Leach v. Scottsdale Indem. Co.

• Decision Date: 12 February 2014
• Docket Number: A151680.,11C13379
• Citation: 323 P.3d 337,261 Or.App. 234
• Parties: Robert LEACH, Plaintiff–Appellant, v. SCOTTSDALE INDEMNITY COMPANY, dba Scottsdale Insurance Company, Defendant–Respondent.
• Court: Oregon Court of Appeals

261 Or.App. 234

323 P.3d 337

Robert LEACH, Plaintiff–Appellant,

v.SCOTTSDALE INDEMNITY COMPANY, dba Scottsdale Insurance Company, Defendant–Respondent.

11C13379; A151680.

Court of Appeals of Oregon.

Submitted Sept. 18, 2013.

Decided Feb. 12, 2014.

Beau D. Harlan and Harlan Law Firm filed the briefs for appellant.

Michael A. Lehner and Lehner & Rodrigues, P.C., filed the brief for respondent.

Before DUNCAN, Presiding Judge, and LAGESEN, Judge, and SCHUMAN, Senior Judge.

LAGESEN, J.

Plaintiff Robert Leach appeals from a final judgment dismissing with prejudice his claims against his insurance company, defendant Scottsdale Indemnity Company (Scottsdale). Leach alleged that Scottsdale breached its duties to defend and indemnify him in connection with Thomas Warberg's personal injury action for injuries sustained as a result of a collision that occurred during a practice session at the motocross track operated by Leach. The trial court granted summary judgment in favor of Scottsdale on both alleged breaches on the ground that the policy did not provide coverage for bodily injuries sustained by motorcycle riders on Leach's track. In addition, the court ruled that Scottsdale was entitled to summary judgment on the alleged breach of the duty to indemnify on the ground that, under the rule of law announced in Stubblefield v. St. Paul Fire & Marine, 267 Or. 397, 517 P.2d 262 (1973), a covenant not to execute by Warberg in favor of Leach extinguished any obligation of Scottsdale to indemnify Leach. We reverse and remand.

I. BACKGROUND

Leach leased, designed, and operated a motocross course at the Fair and Expo Center in Salem, Oregon,¹ under the name “Bob Leach Enterprises.” Scottsdale insured the premises under a commercial general liability policy. The policy provided for $1,000,000 in “bodily injury” and “property damage” liability coverage. It stated that Scottsdale

“will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages.”

However, the policy also contained an endorsement exclusion—titled the “Athletic or Sports Participants” exclusion (“Athletic Participant” exclusion)—that limited the scope of its coverage. The exclusion provided that “this insurance does not apply to ‘bodily injury’ to any person while practicing for or participating in any sports or athletic contest or exhibition that you sponsor.”

Leach routinely held both motocross practice sessions and motocross races at the track. Generally, Leach would hold races on Friday and Saturday nights, or occasionally on Saturday and Sunday, and he would have practice sessions on Wednesday evenings and on those Sundays where no races were held. During one practice session, a rider lost control of the motorcycle that he was riding, and entered Warberg's lane and collided with him. Warberg was seriously injured.

Warberg sued Leach, the rider who caused the collision, and others in Warberg v. Fleck, et al. ( Warberg I ). Warberg sought economic damages for medical expenses in an amount not less than $100,000; economic damages for lost wages or salary in an amount not less than $1,000,000; and noneconomic damages in the amount of $5,000,000. Leach tendered the complaint to Scottsdale. Scottsdale denied coverage and refused to defend or indemnify Leach in connection with the suit on the ground that “Scottsdale does not owe a duty to defend or indemnify its insured, Bob Leach Enterprises, because the ‘Athletic Or Sports Participant’ Exclusion is applicable to bar coverage.”

After Leach unsuccessfully moved for summary judgment, Warberg settled with Leach. In accordance with the settlement, the trial court entered a stipulated judgment against Leach in the amount of $1,500,000. After judgment was entered, Leach and Warberg entered into an “Assignment and Covenant Not to Execute” agreement. Under the agreement,

“pursuant to ORS 31.825, Leach * * * assign[ed] all his rights of recovery, choses in action, and enforcement of obligations between himself and Leach's Insurance Policy holder, Scottsdale Indemnity Company, and against any and all other persons having any responsibility or liability for the Judgment entered in favor of Warberg by Leach * * *.”

(Emphasis omitted.) In turn, Warberg “agree[d] not to enforce the Judgment against Leach by execution or any other manner against Leach in exchange for the Assignment.”

Pursuant to the assignment, Warberg then sued Scottsdale for breach of contract in Warberg v. Scottsdale ( Warberg II ). The complaint alleged that Scottsdale had failed to defend and indemnify Leach in connection with Warberg's original lawsuit in contravention of its obligation under the policy. Scottsdale moved for summary judgment on the grounds that (1) it had no duty, as a matter of law, to defend Leach against Warberg's original claim because its policy “specifically excluded bodily injuries suffered while practicing sports or athletics”; and (2) it had no present duty to indemnify because, among other reasons, the policy had an anti-assignment clause that precluded assignment without written consent from Scottsdale.

The trial court ruled on the motion in a letter opinion. The letter opinion concluded that issues of fact existed as to whether Warberg's injuries fell within the “Athletic Participant” exclusion, but concluded that the anti-assignment clause barred Warberg's action against Scottsdale. The trial court then entered an order stating that Scottsdale was entitled to summary judgment because the anti-assignment clause barred Warberg's action.

Leach then filed the present action, reiterating the claims alleged in Warberg II: that Scottsdale breached its duties under the policy when it refused to defend or indemnify Leach in connection with Warberg I. Scottsdale moved for summary judgment, again asserting that it had no duty to defend or indemnify Leach because Warberg's injuries fell within the “Athletic Participant” exclusion. Scottsdale also asserted that Warberg'scovenant not to execute against Leach eliminated any duty of Scottsdale to indemnify Leach under the rule of law announced in Stubblefield. The trial court granted the motion and entered a general judgment dismissing all of Leach's claims with prejudice.

Leach timely appealed. On appeal, Leach assigns error to the trial court's grant of summary judgment to Scottsdale. Leach contends that (1) in the light of the Warberg II court's conclusion in its letter opinion that there were factual disputes as to whether the “Athletic Participant” exclusion bars coverage for liability for Warberg's injuries, issue preclusion barred the grant of summary judgment in Scottsdale's favor; (2) the undisputed facts do not demonstrate as a matter of law that Warberg's injuries are excluded from coverage by the “Athletic Participant” exclusion; and (3) Stubblefield does not establish as a matter of law that the covenant not to execute eliminated Scottsdale's duty to indemnify.

II. STANDARD OF REVIEW

On review of a trial court's grant of summary judgment, “we view the evidence and all reasonable inferences that may be drawn from the evidence in the light most favorable to * * * the party opposing the motion.” Jones v. General Motors Corp., 325 Or. 404, 408, 939 P.2d 608 (1997). Summary judgment is proper only “if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” Outdoor Media Dimensions Inc. v. State of Oregon, 331 Or. 634, 638, 20 P.3d 180 (2001) (citing ORCP 47 C). “A genuine issue of material fact is lacking when ‘no objectively reasonable juror could return a verdict for the adverse party on the matter that is the subject of the motion for summary judgment.’ ” Id. at 638–39, 20 P.3d 180 (quoting ORCP 47 C).

III. ANALYSIS

A. Issue preclusion does not bar Scottsdale from asserting that the “Athletic Participant” exclusion bars coverage for liability for Warberg's injuries.

The first question presented by this appeal is whether the letter opinion in Warberg II bars the grant of summary judgment in favor of Scottsdale under principles of issue preclusion. Leach argues that the trial court in this case was required to give preclusive effect to the Warberg II court's conclusion in its letter opinion that there are issues of material fact as to whether Warberg's injuries are excluded from coverage under the “Athletic Participant” exclusion. We disagree.

For a prior court decision to be afforded issue-preclusive effect, among other things, the pertinent issue must have been “actually litigated” and “essential to a final decision on the merits in the prior proceeding.” Nelson v. Emerald People's Utility Dist., 318 Or. 99, 104, 862 P.2d 1293 (1993). To satisfy that essentiality requirement, a prior court's resolution of an issue must either be apparent from the face of a judgment or order or, if not apparent from the face of a judgment or order, must have been necessary to the resolution of the prior adjudication. See Westwood Construction Co. v. Hallmark Inns, 182 Or.App. 624, 635–36, 50 P.3d 238,rev. den.,335 Or. 42, 57 P.3d 581 (2002) (discussing the requirements of ORS 43.160, “which had its genesis in the common-law principle of issue preclusion”).

Here, the Warberg II court's order granting summary judgment to Scottsdale did not state on its face that the court resolved any issue regarding the application of the “Athletic Participant” exclusion. Moreover, the court's determination that factual disputes precluded summary judgment in favor of Scottsdale based on the exclusion was not essential to the court's decision to grant summary judgment in favor of Scottsdale on the ground that the policy's anti-assignment clause barred Warberg's action. The scope of the “Athletic Participant” exclusion has no bearing on whether or not Leach was...