bridge. The insurer defended on the grounds that coverage was excluded, first, by a clause in the policy and second, by a public policy against recovering insurance for liability arising from intentional conduct. The trial court entered summary judgment for defendant on the basis of the policy exclusion. The Court of Appeals reversed, holding that the exclusion required clarification by evidence and that coverage, if provided by the insurance policy, was not precluded by the nature of plaintiff's conduct. 53 Or.App. 890, 632 P.2d 1377 (1981). Having allowed review primarily to consider the second issue, we affirm.

The Court of Appeals summarized the facts as follows:

"In September, 1977, plaintiff purchased a broad form property damage liability insurance policy from the defendants. In May, 1978, plaintiff was awarded a contract with the State of Oregon to paint the McCollough Bridge in Coos County. Under the terms of the contract with the State, plaintiff could paint the bridge by brush, roller or spray. The contract also required plaintiff to make arrangements for the removal of overspray from passing vehicles. Despite plaintiff's efforts to avoid overspray damage, a large number of vehicles passing over the bridge were sprayed. In accordance with its contract, plaintiff established a paint removal service near the bridge. Not all drivers took advantage of the service, and some of those who did were unsatisfied. The affidavit of plaintiff's owner asserts that precautions to avoid overspray were taken, but that despite any precautions taken in such a spray paint operation, overspray in undeterminable amounts is inevitable."

53 Or.App. at 892, 632 P.2d 1377.

The clause relied on by defendant as excluding coverage provides:

"This insurance does not cover liability

" * * *

"(h) For damage to property arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental."

53 Or.App. at 892-93, 632 P.2d 1377. The parties dispute whether the list of acids, alkalis, liquids, and other substances mentioned in this clause includes the paint sprayed by plaintiff that gave rise to the claims against it. The Court of Appeals concluded that this reading of the clause is not "so clear as to cause a reasonable person in the position of the insured to believe that paint was one of the substances referred to" in the exclusion and that the clause plausibly might be read to exclude liability for pollution damages to the environment. In view of an affidavit that defendants knew of the sandblasting and painting operations for which plaintiff wished liability insurance, the meaning intended or understood by the parties to the policy should be determined upon trial. 53 Or.App. 894-96, 632 P.2d 1377. We agree with this conclusion of the Court of Appeals.

The case nevertheless would not need to be remanded for trial if the harmful conduct for which plaintiff became liable precludes recovery under a general principle disallowing indemnity against liability for intentional wrongdoing. In the law of liability insurance, this general principle is variously based on specific policy provisions, or on "the very nature of insurance," or on public policy. See Keeton, Insurance Law 288-289 (1971). Because such insurance contracts traditionally covered liability arising from "accidents" or expressly excluded liability for intentional acts, most decisions denying recovery have not had to go beyond the limits explicit or implicit in the contract and squarely to hold insurance covering liability for intentional acts to be an unlawful contract. There may be a question how far the case law interpreting older policies was superseded, intentionally or otherwise, by the 1966 change in a new standard liability policy, which substituted the term "occurrence" for "accident" in the key coverage clause (though retaining "accident" as part of the definition of "occurrence" at least for some purposes). ¹ The insurance contract found in the present record, however, consists primarily of typewritten provisions of a policy issued by defendant underwriters at Lloyd's, London, which refer neither to "accidents" nor to the legal premise of the liability against which the policy protects the insured. If any policy provisions or prior interpretations of similar insurance policies exclude coverage of this insured's operations, other than the exclusion previously referred to, defendants have not cited them. We therefore turn to the question whether Oregon law precludes recovery if the losses resulting from those operations otherwise were within the coverage of the insurance contract.

Defendants contend that recovery is precluded insofar as the insured intentionally chose a method of operation, spray painting, which the insured fully expected to cause the harm for which it paid and now seeks reimbursement. "Intent," in this as in other contexts, is a term of many meanings, which is applied to mental states extending from conscious performance of the simplest bodily acts to the widest ultimate expectations. In a provision restricting insurance against liability for intentional wrongdoing, "intentional" could refer to any liability pleaded as one of the intentional torts, or irrespective of the theory of liability, to an insured's intentional action which unintentionally causes harm, or to such intentional action only when taken in disregard of a certainty or high likelihood of harm, or to actions motivated by a purpose to cause harm, though not necessarily the actual harm suffered by the injured party, or finally only to action taken for the purpose of inflicting the very harm for which liability is later imposed. Courts have reached different positions on these meanings of intent when construing clauses excluding intended harm from insurance coverage. See Pachucki v. Republic Ins. Co., 89 Wis. 703, 708, 278 N.W.2d 898, 901 (1979), citing Annot., 2 A.L.R.3d 1238 (1965). This court interpreted one such exclusion to apply only when the harm itself was intended in City of Burns v. Northwestern Mutual Ins. Co., 248 Or. 364, 434 P.2d 465 (1967). Two later decisions similarly interpreted contract clauses, Snyder v. Nelson/Leatherby Ins. Co., 278 Or. 409, 564 P.2d 681 (1977) (policy limited to losses "caused by accident"); Nielsen v. St. Paul Companies, 283 Or. 277, 583 P.2d 545 (1978) (exclusion of losses "expected or intended from the standpoint of the Insured"). Professor (now Judge) Keeton maintained that the concept of insurance necessarily implies an exclusion of "intentional" losses, as seen from the standpoint of the person whose loss is the basis of the insurance claim, conceding that to include "highly expectable" losses under this rubric states a difficult distinction of degree. Keeton, Insurance Law 286-90, 297-99 (1971).

As we have said, the question how far an insurance policy in the form employed in this case is understood or interpreted to imply such an exclusion has not been briefed. If coverage is to be precluded as a matter of law, however, the rule must be sought not in the meaning of "intent" but in some public policy overriding normal contractual obligations.

Such a public policy may be found in legislative enactments, administrative regulations, even in the constitution, see Hendrix v. McKee, 281 Or. 123, 132, 575 P.2d 134 (1978). No such source is cited to us here. ² Occasionally, the rule may be developed in case law. See Harrell v. Travelers Indemnity Co., 279 Or. 199, 205-208, 567 P.2d 1013 (1977), Isenhart v. General Casualty Co., 233 Or. 49, 377 P.2d 26 (1962). Defendant argues that such a rule precludes insurance against liability for injuries caused by the insured's intentional action when these injuries, though undesired, are so certain as to fall within the tort principle that one is deemed to intend the foreseen or expected consequences of one's acts. The rule is said to be required by a public policy of deterring persons from choosing to disregard known or expected harm to others because any liability for this harm will be borne by the insurer.

Although the argument of "deterrence" has superficial plausibility, this court has not found in it the basis of a "public policy" restricting liability insurance. For one thing, the argument proves too much. There is a public policy, expressed by criminal, administrative, and civil sanctions, to deter negligent and irresponsible as well as intentional misconduct, yet the argument that insurance would undermine the deterrent of liability for negligence was rejected long ago. See Appleman, Insurance Law and Practice § 2105 at 9 (Revised Ed); McNeely, Illegality as a Factor in Liability Insurance, 41 Colum.L.Rev. 26 (1941). Moreover, when a court is called upon to derive a public policy from assumptions about the effect of legal rules on social...