Groshong v. Mutual of Enumclaw Ins. Co.

Citation143 Or.App. 450,923 P.2d 1280
PartiesJoel C. GROSHONG, Joann Huth and Gary Huth, Appellants, v. MUTUAL OF ENUMCLAW INSURANCE COMPANY, a Washington corporation, Respondent. 9407-04901; CA A89325.
Decision Date11 September 1996
CourtCourt of Appeals of Oregon

Thomas M. Christ, Portland, argued the cause for respondent. With him on the brief was Mitchell, Lang & Smith.

Before DEITS, P.J., and De MUNIZ and HASELTON, JJ.


Plaintiffs appeal from the trial court's judgment, following a stipulated facts trial, that the defendant insurance company was not obligated to defend and indemnify plaintiffs against a claim of intentional housing discrimination. We affirm.

The parties stipulated to the following facts: Plaintiff Joel Groshong owned the Cabana Apartments in Portland and employed plaintiffs JoAnn and Gary Huth to manage them. In November 1992, a prospective tenant, Ms. Sifuentes, who had a seven-week-old son, inquired about renting a vacant second-floor apartment. Ms. Huth informed Sifuentes that the Cabana Apartments did not allow small children on the second floor because of safety concerns--e.g., small children might fall off the balcony or injure themselves on stairs leading up to the second-floor apartments. Because no first-floor apartments were available, Sifuentes was unable to obtain housing at the Cabana Apartments. 1

Shortly thereafter, Sifuentes retained legal counsel who sent plaintiffs a demand letter, enclosing a draft federal court complaint alleging intentional housing discrimination, and demanding a settlement of $15,000. Plaintiffs tendered the demand letter and draft complaint to their insurer, defendant Mutual of Enumclaw, requesting coverage under plaintiffs' "Special Businessowners" insurance policy. Defendant refused to defend or indemnify plaintiffs against Sifuentes' claims.

Sifuentes next filed an administrative complaint with the United States Department of Housing and Urban Development (HUD). Plaintiffs tendered that complaint to defendant, who, once again, declined the tender. HUD ultimately issued a written "determination of reasonable cause" that plaintiffs, in excluding Sifuentes and her son from the second-floor apartment, had violated the federal Fair Housing Act, 42 U.S.C. § 3601 et seq, 2 and initiated a charge of discrimination based on that determination.

In November 1993, the United States Department of Justice filed a complaint on Sifuentes' behalf against plaintiffs in federal court. Defendant declined plaintiffs' tender of that complaint. In April 1994, plaintiffs, who had retained their own legal counsel, entered into a settlement and consent order with the United States and Sifuentes. That settlement and consent order required plaintiffs to, inter alia, (1) pay Sifuentes $10,000 for "compensatory damages and counsel fees" and (2) discontinue their policy of refusing to rent to families with small children.

In July 1994, plaintiffs filed this action, asserting that defendant had breached its contract of insurance by denying coverage and, particularly, by failing to defend and indemnify plaintiffs against Sifuentes' administrative and civil claims. The pertinent portions of plaintiffs' policy provided:

"The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of * * * personal injury caused by an occurrence to which this insurance applies.

" * * * * *

"occurrence means * * * with respect to personal injury, the commission of an offense, or series of similar or related offenses;

"personal injury means injury which arises out of one or more of the following offenses committed in the conduct of the named insured's business:

" * * * * *

"(c) wrongful entry or eviction, or other invasion of the right of private occupancy[.]" (Boldface in original.)

The policy further provides that,

"The Company shall have the right and duty to defend any claim or suit against the insured seeking damages payable under this policy, even though the allegations of the suit may be groundless, false, or fraudulent." (Boldface in original.)

Plaintiffs sought damages, including their costs incurred in defending the administrative and civil proceedings, the amount of their settlement with Sifuentes, and anticipated costs of future compliance with the federal court consent order.

Defendant answered, asserting that its policy did not cover Sifuentes' claim for four reasons: (1) That claim did not allege "bodily injury," "property damage," or "personal injury" within the meaning of plaintiffs' policy. (2) That claim did not allege an "occurrence" within the policy's coverage. (3) That claim fell within the policy's exclusion for "personal injury arising out of the willful violation of a penal statute[.]" (4) It would be against public policy to provide insurance coverage for a claim of intentional housing discrimination.

The trial court, after implicitly rejecting defendant's public policy argument, held that, as a matter of law, Sifuentes' claim did not pertain to "wrongful entry or eviction, or other invasion of the right of private occupancy" and, thus, did not allege a "personal injury" within the policy's coverage. Accordingly, the court entered judgment for defendant.

On appeal, plaintiffs contend that the trial court erred in its construction and application of the operative "wrongful entry or eviction, or other invasion of the right of private occupancy" policy language. As support for their position, plaintiffs invoke cases from other jurisdictions that have, apparently, construed similar language as covering housing discrimination claims. 3

Defendant responds that the trial court's construction of the policy language was correct and musters its own supporting authority from other jurisdictions. 4 In all events, defendant asserts, extending insurance coverage to Sifuentes' claim would be void as against public policy under Oregon law.

As amplified below, we agree with defendant that public policy precludes insurance coverage in the circumstances presented here. Accordingly, we do not address the question of whether, in the absence of public policy constraints, Sifuentes' claim would otherwise implicate "wrongful entry or eviction, or other invasion of the right of private occupancy."

Before reaching the substance of defendant's public policy argument, however, we must resolve a threshold procedural issue pertaining to the presentation of that issue. Plaintiffs argue that we cannot consider the public policy argument because defendant was required, under ORAP 5.57, to cross-assign error to the trial court's rejection of that argument but failed to do so. Defendant responds that a cross-assignment of error is unnecessary--and, indeed, would be inappropriate under ORAP 5.57--and that the public policy argument is properly characterized and reviewed as an alternative basis for affirmance. Defendant is correct.

ORAP 5.57 provides, in part:

"(1) A respondent must cross-assign as error any trial court ruling described in subsection (2) in order to raise the claim of error in the appeal.

"(2) A cross-assignment of error is appropriate:

"(a) If, by challenging the trial court ruling, the respondent does not seek to reverse or modify the judgment on appeal; and

"(b) If the relief sought by the appellant were to be granted, respondent would desire reversal or modification of an intermediate ruling of the trial court." (Footnote omitted.)

Thus, ORAP 5.57 requires a cross-assignment of error only if a respondent challenges and seeks reversal or modification of a "ruling of the trial court." (Emphasis supplied.) Here, defendant does not seek reversal or modification of a ruling by the trial court; rather, defendant urges us to affirm the trial court based on reasoning the court rejected. In Oak Crest Const. Co. v. Austin Mutual Ins. Co., 137 Or.App. 475, 905 P.2d 848 (1995), which also involved construction and enforcement of an insurance policy, we rejected an argument virtually identical to the one that plaintiffs make here:

"Plaintiff argues that we may not consider this issue, because

'the trial judge specifically found that the facts in this case gave rise to an occurrence. If the Defendant wishes to challenge this portion of the ruling below, it should have designated a cross-assignment of error.'

"We disagree. The trial court's various reasons for its ruling on the motions for summary judgment are not independently assignable as error. 'Rulings' must be assigned or cross-assigned as error, not the reasons for the rulings. ORAP 5.57. In this case, the only rulings at issue are the trial court's decisions to grant defendant's motion for summary judgment and to deny plaintiff's cross-motion. Defendant's argument that the trial court was correct in both instances, because the property damage was not caused by an 'occurrence,' is merely an argument that the court was correct for the wrong reason." Id. at 478 n. 2, 905 P.2d 848 (citations omitted).

We turn, then, to the merits of defendant's argument that, under Oregon law, public policy precludes insurers from defending and indemnifying their insureds against claims for intentional discrimination. Isenhart v. General Cas. Co., 233 Or. 49, 377 P.2d 26 (1962), states the governing principle:

"[A] clause in a contract of insurance purporting to indemnify the insured for damages recovered against him as a consequence of his intentional conduct in inflicting injury upon another is unenforceable by the insured on the ground that to permit recovery would be against public policy." Id. at 53, 377 P.2d 26.

In applying that principle, "the obligation of the insurer to defend is to be determined by the allegations of the complaint filed against the insured." Id. at 54, 377 P.2d 26 (footnote omitted).

Nielsen v. St. Paul Companies, 283 Or. 277, 583 P.2d 545 (1978), reiterated that

"[i]nsurance coverage for the...

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