Eslamizar v. American States Ins. Co.
| Decision Date | 26 April 1995 |
| Citation | 894 P.2d 1195,134 Or.App. 138 |
| Parties | Siyavash ESLAMIZAR, dba Great Grinder Shop, Appellant, v. AMERICAN STATES INSURANCE COMPANY, an Indiana corporation, Respondent. C910651CV; CA A78747. |
| Court | Oregon Court of Appeals |
Thomas W. Kohl, Hillsboro, argued the cause for appellant. With him on the briefs was Frost & Kohl.
Darleen Darnall, Portland, argued the cause for respondent. With her on the brief were Lisa E. Lear and Bullivant, Houser, Bailey, Pendergrass & Hoffman.
Before WARREN, P.J., and EDMONDS and LANDAU, JJ.
Plaintiff appeals from a judgment entered upon a jury verdict in favor of defendant, assigning error to the trial court's failure to grant plaintiff's motion for a directed verdict on defendant's affirmative defenses and to the form of verdict submitted to the jury. We reverse and remand.
We view the facts in the light most favorable to defendant and extend to defendant the benefit of every reasonable inference that may be drawn from the evidence. Shockey v. City of Portland, 313 Or. 414, 422, 837 P.2d 505 (1992), cert. den. 507 U.S. 1017, 113 S.Ct. 1813, 123 L.Ed.2d 444 (1993).
Plaintiff owned a restaurant, which he had insured under a fire policy he purchased from defendant. Defendant's policy contained the following provisions:
When plaintiff's restaurant was destroyed by fire, plaintiff notified defendant and submitted a proof of loss form. Local police investigated the fire and concluded that plaintiff, or someone acting at plaintiff's direction, had set the fire. Defendant conducted its own investigation of the fire as well. In the course of that investigation, plaintiff testified under oath that he knew nothing of insurance matters, and that, upon consultation with a real estate broker, he estimated the value of the restaurant at $90,000. Further inquiry by defendant, however, established that plaintiff had substantial prior experience in the insurance industry, and that he had, in fact, run an insurance company in another country. Defendant's investigation also showed that plaintiff never consulted with a real estate broker about the value of the restaurant, and that it was probably worth substantially less than $90,000. In addition, defendant learned that plaintiff had told an acquaintance that he had inflated an earlier burglary claim at the restaurant and recovered more than was actually stolen. Finally, defendant learned that, shortly before the fire, plaintiff had told another acquaintance that the restaurant was doing poorly and that, if he could not sell it he would "burn the S.O.B." According to the acquaintance, plaintiff said that he did not mention the conversation to defendant because he did not want defendant to become suspicious.
On the basis of the results of the investigation, defendant denied plaintiff's claim. Plaintiff initiated this action for breach of contract. Defendant answered, raising affirmative defenses of arson and misrepresentation. Defendant alleged that the latter defense was based on plaintiff's material misstatements about his real estate broker's valuation of the restaurant and about his lack of any knowledge about insurance, on his concealment of his prior involvement in filing inflated and fraudulent claims, and on his concealment of his prior statements about the real cause of the fire and of the identity and locations of witnesses to those statements.
At trial, plaintiff moved for a directed verdict on the affirmative defenses. The trial court denied the motion and submitted the case to a jury on a general verdict form. The jury returned a verdict in favor of defendant, and plaintiff appeals.
Plaintiff assigns error to the trial court's denial of the motion for a directed verdict as to the affirmative defense of misrepresentation. Plaintiff argues that, under the terms of defendant's policy and the statute on which it is based, misrepresentations may defeat a claim for coverage only upon proof that plaintiff's representations were material and that defendant relied on them. According to plaintiff, there is no evidence of either materiality or reliance. Because of the nature of the general verdict, plaintiff concludes, we cannot tell whether the jury rendered its verdict on the arson defense--the validity of which plaintiff does not challenge--or the misrepresentation defense, and the judgment must be reversed.
Defendant argues that the evidence shows that plaintiff's misrepresentations and efforts to conceal information were plainly material. Defendant further argues that, under Hendricksen v. Home Ins. Co., 237 Or. 539, 392 P.2d 324 (1964), and Callaway v. Sublimity Ins. Co., 123 Or.App. 18, 858 P.2d 888 (1993), insurers are not required to establish reliance upon misrepresentations to defeat a claim.
We do not address the parties' arguments concerning materiality, because, even if plaintiff's statements were material, proof of reliance is required, and there is no evidence that defendant relied on those statements.
The language of the policy states:
"In order to use any representation made by you * * * we must show that the representations are material and that we relied on them."
That language is based on, and essentially repeats, ORS 742.208(3), which requires all fire insurance policies to contain a provision that:
"In order to use any representation by or on behalf of the insured in defense of a claim under the policy, the insurer must show that the representations are material and that the insurer relied on them."
When policy language matches the requirements of the statute, we approach the issue of the interpretation of the policy as a matter of statutory construction. Perez v. State Farm Mutual Ins. Co., 289 Or. 295, 299, 613 P.2d 32 (1980). In construing ORS 742.208(3), our task is to discern the intention of the legislature. Our first and primary source of evidence of the legislature's intent is the text of the statute, viewed in context. If the legislature's intentions are plainly revealed in the text in context, then we proceed no further in our analysis. PGE v. Bureau of Labor and Industries, 317 Or. 606, 610-12, 859 P.2d 1143 (1993).
In this case, the language of the statute is plain on its face. It says that, to rely on misrepresentations to defeat a claim, the insurer "must show * * * that the insurer relied on them." There is no room for construction. The statute requires proof of reliance.
Callaway, 123 Or.App. at 20 n. 1, 858 P.2d 888. In saying that, however, we were not construing ORS 742.208(3). That statute, which applies only to fire insurance policies, did not apply in that case. 1 We conclude, therefore, that defendant must prove reliance on plaintiff's misrepresentations in order to prevail on its affirmative defense under ORS 742.208(3).
Ordinarily, to show reliance there must be evidence that one has acted or refrained from acting to his or her detriment. Riley Hill General Contractor v. Tandy Corp., 303 Or. 390, 405, 737 P.2d 595 (1987); Crawford v. Standard Insurance Co., 49 Or.App. 731, 735-36, 621 P.2d 583 (1980), rev. den. 290 Or. 652 (1981). We are aware that, in cases such as this in which the insurer has denied coverage, it may be difficult for the insurer to establish that it has acted to its detriment or refrained from acting to its detriment. By denying coverage, the insurer has avoided the detriment. 2 Nevertheless, the language of the statute gives no indication that the legislature intended the term "reliance" to mean anything other than what it ordinarily means as an element of a common law fraud claim.
Even assuming, for the sake of argument, that the reference to "reliance" in ORS 742.208(3) is ambiguous, the legislative history demonstrates that the legislature intended nothing other than what is ordinarily meant by the term. The legislature originally enacted what is now ORS 742.208(3) in 1967. The text of the law then read:
"A fire insurance policy shall contain a provision as follows: 'This entire policy shall be void if, whether before or after a loss, the insured has wilfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto.' "
Or.Laws 1967, ch. 359, § 483. The law as then drafted did not expressly require an insurer to establish reliance on misrepresentations of an insured as a condition of voiding the policy on the basis of those misrepresentations. Several court decisions read similar language in statutory provisions relating to other forms of insurance to require proof of reliance, as in the...
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