Moody v. Or. Cmty. Credit Union

Docket NumberA172844
Decision Date26 January 2022
PartiesChristine MOODY, individually, and in her capacity as the Personal Representative of the Estate of Steven "Troy" Moody, Deceased, Plaintiff-Appellant, v. OREGON COMMUNITY CREDIT UNION, aka OCCU, an Oregon entity, association, union, or corporation et al., Defendants, and FEDERAL INSURANCE COMPANY, an Indiana corporation, Defendant-Respondent.
CourtOregon Court of Appeals

Argued and submitted August 24, 2021

Lane County Circuit Court 19CV26557 Bradley A. Cascagnette, Judge.

Travis Eiva argued the cause and fled the briefs for appellant.

R Daniel Lindahl argued the cause for respondent. Also on the brief were Stuart D. Jones and Bullivant Houser Bailey PC.

Before Powers, Presiding Judge, and Egan, Judge, and Landau, Senior Judge.

Reversed and remanded.


ORS 746.230 provides that an insurer may not refuse to pay claims without conducting a reasonable investigation or fail to attempt in good faith to promptly and equitably settle claims when liability is reasonably clear. In this case, plaintiff alleges that defendant Federal Insurance Company violated that statute when it unreasonably denied her claim for accidental loss of life benefits arising out of the accidental death of her husband and is therefore liable for negligence per se. She further alleges that she is entitled to damages for the emotional distress resulting from defendant's negligence. Defendant moved to dismiss the negligence per se claim and strike the allegation of damages for emotional distress on the ground that a negligence claim may not be predicated on a breach of an insurance policy. The trial court agreed and granted defendant's motions. For the reasons that follow, we conclude that the trial court erred and therefore reverse and remand.


We take the facts from the allegations of the complaint. McLaughlin v. Wilson, 365 Or. 535, 537, 449 P.3d 492 (2019). Defendant contracted to provide life insurance coverage and benefits in the amount of $3, 000 to be paid on the death of plaintiffs husband, Troy. The policy further provided that, if Troy suffered an accidental loss of life it would pay the benefit amount to plaintiff.

Troy was accidentally shot and killed by a friend on a camping trip. Plaintiff timely filed a claim with defendant, but defendant denied the claim. Defendant asserted that its policy excluded accidents caused by or resulting from the insured being under the influence and that the exclusion applied because the sheriffs toxicology report stated that there was evidence that Troy had tested positive for marijuana.

Plaintiff initiated this action, alleging that defendant was mistaken in denying benefits because Troy died because of being accidentally shot by another person, not because he had been using marijuana. Plaintiff advanced a number of claims for relief, among them a claim for breach of contract and another for negligence per se, based on defendant's failure to conduct a reasonable investigation of Troy's death and its failure, in good faith, to settle her claim-all in breach of ORS 746.230(1). Plaintiff claimed economic damages in the amount of the $3, 000, as well as noneconomic damages for emotional distress in the amount of $47, 001.

Defendant moved to dismiss the negligence per se claim on the ground that Oregon does not recognize such tort claims for what is essentially a breach of contract claim. It also moved to strike the allegation of damages for emotional distress. The trial court granted the motions and entered a limited judgment dismissing the second and third claims.

Meanwhile, while the appeal was pending, the case proceeded on plaintiffs breach of contract claim. Defendant tendered the $3, 000 in claimed coverage, and the trial court entered a judgment in favor of plaintiff on that claim.


Plaintiff assigns error both to the dismissal of her negligence per se claim and to the striking of her allegation of damages for emotional distress. In her briefing, she combines her arguments on both assignments, as does defendant in response. As the issues are necessarily intertwined, we do likewise.

Plaintiff acknowledges that, ordinarily, the remedy for a violation of the terms of a contract-including an insurance policy-is a claim for breach of contract. But, she argues, Oregon courts recognize an exception to that general rule when a breach of the contract violates a standard of care independent of the terms of the contract. Plaintiff contends that, as this court held in Abraham v. T. Henry Construction, Inc., 230 Or.App. 564, 572, 217 P.3d 212 (2009), affd on other grounds, 350 Or. 29, 249 P.3d 534 (2011) (Abraham I), a standard expressed in a statute constitutes such an independent standard of care that will support a claim for negligence per se. Here, plaintiff argues, defendant's breach of its policy of insurance also violated just such an independent, statutory standard of care spelled out in ORS 746.230(1). Defendant responds that the trial court was correct in dismissing the negligence per se claim.

In reviewing the trial court's decision to dismiss plaintiffs claims, our task is to determine whether, viewing the allegations of the complaint in the light most favorable to plaintiff, she has failed to state a claim as a matter of law. Hernandez v. Catholic Health Initiatives, 311 Or.App. 70, 72, 490 P.3d 166 (2021).

As framed by the arguments of the parties, the issue before us is to determine when a party to a contract may sue another party to the same contract for negligence. Obligations specified in the terms of a contract are based on the intentions of the parties to a given transaction, while obligations in tort are imposed by law, apart from any such contractual obligations. Abraham I, 230 Or.App. at 568 (citing Conway v. Pacific University, 324 Or. 231, 237, 924 P.2d 818 (1996)). Ordinarily, if one party to the contract fails to meet a contractual obligation, the remedy is an action for breach of the contract. Id. If an injured party to a contract seeks to maintain a tort claim, such a claim must be based on the breach of a standard of care independent of the contract. As the Oregon Supreme Court explained in Georgetown Realty v. The Home Ins. Co., 313 Or. 97, 106, 831 P.2d 7 (1992):

"When the relationship involved is between contracting parties, and the gravamen of the complaint is that one party caused damage to the other by negligently performing its obligations under the contract, then, and even though the relationship between the parties arises out of the contract, the injured party may bring a claim for negligence if the other party is subject to a standard of care independent of the terms of the contract. If the plaintiffs claim is based solely on a breach of a provision in the contract, which itself spells out the party's obligation, then the remedy normally will be only in contract, with contract measures of damages and contract statutes of limitation."

In some cases, that independent standard of care will arise from a special relationship between the parties. In Georgetown, for example, the court held that an insurer that had assumed a contractual relationship to defend an insured was in a special relationship with that insured and, as a result, was subject to tort liability for a violation of the standard of care that applies to that particular relationship. Id. at 110-11. In other cases, such an independent standard of care may be expressed in a statute or administrative rule. Abraham I illustrates the point. In that case, the plaintiffs entered into a contract with the defendants for the construction of a house. After construction was completed, the plaintiffs discovered water leakage caused by defective construction. They sued the defendants for both breach of contract and negligence, based on the defendants' violation of the Oregon Building Code. The trial court dismissed both claims-the contract claim because it was time-barred and the negligence claim because one party to a contract generally may not bring a tort action against another party to the same contract in the absence of a special relationship creating an independent duty. 230 Or.App. at 567. We concluded that although the contract claim was indeed time-barred, the trial court had erred in granting summary judgment on the negligence claim. We explained that, although generally a party to a contract may not bring a tort claim against another party to the contract, an exception applies when the tort claim is predicated on a violation of a standard of care that exists independent of the contract. Id. at 569. We said that such an independent standard of care may derive either from a special relationship between the parties or statutes and administrative rules promulgated pursuant to statutes. Id. at 572. We concluded that the Oregon Building Code was such an independent standard of care sufficient to support a claim for negligence per se. Id. at 573-74.

The violation of such an independent standard of care is not all that is required to state a negligence claim against another party to a contract. A negligence claim based on a statutory violation requires that a plaintiff plead and ultimately prove that

"(1) defendants violated a statute; (2) that plaintiff was injured as a result of that violation; (3) that plaintiff was a member of the class of persons meant to be protected by the statute; and (4) that the injury plaintiff suffered is of a type that the statute was enacted to prevent."

McAlpine v. Multnomah County, 131 Or.App. 136, 144, 883 P.2d 869 (1994), rev den, 320 Or. 507 (1995).

With those legal principles in mind, we conclude that plaintiffs complaint satisfies each of the four requirements for stating a claim for...

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