Clinical Research Institute v. KEMPER INS.

• Decision Date: 28 January 2004
• Citation: 84 P.3d 147,191 Or. App. 595
• Parties: CLINICAL RESEARCH INSTITUTE OF SOUTHERN OREGON, P.C., an Oregon Corporation, Appellant, v. KEMPER INSURANCE COMPANIES, American Manufacturers Mutual Insurance Company, an Illinois Corporation, and Lori Hagler, Respondents.
• Court: Oregon Court of Appeals

84 P.3d 147

191 Or. App. 595

CLINICAL RESEARCH INSTITUTE OF SOUTHERN OREGON, P.C., an Oregon Corporation, Appellant, v. KEMPER INSURANCE COMPANIES, American Manufacturers Mutual Insurance Company, an Illinois Corporation, and Lori Hagler, Respondents.

02-0516-E2; A118681.

Court of Appeals of Oregon.

Argued and Submitted November 3, 2003.

Decided January 28, 2004.

Ridgway K. Foley, Jr., Portland, argued the cause for appellant. With him on the opening brief was Greene & Markley, P.C., Portland. With him on the reply brief were Bernard S. Moore and Frohnmayer, Deatherage, Pratt, Jamieson, Clarke & Moore, P.C., Medford.

David Simantob argued the cause for respondents Kemper Insurance Companies and American Manufacturers Mutual Insurance Company. On the brief were Benjamin M. Bloom and Normecker, Cowling, Hassen, & Heysell, L.L.P., Medford, and Jeffrey A. Meyers and Tressler, Soderstrom, Maloney & Priess, Los Angeles.

No appearance for respondent Lori Hagler. Before LANDAU, Presiding Judge, and ARMSTRONG and BREWER, Judges.

BREWER, J.

In this declaratory judgment action, plaintiff insured appeals from summary judgment in favor of defendants insurers.¹ Plaintiff argues that the trial court erred in concluding that the business owner's policy that defendants issued to plaintiff did not provide coverage for a former employee's defamation claim against plaintiff. We review for errors of law, Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 469, 836 P.2d 703 (1992), and affirm.

Plaintiff purchased a "Kemper Premier Businessowners Special Policy" from defendants in May 2000. The policy included separate forms providing coverage for property damage and commercial liability. Only the latter coverage is at issue here. The policy provided that defendants "will pay those sums that the insured becomes legally obligated to pay as damages because of * * * `personal injury' * * * to which this insurance applies." It further provided that the insurance applies to "`[p]ersonal injury' caused by an offense arising out of your business * * * but only if the offense was committed in the `coverage territory' during the policy period."

The policy defined "personal injury" as "injury, other than `bodily injury' or `advertising injury,' arising solely out of one or more of the following offenses:

"* * * * *

"d. Oral or written publication of material that slanders or libels a person or organization or a person's or organization's goods, products or services; or

"e. Oral or written publication of material that violates a person's right of privacy."

(Boldface in original.)

In July 2001, Hagler brought an action against plaintiff that included a claim for "interference with economic opportunity" based on plaintiff's conduct after Hagler's termination in January 2001. Hagler later filed an amended complaint that added several other claims but did not alter the substantive allegations of the interference with economic opportunity claim. Only the latter claim is at issue in this action. As pertinent here, Hagler alleged in that claim that she would have been hired by a prospective employer if plaintiff had not wrongfully interfered by:

"1. * * * publishing to [the prospective employer] a false and defamatory letter * * * that [Hagler] was a former employee of [plaintiff], that [Hagler] was prohibited from having any contact with [the prospective employer's] clinical research director * * * and that [plaintiff] would file a lawsuit against [the prospective employer] if they had contact with [Hagler]. Although not stated directly, implicit in the libelous communication above described was the assertion by [plaintiff] that [the prospective employer] would be sued if, in fact, that organization hired [Hagler].

"2. The false assertions described [in the previous paragraph] were made with the motive to prevent [plaintiff's] employees and former employees, including [Hagler], who were lawfully entitled to seek employment elsewhere from seeking and finding employment with a competing business. At all times [plaintiff] knew and [was] aware that there was no non-competition agreement in force and effect between [plaintiff] and [its] employees, including [Hagler]. [Plaintiff] knew that [its] threats to file a lawsuit against [the prospective employer], should that organization hire [Hagler] or other employees of [plaintiff's] were groundless and without merit whatsoever." Plaintiff tendered the defense of Hagler's action to defendants. Defendants initially accepted the tender under a reservation of rights, stating that the interference claim "alleges defamation in the form of libel" and that that allegation was "likely covered under the personal injury portion of [the] policy." Defendants later withdrew their defense of the action, concluding that the interference claim was covered under the personal injury portion of the policy but that the "Employment-Related Practices" (ERP) exclusion applied "to remove any potential for coverage[.]" Plaintiff then commenced this action, seeking a declaratory judgment to the effect that defendants owed it a duty to defend the action.

Plaintiff thereafter moved for summary judgment, and defendants filed a cross-motion for summary judgment. The trial court denied plaintiff's motion for summary judgment and granted defendants' cross-motion, based on its conclusion that plaintiff's claim was subject to the ERP exclusion in the policy.

On appeal, plaintiff assigns error to the grant of summary judgment in favor of defendants. Plaintiff asserts that the ERP exclusion applies only to prospective and current employees, not to former employees. Plaintiff asserts that, at the least, its proposed construction is reasonable, thus making the exclusion ambiguous and requiring us to construe the ambiguity in its favor. Defendants reply that the ERP exclusion is unambiguous and that it is not limited in scope to current employees. Plaintiff raises an alternative theory for the first time in its reply brief on appeal—specifically, that the defamation alleged by Hagler was not "employment-related" because plaintiff's statements did not relate to Hagler's work performance. Defendants contend that plaintiff's alternative theory is unpreserved and not properly before us. We begin our analysis with plaintiff's original theory, as framed before the trial court and in plaintiff's opening brief on appeal.

Ordinarily, we evaluate a duty to defend claim by examining two documents: the complaint and the insurance policy. American Hardware Ins. Group v. West One Auto., 167 Or.App. 244, 247, 2 P.3d 413 (2000). The failure to identify or separately state claims correctly does not defeat the duty to defend. Rather, "`in the absence of any compelling evidence of no coverage, the insurer owes a duty to defend if the injured claimant can recover under the allegations of the complaint upon any basis for which the insurer affords coverage.'" Marleau v. Truck Insurance Exchange, 333 Or. 82, 91, 37 P.3d 148 (2001) (quoting Casey v. N.W. Security Ins. Co., 260 Or. 485, 489, 491 P.2d 208) (1971) (emphasis in Marleau).

We interpret insurance policy provisions according to the analytical framework set out in Hoffman Construction Co. We first determine whether the policy defined the term at issue and, if it did not, we look to the plain meaning of the term. American Hardware Ins. Group, 167 Or. App. at 248, 2 P.3d 413. If we determine that there are two or more plausible interpretations of the term, then we consider whether those interpretations "withstand scrutiny, i.e., continue[ ] to be reasonable, after the interpretations are examined in the light of, among other things, the particular context in which that term is used in the policy and the broader context of the policy as a whole." Hoffman Construction Co., 313 Or. at 470, 836 P.2d 703. Only if more than one interpretation remains reasonable after such an examination will we conclude that the policy provision is ambiguous. Id. If the provision is ambiguous, we construe it against the insurer as its drafter. Id. at 470-71, 836 P.2d 703.

Hagler's complaint alleged that she was not hired by a prospective employer because plaintiff sent a "false and defamatory letter" to the prospective employer stating that Hagler was prohibited from having contact with representatives of that employer.² The ERP exclusion provides:

"This insurance does not apply to:

"* * * *

"r. Employment-Related Practices "`Bodily injury,' `personal injury,' or `advertising injury' to:

"1) A person arising out of any:

"a) Refusal to employ that person;

"b) Termination of that person's employment; or

"c) Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, or discrimination directed at that person; or

"2) The spouse, child, parent, brother or sister of that person as a consequence of `bodily injury' or `personal injury' to that person at whom any of the employment-related practices described in paragraphs a), b) or c) above is directed.

"This exclusion applies:

"1) Whether the insured may be liable as an employer or in any other capacity; and

"2) To any obligation to share damages with or repay someone else who must pay damages because of the injury."

(Boldface in original.) This case concerns the meaning of subsection (r)(1)(c), which excludes from coverage personal injury "arising out of any * * * [e]mployment-related practices, policies, acts or omissions." The policy does not define either the phrase or its constituent terms. Accordingly, we consider the ordinary meanings of those terms. American Hardware Ins. Group, 167 Or. App. at 248, 2 P.3d 413.

The ordinary meaning of the words "arising out of" is very broad. See Oakridge Comm. Ambulance v. U.S. Fidelity, 278 Or. 21, 25, 563 P.2d 164 (1977)

("The words `arising out of when used in [an automobile liability provision providing...