Richardson v. Guardian Life Ins. Co.

• Decision Date: 07 July 1999
• Citation: 984 P.2d 917,161 Or. App. 615
• Parties: Bruce L. RICHARDSON, D.M.D., Appellant, v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA and Clifford A. Bailey, Respondents.
• Court: Oregon Court of Appeals

984 P.2d 917

161 Or. App. 615

Bruce L. RICHARDSON, D.M.D., Appellant, v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA and Clifford A. Bailey, Respondents.

(9608-06418; CA A101063)

Court of Appeals of Oregon.

Argued and Submitted March 15, 1999.

Decided July 7, 1999.

Albert J. Bannon, Portland, argued the cause for appellant. With him on the briefs were Tara J. Schleicher and Farleigh, Wada & Witt, P.C.

R. Daniel Lindahl, Portland, argued the cause for respondent The Guardian Life Insurance Company of America. With him on the brief were Robert B. Miller and Bullivant, Houser, Bailey.

Ruth C. Rocker, Portland, argued the cause for respondent Clifford A. Bailey. With her on the brief were Janet M. Schroer and Hoffman, Hart & Wagner.

Before LANDAU, Presiding Judge, and LINDER and BREWER, Judges.

BREWER, J.

Plaintiff appeals from summary judgment for defendants on each of his multiple tort, contract, statutory, and other claims in this action relating to the interpretation of two business overhead disability insurance policies. Defendants are his insurer and insurance agent. Plaintiff's overarching contentions are that the trial court erred in dismissing his primary claims that the policies covered overhead expenses incurred after he sold his dental practice or, alternatively, that the insurer is estopped from denying coverage after its agent stated that coverage existed. Therefore, plaintiff asserts that his other claims, each of which depends heavily on one or the other of his primary claims, remain viable as well. For the reasons that follow, we affirm.

On appeal from summary judgment, we view the facts and all reasonable inferences drawn from those facts in the light most favorable to plaintiff, the non-moving party. Jones v. General Motors Corp., 325 Or. 404, 420, 939 P.2d 608 (1997). Plaintiff was the sole shareholder of Bruce L. Richardson, D.M.D., P.C. (the corporation), the professional corporation through which he practiced dentistry. In 1987, plaintiff purchased two business overhead expense policies from defendant, The Guardian Life Insurance Company of America (Guardian), through an insurance agent, defendant Clifford Bailey. Each policy covered up to $2,000 per month in overhead expenses of plaintiff's business should he become disabled. The policies identically defined covered expenses as follows:

"Covered expenses mean regular business expenses:

"• which you normally incur in the conduct of your business or profession;

• which require a cash payment; and

• which the United States Internal Revenue Service accepts as tax deductible business overhead expenses.

"As part of your proof of loss while you are disabled, you must give us a written statement of the covered expenses you incur each month."¹

Each policy defined "total disability" as the inability "to perform the major duties of your occupation." The policies also provided that the insured "may" cancel should he or she discontinue practice. According to a pamphlet accompanying the policies to qualify for coverage, the insured either was required to own 20 percent of the practice or to "have a contractual obligation" to pay the overhead expenses of the business.

In March 1996, plaintiff's health began to deteriorate. In April of that year, he entered into negotiations to sell all of his stock in the corporation to one of its employees, Dr. Keys. Plaintiff retained an experienced and qualified attorney to advise him and to document the transaction. By May 8, plaintiff was no longer able to work as a dentist and was totally disabled within the meaning of the policies. In early May, Keys became concerned that she would not be able to pay all of the overhead expenses of the corporation while she was building up her clientele. Plaintiff informed Bailey of the plan to sell his practice, and plaintiff claims that Bailey told him that the policies might cover his overhead expenses. Plaintiff's attorney analyzed the policies and provided plaintiff with legal advice concerning the prospects for coverage of overhead expenses under the policies following the sale of plaintiff's stock. On May 20, plaintiff's attorney asked Bailey whether the policies would cover the overhead expenses under those circumstances. According to plaintiff's attorney, Bailey told him that the policies would provide that coverage. The attorney recommended that plaintiff enter into the stock purchase agreement, including a provision binding plaintiff to pay one year's overhead expenses. Plaintiff and Keys executed the agreement on or about May 23. The agreement was expressly made retroactive, effective May 8. On June 25, plaintiff submitted a notice of disability claim to Guardian under the policies. The notice stated that plaintiff had been disabled since May 8. Guardian denied coverage, and plaintiff filed this action to recover damages, including the overhead expenses that he agreed to pay on behalf of Keys.

Plaintiff made six claims against Guardian. Those claims allege breach of contract, estoppel to deny coverage, unfair claim settlement practices, bad faith denial of coverage, breach of the implied covenant of good faith and fair dealing, and intentional infliction of emotional distress. Plaintiff sought damages and attorney fees as remedies. Plaintiff alleged three claims against Bailey, including negligence, breach of the covenant of good faith and fair dealing, and intentional infliction of emotional distress. Guardian filed its first motion for summary judgment against the breach of contract and estoppel claims. The trial court granted summary judgment on the breach of contract claim but initially denied summary judgment on the estoppel claim. Guardian later filed a second motion for summary judgment, this time challenging the unfair claims settlement practices, bad faith denial of coverage, breach of the covenant of good faith and fair dealing, and attorney fees claims. The trial court granted Guardian's second summary judgment motion as to all claims moved against except the attorney fee claim. Finally, Guardian filed a third motion for summary judgment on plaintiff's remaining claims, including estoppel and intentional infliction of emotional distress. Bailey also moved for summary judgment on each of plaintiff's claims against him. The trial court granted the motions in their entireties and entered final judgment dismissing all of plaintiff's claims.

Plaintiff's first assignment of error contests the trial court's conclusion that the policies did not cover his claim for business overhead expenses and, therefore, that Guardian's denial of coverage was not a breach of contract. Guardian argues that the trial court correctly concluded that there was no coverage, because the policies only covered expenses plaintiff incurred in conducting his business or profession. Guardian asserts that the claimed expenses were incurred in Keys' business at a time when plaintiff no longer conducted a business. Plaintiff counters that the policy language is ambiguous and that the phrase "which you normally incur in the conduct of your business or profession" must be examined in light of the policies as a whole. Plaintiff argues that the term "business or profession" applies to his circumstances because, consistent with the example in the policy pamphlet, he remains contractually obligated to pay Keys' overhead expenses. He also relies on the policies' definition of "total disability":

"Total disability means that, because of sickness or injury, you are not able to perform the major duties of your occupation.

"Occupation means your regular occupation or profession at the time you become totally disabled." (Emphasis added and in original.)

Plaintiff argues that he was a dentist at the time he became totally disabled and, therefore, that he was not required to practice his profession during the period when covered expenses were incurred.

The interpretation of an insurance policy is a question of law. Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 469, 836 P.2d 703 (1992). The primary rule of construction in an insurance contract

"is to ascertain the intention of the parties. * * * We begin with the terms and conditions of the policy itself. * * * If the term at issue is not defined in the policy, the next step is to look to the plain meaning of the term. * * * If there is more than one plausible interpretation of the term's plain meaning, each interpretation must be scrutinized in the light of the specific context in which the term is used in the policy and also in the broad context of the policy as a whole.* * * If, after scrutiny, both proffered interpretations remain reasonable, the rule of interpretation against the drafter applies." Baumann v. North Pacific Ins. Co., 152 Or.App. 181, 186, 952 P.2d 1052, rev. den. 327 Or. 621, 971 P.2d 413 (1998).

The dispositive issue on plaintiff's first assignment of error is the meaning of the policy term "covered expenses." The policies define covered expenses as "regular business expenses which you normally incur in the conduct of your business or profession[.]" Because the term "covered expenses" is defined in the policies, that meaning controls: to be covered, the expenses must be incurred by plaintiff in the conduct of his business. The policy does not further define the word "conduct." However, the word does have a plain meaning in this context; namely, to describe "the act, manner, or process of * * * carrying forward (as a business* * *)." Webster's Third New Int'l Dictionary, 473 (unabridged ed 1993) (emphasis added). Moreover, in order to be covered, expenses must be incurred in "your" (the insured's) business. Thus, the plain meaning of the policies' definition of covered expenses shows the intention that the insured must actually be in business in order to incur covered expenses.

Although not controlling, case authority from other jurisdictions supports our interpretation of the plain meaning of the...