Capital Credit & Collection Serv., Inc. v. Kerr Contractors, Inc.
| Decision Date | 17 October 2018 |
| Docket Number | A163697 (Control),A163789,A164570 |
| Citation | 294 Or.App. 486,432 P.3d 315 |
| Parties | CAPITAL CREDIT AND COLLECTION SERVICE, INC., Plaintiff-Respondent, v. KERR CONTRACTORS, INC., Defendant-Appellant. Capital Credit and Collection Service, Inc., Plaintiff-Respondent, v. Columbia Northwest Recycling, Inc., Defendant-Appellant. Capital Credit and Collection Services, Inc., Plaintiff-Respondent, v. Crestline Construction Company, LLC, Defendant-Appellant. |
| Court | Oregon Court of Appeals |
Joseph Yazbeck, Jr., D. Brent Carpenter, and Jordan Ramis PC filed the briefs for appellants.
Michael J. Kavanaugh filed the brief for respondent.
Before Hadlock, Presiding Judge, and DeHoog, Judge, and Aoyagi, Judge.
In this breach of contract action, the trial court granted summary judgment in favor of plaintiff, and defendant1 appeals the resulting judgment. Defendant contends that the contract at issue is ambiguous as a matter of law, that it must be construed against plaintiff because it is an insurance contract, and that the trial court erred in granting summary judgment in favor of plaintiff. We conclude that the contract is unambiguous and that the trial court did not err. Accordingly, we affirm.
Summary judgment is appropriate when no genuine issue of material fact exists for trial and the moving party is entitled to prevail as a matter of law. ORCP 47 C. The parties agree that their dispute turns on purely legal aspects of contract interpretation. There are no disputed facts.
Oregon Employers Trust, Inc. (OET) operated a workers’ compensation and employers’ liability coverage pooling arrangement, which is essentially a form of insurance. Approximately 285 companies participated in OET’s pool during the time period relevant to this appeal. Defendant joined the pool on October 1, 2010. At that time, defendant entered into a Workers’ Compensation and Employers Liability Self-Insured Group Coverage Pooling and Indemnity Agreement (Pooling Agreement), which governed the terms of defendant’s participation. Part Six, Condition G, of the Pooling Agreement, titled "Assessments," provides:
The cover page of the agreement also references Part Six, Condition G, immediately above the parties’ signatures: "The features of this Pooling Agreement include the possibility of joint & several liability with assessments and payments after termination of the Participant’s participation as detailed in Part Six (pg. 9)—Conditions / ‘G’ Assessments noting provisions of ORS 656.017 / 656.735 / 656.054."
Defendant was in the OET pool for two years. In late September 2012, defendant notified OET that it wished to "cancel" its participation. OET responded a few days later that it would be "non-renewing" defendant’s agreement and membership "effective October 01, 2012 at 12:01 a.m. because of coverage placed elsewhere." Defendant ceased participation in the OET pool on October 1, 2012.
In 2013, the state increased its capitalization requirements for risk pools such as OET. As a result, OET had to increase its capitalization from $3,275,000 to $3,950,000. To timely meet the new requirements and avoid decertification, OET initially borrowed money and then, in September 2013, issued a 12% assessment against current and former pool participants for the policy years 2011 and 2012. Defendant objected to the assessment and did not pay the amount assessed against it.
By mid-2014, the number of participants in OET’s pool had dropped substantially, and, as a result, OET’s board voted to decertify the pool. At that time, the state entered into a claims management agreement with OET’s administrator to continue administering the pool’s funds, including paying covered workers’ compensation claims that had arisen while the pool was active.
OET assigned to plaintiff its claim against defendant for the unpaid 2012 assessment. Plaintiff filed this action for breach of contract and soon moved for summary judgment. Plaintiff argued that defendant was obligated to pay the 2012 assessment under the terms of the Pooling Agreement. Defendant opposed the motion, contending that the agreement was ambiguous as to OET’s authority to impose the assessment and that the ambiguity should be construed in defendant’s favor because of the interpretive rules applicable to insurance policies. Ultimately, the trial court agreed with plaintiff, granted summary judgment, and entered a judgment in plaintiff’s favor.
Defendant appeals that judgment, assigning error to the grant of summary judgment. The primary issue on appeal is whether the Pooling Agreement, particularly Part Six, Condition G, is ambiguous as to OET’s authority to impose the 2012 assessment on defendant. Whether a contract term is ambiguous is a question of law. Heathman Hotel v. McCormick & Schmick Restaurant , 284 Or. App. 112, 117, 391 P.3d 892 (2017) (contracts generally); Hoffman Construction Co. v. Fred S. James & Co. , 313 Or. 464, 470, 836 P.2d 703 (1992) (insurance policies). The correct interpretation of an unambiguous term also is a question of law. Heathman Hotel , 284 Or. App. at 117, 391 P.3d 892 (contracts generally); Hunters Ridge Condo. Assn. v. Sherwood Crossing , 285 Or. App. 416, 422, 395 P.3d 892 (2017) (insurance policies).2
Defendant contends that, contrary to the trial court’s ruling, Part Six, Condition G, is ambiguous in two regards. First, defendant argues that it is ambiguous whether OET has discretion to assess pool participants for any legitimate business purpose, including increasing OET’s capitalization to meet state regulatory requirements, or whether OET may only assess participants for the limited purposes identified in the second paragraph of Part Six, Condition G. Second, defendant argues that it is ambiguous whether former participants who "cancel" their agreements are subject to assessment after leaving the pool, or whether only former participants whose agreements are "terminated" are subject to assessment after leaving the pool.
We address each of the alleged ambiguities in turn. Regarding the purposes for which OET may make assessments, the full text of Part Six, Condition G, is set forth above. The first paragraph provides that OET’s board of directors "may, in its sole discretion, at any time impose assessments upon you and our other Participants or former Participants subject to assessment." Assessments "may also be imposed" upon order of the director of the Workers’ Compensation Division of the Oregon Department of Consumer and Business Services (WCD). "Further," the second paragraph states, the participant understands that if it "terminate[s] from the group," it will "continue to be jointly and severally liable for the payment of any compensation due to a subject worker and other amounts due to the [WCD]" arising out of a period when it was in the group. The third paragraph states that it is "further understood and agreed" that defendant shall be jointly and severally liable for certain civil penalties and claim costs in the event of a DCBC noncompliance order. Finally, the fourth paragraph concludes, "You are assessable while this agreement is in effect and for three years following its termination."
Defendant acknowledges that one plausible reading of Part Six, Condition G, is that it gives OET broad discretion to assess participants for any legitimate business purpose while the agreement is in effect and for three years following its termination. That is the interpretation that plaintiff urges and that the trial court adopted. Defendant argues, however, that there is a second plausible interpretation that would lead to a different result. Specifically, defendant posits that the second paragraph may be read as limiting the discretion granted in the first paragraph, such that OET only has authority to assess participants for compensation payments to subject workers and for amounts due to the WCD. Plaintiff rejects that alternative interpretation as implausible, especially in the context of the Pooling Agreement as a whole. See Milne v. Milne Construction Co. , 207 Or. App. 382, 388, 142 P.3d 475 (2006) (); Holloway v. Republic Indemnity Co. of America , 341 Or. 642, 650, 147 P.3d 329 (2006) ().
We agree with the trial court that defendant’s proposed second interpretation of Part Six, Condition G, is implausible. The first paragraph expressly states that OET’s board has "sole...
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