Masood v. Safeco Ins. Co. of Or.

• Decision Date: 09 December 2015
• Docket Number: A149925 (Control), A149926.,CV09070070, CV10060761
• Parties: Sohail MASOOD, Plaintiff–Appellant Cross–Respondent, v. SAFECO INSURANCE COMPANY OF OREGON, an Oregon Insurance company; Defendant–Respondent Cross–Appellant, and Overland Solutions, Inc., Defendant–Respondent, and A.O.A. West, Inc., an Oregon Corporation, Defendant. Sohail Masood, Plaintiff–Appellant Cross–Respondent, v. Safeco Insurance Company of Oregon, an Oregon insurance company, Defendant–Respondent Cross–Appellant, and A.O.A. West, Inc., Defendant.
• Court: Oregon Court of Appeals

275 Or.App. 315

365 P.3d 540

Sohail MASOOD, Plaintiff–Appellant Cross–Respondent,

v.SAFECO INSURANCE COMPANY OF OREGON, an Oregon Insurance company; Defendant–Respondent Cross–Appellant,andOverland Solutions, Inc., Defendant–Respondent,

and

A.O.A. West, Inc., an Oregon Corporation, Defendant.

Sohail Masood, Plaintiff–Appellant Cross–Respondent,

v.Safeco Insurance Company of Oregon, an Oregon insurance company, Defendant–Respondent Cross–Appellant,andA.O.A. West, Inc., Defendant.

CV09070070, CV10060761

A149925 (Control), A149926.

Court of Appeals of Oregon.

Argued and Submitted Nov. 24, 2014.

Decided Dec. 9, 2015.

Sara Kobak, Portland, argued the cause for appellant-cross-respondent. With her on the brief were David Axelrod, W. Michael Gillette, and Schwabe, Williamson & Wyatt, P.C. With her on the reply brief were David Axelrod, Abra T. Cooper, and Schwabe, Williamson & Wyatt, P.C.

Jonathan W. Henderson, Portland, argued the cause for respondent. With him on the brief were William Davis and Davis Rothwell Earle & Xóchihua, P.C.

R. Daniel Lindahl, Portland, argued the cause for respondent-cross-appellant. On the brief were Janice C. Puracal, Jerret E. Sale, Washington, John A. Bennett, Stuart D. Jones, and Bullivant Houser Bailey PC. On the reply brief were Jerret E. Sale, Washington, John A. Bennett, and Bullivant Houser Bailey PC.

Before ARMSTRONG, Presiding Judge, and NAKAMOTO, Judge, and EGAN, Judge.

NAKAMOTO, J.

This is a complex civil case that arose after a fire destroyed plaintiff's multi-million dollar home and its contents. Plaintiff brought a breach-of-contract claim against his insurer, Safeco, for failing to pay him the "extended dwelling coverage" under his insurance policy based on an oral settlement agreement that he made with Safeco (the fire-loss claim), and for failing to pay on a claim for a theft that plaintiff alleged occurred after the fire (the theft-loss claim). Plaintiff also brought a negligence claim against Overland Solutions, Inc., a company that prepared a replacement-cost estimate of plaintiff's home for Safeco before the fire. Safeco brought a counterclaim against plaintiff for breach of contract based on its contention that plaintiff had willfully misrepresented the quality and value of three built-in components in his home. The trial court granted Overland's motion for summary judgment on plaintiff's negligence claim, and the case proceeded to trial on plaintiff's and Safeco's respective claims for breach of contract.¹

After a lengthy trial, the jury determined that Safeco had breached an oral settlement agreement with plaintiff on his fire-loss claim and that plaintiff's damages were $2,452,500, but it found in favor of Safeco on plaintiff's theft-loss claim. The jury also determined that plaintiff had willfully misrepresented the three house components and that Safeco had relied on those misrepresentations. After hearing the parties' post-trial arguments on the effect of the jury's findings, the trial court concluded that, based on public policy reasons, plaintiff "shall take no damages" under the judgment on his breach-of-contract claim. The trial court also determined that plaintiff's misrepresentations voided the insurance contract as of the day before the fire and that Safeco was entitled to a judgment of $9,977,290.78, which was the amount of payments Safeco had made to plaintiff on his fire-loss claim under the policy.

On appeal, plaintiff asserts 12 assignments of error, and Safeco asserts three cross-assignments of error and brings a cross-appeal asserting a single assignment of error. We first address plaintiff's second and third assignments of error and conclude that the trial court erred in denying plaintiff's motion for directed verdict on Safeco's breach-of-contract counterclaim because there is no evidence in the record that Safeco reasonably relied on the misrepresentations that the jury found plaintiff had made to Safeco. Based on that disposition, we need not address plaintiff's fourth through ninth assignments of error, nor Safeco's third cross-assignment of error. That disposition also renders moot Safeco's cross-appeal of the trial court's denial of prejudgment interest on its money judgment against plaintiff.

On plaintiff's first assignment of error, challenging the trial court's decision that plaintiff "shall take no damages" under the judgment on his fire-loss claim, we conclude that (1) the trial court erred in concluding that the settlement contract was void as against public policy and (2) the disposition of Safeco's counterclaim disposes of Safeco's other arguments in support of the judgment. On Safeco's related first and second cross-assignments of error, we conclude that the trial court did not err in denying Safeco's motions for directed verdict on plaintiff's fire-loss claim.

In plaintiff's tenth and eleventh assignments of error, he challenges the trial court's admission of evidence of a United Kingdom court's findings that plaintiff had forged documents in an unrelated case. Because of our dispositions on Safeco's counterclaim and plaintiff's fire-loss claim, those assignments of error relate only to plaintiff's theft-loss claim. With respect to the theft-loss claim, we conclude that the trial court did not err in admitting that evidence and did not err in excluding plaintiff's evidence offered to rebut the United Kingdom court's findings. Accordingly, we affirm the judgment for Safeco on plaintiff's theft-loss claim.

Finally, in his twelfth assignment of error, plaintiff challenges the trial court's grant of summary judgment to Overland. We conclude that the trial court did not err in concluding that plaintiff's claim was barred by the economic loss doctrine.

Accordingly, we reverse the judgment for Safeco on its breach-of-contract counterclaim, vacate and remand the judgment for plaintiff on his fire-loss claim with instructions to enter a judgment for plaintiff in the amount of the jury's award, dismiss Safeco's cross-appeal as moot, and otherwise affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

On appeal, this case involves two different claims, the fire-loss claim and the theft-loss claim, that plaintiff brought against his insurer, Safeco; Safeco's counterclaim for breach of contract against plaintiff based on fraud;² and plaintiff's negligence claim against Overland. The background facts with respect to those claims are set out separately below, although the timeframe of the applicable facts largely occurred concurrently. In addition to the background facts set out here, we also discuss particular evidence in more detail in the analysis that follows.

In stating the background facts, with respect to those claims that went to the jury, we view the evidence, and the reasonable inferences taken from that evidence, in the light most favorable to the party that prevailed below on each claim. See Greist v. Phillips, 322 Or. 281, 285, 906 P.2d 789 (1995) ("Because this case comes to us after a trial at which the jury found in plaintiff's favor, we view all the evidence, and the inferences that reasonably may be drawn from it, in the light most favorable to plaintiff"). With respect to the grant of summary judgment to Overland, we review the summary judgment record in the light most favorable to plaintiff, the nonmoving party, and draw all reasonable inferences in his favor. Jones v. General Motors Corp., 325 Or. 404, 408, 939 P.2d 608 (1997).

A. Plaintiff's House and Property

Plaintiff owned a 20–acre parcel in West Linn that included an approximately 12,600 square-foot house and several additional buildings and structures. Plaintiff and his family used the house as a residence, and plaintiff also worked from there and hosted international guests. The house was built in 1994 as a "spec" house; that is, it was built without a prospective owner, so it did not have custom features. Plaintiff purchased the house in 1996 and, over four years, extensively renovated the house and added a large expansion. As part of the renovation, an audio/visual system was integrated into the home. After the renovation, the interior of the house included high-end finishes, custom fixtures and furnishings, murals, and artwork.

B. Plaintiff's Negligence Claim against Overland

Plaintiff obtained insurance for his house from Safeco through AOA West, Inc., an independent insurance agency, and had done so since 1998.³ Safeco had a contract with Overland to conduct real estate inspection appraisal services and, in April 2008, requested that Overland provide a replacement-cost estimate for plaintiff's house. Based on an inspection by its agent, Teri DeHaan, Overland reported the replacement-cost value of plaintiff's house at $4.905 million. Under Safeco's flat-fee arrangement with Overland, Safeco paid Overland $215 for its report.

Jason Rogers, from AOA West, obtained a copy of that report from Safeco and then forwarded it to plaintiff. Plaintiff objected to the report to Rogers because he believed it significantly undervalued his house. However, at a meeting on August 5, 2008, plaintiff increased his policy limits with Safeco to match Overland's reported value, as recommended by Rogers, because Rogers told him that that was the maximum coverage he could get. Four days later, on August 9, 2008, plaintiff's home was destroyed by a fire while subject to the policy limits set on August 5.

In his claim against Overland, plaintiff contended that its negligently prepared appraisal left him significantly underinsured, and he sought millions of dollars in damages for the underinsured amount. Before trial, the trial court granted summary judgment to Overland, concluding that plaintiff's claim was barred by the economic loss doctrine because plaintiff and Overland did not have a special relationship that gave rise to an enhanced duty of care.

C. Claims Related to the Fire Loss of Plaintiff's House

1. Plaintiff's fire-loss claim against Safeco

The fire on August 9, 2008, caused a complete loss to plaintiff's house...