Rogowski v. Safeco Ins. Co. of Or.

• Decision Date: 16 September 2020
• Docket Number: A169063
• Citation: 306 Or.App. 505,473 P.3d 111
• Parties: Gary ROGOWSKI, Plaintiff-Respondent, v. SAFECO INSURANCE COMPANY OF OREGON, Defendant-Appellant.
• Court: Oregon Court of Appeals

306 Or.App. 505

473 P.3d 111

Gary ROGOWSKI, Plaintiff-Respondent,

v.SAFECO INSURANCE COMPANY OF OREGON, Defendant-Appellant.

A169063

Court of Appeals of Oregon.

Argued and submitted December 9, 2019.

September 16, 2020

Thomas M. Christ argued the cause for appellant. Also on the briefs was Sussman Shank LLP.

Brooks M. Foster, Portland, argued the cause for respondent. On the brief were Brian D. Chenoweth, Bradley T. Crittenden, and Chenoweth Law Group, PC.

Before Ortega, Presiding Judge, and Shorr, Judge, and James, Judge.

SHORR, J.

In this insurance coverage case, defendant Safeco Insurance Company of Oregon (Safeco) appeals from a general judgment awarding plaintiff Gary Rogowski declaratory relief and monetary damages.¹ The trial court denied Safeco's motion for summary judgment and granted Rogowski's cross-motion for summary judgment, declaring that Safeco had a duty to defend Rogowski in a lawsuit brought against Rogowski by his tenant, Hawley, and awarding money damages for Rogowski's attorney fees incurred in that lawsuit. The court's rulings, and our decision on appeal, turn on whether a pollutant exclusion in Rogowski's insurance policy excluded coverage for the types of injuries alleged in Hawley's complaint. Because we conclude that the trial court did not err in declaring that Safeco had a duty to defend Rogowski or in awarding damages for the cost of that defense, we affirm.

The following facts are taken from Hawley's complaint and are undisputed for purposes of this appeal. Hawley resided in a rental property owned by Rogowski. Hawley informed Rogowski that Hawley smelled natural gas in the residence. Twelve days later, a technician from NW Natural, the natural gas company, was dispatched to the residence. The technician noted that the odor of natural gas was immediately evident upon entering the premises. The technician also noted that his gas meter indicated an alarm for carbon monoxide, and that a subsequent test for carbon monoxide indicated levels of 4,000 parts per million at the gas furnace and hot water heater. The technician recommended immediate action.

The following day, a AAA Heating and Cooling technician came to the residence and observed that the exhaust duct of the furnace was plugged by debris in the chimney, and that the furnace had been improperly modified. The complaint alleged that a chimney technician subsequently removed over 80 pounds of debris from the chimney that had been blocking the furnace and hot water heater exhaust outlets. That technician also noted that the HVAC system was not working well.

Hawley filed a complaint against Rogowski. Hawley alleged that Rogowski was aware of the furnace problems and had disconnected the fire detector and/or carbon monoxide detector in the residence. The complaint also alleged as follows:

"10.

"As a result of the defects in the gas furnace, hot water heater, duct work, and chimney, Mr. Hawley was exposed to degraded indoor air quality and long-term carbon monoxide exposure and poisoning that rendered the Residence unfit for human habitation and causing Mr. Hawley serious health concerns as related herein.

"11.

"Defendant was negligent in one or more of the following ways, each of which was a substantial contributing factor in causing the long-term carbon monoxide exposure , resulting in significant injuries to Mr. Hawley:

"a) In failing to provide properly functioning HVAC related appliances and duct space in the Residence;

"b) In failing to maintain the properly operating condition of the HVAC related appliances and duct work in the Residence;

"c) In failing to inspect the Residence on a regular basis for malfunctions or debris build-up in the HVAC related appliance and ducts of the Residence;

"d) In failing to provide a properly functioning carbon monoxide monitor in the Residence; and

"e) In failing to provide a rental residence to Mr. Hawley which was free from excess carbon monoxide exposure."

(Emphases added.) The complaint listed Hawley's "sustained serious health concerns," which were "a direct and proximate result of the negligence of [Rogowski]." The listed "health concerns" stated a wide variety of conditions, including, for example, depression and nausea.

Rogowski had purchased a landlord protection insurance policy from Safeco that included premises liability coverage. The policy stated that the premises liability coverage insured Rogowski for "bodily injury or property damage caused by an occurrence arising out of the ownership, maintenance, occupancy or use of the insured location." The policy listed a number of exclusions to the premises liability coverage, including, as is pertinent to this appeal, an exclusion for

"liability arising, in whole or part, out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, escape, emission, transmission, absorption, ingestion or inhalation of pollutants at any time. This includes any loss, cost or expense arising out of any:

"(1) request, demand or order that any insured or others test for, monitor, abate, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to, or assess, the effects of pollutants; or

"(2) claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, or in any way responding to, or assessing, the effects of pollutants[.]"

The policy defined "pollutants" as "any of the following":

"a. liquid fuels;

"b. lead or any materials containing lead;

"c. asbestos or any materials containing asbestos;

"d. radon;

"e. formaldehyde or any materials containing formaldehyde;

"f. electric fields, magnetic fields, electromagnetic fields, power frequency fields, electromagnetic radiation or any other electric or magnetic energy of any frequency;

"g. carbon monoxide ;

"h. pathogenic or poisonous biological materials;

"i. acids, alkalis or chemicals;

"j. radioactive substances; or "k. any other irritant or contaminant including waste, vapor, fumes or odors ."

(Emphases added.) Rogowski tendered the Hawley lawsuit to Safeco for defense under the policy. Safeco denied coverage. Rogowski then filed this lawsuit for breach of contract, seeking money damages for his defense costs and a declaratory judgment that Safeco has a duty to defend him against Hawley's complaint.

Safeco filed a motion for summary judgment, asserting that it had no duty to defend Rogowski because Hawley's complaint fell outside of the policy. Safeco argued that Hawley claimed injury from carbon monoxide, which was expressly excluded under the "pollutant" exclusion. Rogowski filed a cross-motion for partial summary judgment. Rogowski conceded that any injury from carbon monoxide was excluded under the pollutant exclusion, but Rogowski argued that the complaint could reasonably be read to allege injury from "natural gas" and "degraded indoor air quality," neither of which were excluded.

The trial court ruled that Safeco had a duty to defend Rogowski. In an opinion and order, the court first concluded that the claims in Hawley's complaint were ambiguous because the complaint "refers to degraded indoor air quality, carbon monoxide and natural gas." The court then concluded that, although bodily injury caused by exposure to carbon monoxide was unambiguously excluded from coverage by the pollutant exclusion, the policy was ambiguous as to whether degraded indoor air quality and natural gas were also excluded as pollutants. Construing the ambiguity against the insurer, the court concluded that the policy could reasonably be understood to cover bodily injury as a result of degraded indoor air quality and exposure to natural gas. The court therefore ruled that Safeco owed Rogowski a duty to defend. Safeco now appeals.

Safeco assigns error to the trial court's denial of its motion for summary judgment and grant of Rogowski's cross-motion. "For summary judgment to be appropriate on the duty to defend or the duty to indemnify, there must be no genuine dispute of material fact and the moving party must be entitled to judgment as a matter of law."

Bighorn Logging Corp. v. Truck Ins. Exchange , 295 Or. App. 819, 826, 437 P.3d 287, rev. den. , 365 Or. 195, 451 P.3d 975 (2019) (citing Ledford v. Gutoski , 319 Or. 397, 403, 877 P.2d 80 (1994) ). Our resolution of this appeal depends upon our consideration of the complaint filed against Rogowski and our interpretation of the insurance policy that Rogowski purchased from Safeco, which presents an issue of law. Hunters Ridge Condo. Assn. v. Sherwood Crossing , 285 Or. App. 416, 422, 395 P.3d 892 (2017).

An insurer's duty to defend its insured is determined by comparing the four corners of the complaint to the four corners of the insurance policy. West Hills Development Co. v. Chartis Claims , 360 Or. 650, 653, 385 P.3d 1053 (2016). Under that so-called "four-corners" or "eight-corners" rule, we compare the allegations in the complaint to the coverage under the policy to determine if the duty to defend extends to the alleged conduct of the insured. Id . If the complaint asserts a claim covered by the policy, the insurer has a duty to defend, even if the complaint also asserts claims that fall outside the policy's coverage. FountainCourt Homeowners' v. FountainCourt Develop. , 360 Or. 341, 354, 380 P.3d 916 (2016). In other words, "[t]he insurer has a duty to defend if the complaint provides any basis for which the insurer provides coverage," i.e. , if the facts in the complaint "may reasonably be interpreted to include conduct within the coverage of [the insurance] policy." Ledford , 319 Or. at 400, 877 P.2d 80 (emphasis in original).

Allegations in a complaint may fall outside of an insurance policy either because "the allegations do not involve insured conduct or because one or more coverage exclusions in the policy absolve the insurer of its duty to defend." Bighorn Logging Corp. , 295 Or. App. at 828, 437 P.3d 287 (citing FountainCourt...