SHEARER v. GEMINI Ins. Co.

Decision Date29 September 2010
Docket NumberA136818 (Control),A140007.,0507-07126
Citation240 P.3d 67,237 Or.App. 468
PartiesFRED SHEARER & SONS, INC., an Oregon corporation, Plaintiff-Respondent, v. GEMINI INSURANCE COMPANY, a Delaware corporation, Defendant-Appellant. Gemini Insurance Company, a Delaware corporation, Counterclaim Plaintiff, v. Fred Shearer & Sons, Inc., an Oregon corporation, Counterclaim Defendant.
CourtOregon Court of Appeals

OPINION TEXT STARTS HERE

COPYRIGHT MATERIAL OMITTED.

Todd S. Baran argued the cause and filed the briefs for appellant.

John L. Langslet, Portland, argued the cause for respondent. With him on the brief were Joan L. Volpert and Martin, Bischoff, Templeton, Langslet & Hoffman LLP.

Before LANDAU, Presiding Judge, and SCHUMAN, Judge, and ORTEGA, Judge.

SCHUMAN, J.

Defendant Gemini Insurance Company insured TransMineral USA, a distributor of a stucco product. Plaintiff Fred Shearer & Sons, Inc. (Shearer) installed that product on the exterior of a residence. The product allegedly failed, and the property owners sued their general contractor who, in turn, sued Shearer and TransMineral. Shearer then tendered the defense of that underlying action to Gemini, on the theory that the policy issued by Gemini to TransMineral contained an endorsement that also required Gemini to cover “vendors” of TransMineral products, and that Shearer was such an entity. Gemini rejected the tender, and Shearer brought this action seeking, among other relief, a declaration that Gemini owed Shearer a duty of defense. The trial court granted Shearer's motion for partial summary judgment to that effect, and, after a trial on stipulated facts, entered a limited judgmentagainst Gemini, which it now appeals. We affirm. 1

Although the facts themselves are undisputed, there is a question in this case as to which of those facts properly may be considered when determining the duty to defend. We discuss that issue below and resolve it in favor of the more inclusive position. 237 Or.App. at 474-78, 240 P.3d at 72-74. The following recitation reflects that determination.

In May 2000, Walsh Construction Co. entered into a contract with the Evenstads to perform various repairs to their residence. Walsh then subcontracted with Shearer to apply stucco to the exterior of the residence, which Shearer did. Sometime after the repairs were completed, the Evenstads discovered cracking in the stucco, and they eventually filed an action against various defendants, including their general contractor, Walsh. The factual allegations in that complaint included the following:

“After the repairs were completed, the [Evenstads] began to notice cracking of the stucco and were told by * * * Walsh and Shearer that such cracking was normal andto be expected. Plaintiffs became more concerned as the cracking continued and they began to notice leaking and mold[.] * * *.

“ * * * * *

“While the plaintiffs have not yet obtained bids for performing the repairs that will be necessary, their preliminary estimate is that the total costs of the design and repair work will be approximately $1.5 million. The [Evenstads] will amend this Complaint to allege the specific items and amounts of the damages when they become known.”

(Paragraph numbering omitted.)

The Evenstads further alleged that Walsh had breached its construction contract in a number of specifics, including:

(a) Failing to mix and apply the stucco products and cladding system in a professional and workmanlike manner;

(b) Failing to mix and apply the stucco products and cladding system in accordance with industry standards;

(c) Failing to mix and apply the stucco products and cladding system according to the stucco manufacturer's instructions and recommendations;

(d) Failing to properly mix the lime plaster compounds to meet the appropriate density for the stucco;

(e) Failing to supply plaintiffs with a stucco product and cladding system that was free of defects and that met industry standards;

(f) Applying the cement plaster, lime plaster and/or limestone mortar that make up the stucco cladding during periods when the ambient temperature was greater than 77°F without follow-up moist-curing of the basecoat during the cure process;

“ * * * * *

(h) Applying a stucco product that did not contain a proper mix of binder agents;

(i) Applying a stucco product that was represented to contain only lime-based materials, but that in fact contained non-lime based materials; (j) Applying a defective stucco product and cladding system * * *.”

In response to the complaint, Walsh filed its own third-party complaint against Shearer, its subcontractor, and TransMineral. Walsh alleged that Shearer “was responsible for all aspects of recommending, selecting, and applying stucco products to the Residence,” and was therefore liable to Walsh on a theory of indemnity or contribution. As for TransMineral, Walsh alleged that the company was “in the business of distributing limestone products” and was negligent “in designing and manufacturing the stucco product used on the Residence * * *.”

After receiving the third-party complaint, Shearer tendered the defense of the claims to Gemini, which, beginning in 2000, had insured TransMineral under a general liability policy. Shearer claimed that it, too, was covered by TransMineral's policy throughwhat is known as a “vendors endorsement.” The endorsement at issue (titled “Additional Insured-Vendors”) provided coverage to “all vendors of [TransMineral],” but “only with respect to ‘bodily injury’ or ‘property damage’ arising out of ‘your products' * * * which are distributed or sold in the regular course of the vendor's business,” subject to certain exclusions.

Shearer, at all relevant times, had been operating under an “Exclusive Applicator Agreement” with TransMineral. The agreement provided that “TransMineral desires to grant to the Exclusive Applicator [Shearer] the exclusive right to distribute Lé Decor Products [stucco] and all the other products [TransMineral] distributes.” Nonetheless, Gemini rejected Shearer's tender, on the ground that, [i]f there is any fault in this matter, it will bear a relationship to the negligent ‘mixing’ of the product and/or the application thereof.” 2

Its tender rejected, Shearer filed this action against Gemini seeking a declaration that, under the vendorsendorsement, Gemini owed a duty to defend Shearer in the underlying litigation. Shearer then moved for partial summary judgment on that question, and the trial court granted the motion. Additional issues regarding the amount of the defense obligation were tried to the court, and the court again ruled in Shearer's favor. The rulings were reduced to a limited judgment, which Gemini now appeals. That judgment provides, in part:

“1. Gemini owes a duty to defend Shearer in the Evenstad Residence Case, which duty accrued on November 4, 2004;

“ * * * * *

“3. Gemini is responsible for fifty percent (50%) of Shearer's defense costs in * * * the Evenstad Residence [case] * * * from the date[ ] specified above;

“ * * * * *

“5. Shearer's billed defense costs * * * were ‘incurred’ and are recoverable[.]

In its first assignment of error, Gemini challenges the trial court's ruling on Shearer's motion for partial summary judgment regarding the duty to defend. The trial court erred in granting that motion, Gemini argues, for either of two reasons: One, Shearer is not an insured for purposes of the vendors endorsement to TransMineral's policy; and, two, even assuming that Shearer is an insured, certain exclusions in the policy eliminate any coverage that Shearer might otherwise have had. 3

We begin with the question whether Shearer is an “insured” under TransMineral's policy. The vendors endorsement to that policy, as explained above, extends coverage to“any person or organization (referred to below as vendor) that distributes or sells TransMineral's products in the “regular course of [that person or organization's] business.” 237 Or.App. at 472-73, 240 P.3d at 70-71. For its part, Gemini does not appear to contest the fact that Shearer, pursuant to its Exclusive Applicator Agreement with TransMineral, was a “distributor” of TransMineral products, including the Lé Decor product used on the Evenstad residence. Rather, Gemini makes a more technical argument: that it is impossible to tell from the pleadings in the underlying action or the policy language that Shearer sold or distributed the stucco product in the ordinary course of business. In Gemini's view, the four corners of those documents-that is, the pleadings and the insurance policy-exclusively govern whether Gemini owes any duty to defend, and [n]othing in [Walsh's] allegationsexpressly or impliedly connotes that Shearer ‘distributed’ or ‘sold’ the TransMineral products.” 4 In light of that deficiency in the underlying pleadings, Gemini argues, the trial court erred in granting summary judgment in favor of Shearer.

Meanwhile, Shearer appears to accept Gemini's statement of the “four-corners rule” but argues that the pleadings do, in fact, demonstrate that Shearer was an “insured.” 5 Shearer's concession regarding the scope of our review, however, is not well founded and for the reasons that follow, we choose not to accept it. McLauchlan and McLauchlan, 227 Or.App. 476, 491, 206 P.3d 622, rev. den., 346 Or. 363, 213 P.3d 577 (2009) (where this court “do[es] not agree with the parties' understanding of the law,” it is not bound to accept a concession regarding a legal conclusion) (citing State v. Bea, 318 Or. 220, 224, 864 P.2d 854 (1993)).

The seminal case regarding the duty to defend under Oregon law is Ledford v. Gutoski, 319 Or. 397, 877 P.2d 80 (1994). In an oft-quoted passage, the court explained:

“Whether an insurer has a duty to defend an action against its insured depends on two documents: the complaint and the insurance policy. Oakridge Comm. Ambulance v. U.S. Fidelity, 278 Or. 21, 24, 563 P.2d 164 (1977). ...

To continue reading

Request your trial
35 cases
  • Hunters Ridge Condo. Ass'n v. Sherwood Crossing, LLC
    • United States
    • Oregon Court of Appeals
    • May 10, 2017
    ...in Admiral Insurance nevertheless supports our conclusion that the exclusion is ambiguous. See Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 237 Or.App. 468, 481-82, 240 P.3d 67 (2010), rev. den., 349 Or. 602, 249 P.3d 123 (2011) (relying on cases from other jurisdictions to buttress conclu......
  • Century Indem. Co. v. Marine Grp., LLC
    • United States
    • U.S. District Court — District of Oregon
    • January 27, 2012
    ...seeking a defense is an insured under the policy, the court may consider extrinsic evidence. Fred Shearer & Sons, Inc. v. Gemini Insurance Co., 237 Or.App. 468, 477–478, 240 P.3d 67 (2010).A. Existence of Duty to Defend in Policy INA and Great American argue that their policies do not conta......
  • Leach v. Scottsdale Indem. Co.
    • United States
    • Oregon Court of Appeals
    • February 12, 2014
    ...the interpretation of the provision offered by Leach is consistent with that of other courts. See Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 237 Or.App. 468, 481–82, 240 P.3d 67 (2010), rev. den.,349 Or. 602, 249 P.3d 123 (2011) (observing that case law from other jurisdictions, “though ......
  • Century Indem. Co. v. Marine Grp., LLC
    • United States
    • U.S. District Court — District of Oregon
    • September 11, 2015
    ...the insurer owes a duty to defend—even if other allegations of conduct or damage are excluded.Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 237 Or.App. 468, 478, 240 P.3d 67 (2010) (quoting Ledford, 319 Or. at 400, 877 P.2d 80 ) (internal citations omitted). It is the insurer's burden to pr......
  • Request a trial to view additional results
3 books & journal articles
  • CHAPTER 5 Comprehensive or Commercial General Liability (CGL) Insurance: Coverage A for "Bodily Injury" or "Property Damage" Liabilities
    • United States
    • Full Court Press Insurance for Real Estate-Related Entities
    • Invalid date
    ...A.3d 154 (2010). North Carolina: Smith v. Heath, 703 S.E.2d 194 (N.C. App. 2010). Oregon: Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 237 Or. App. 468, 240 P.3d 67 (2010). Pennsylvania: Burton v. Republic Insurance Co., 845 A.2d 889, 893 (Pa. Super. 2004). Rhode Island: Bliss Mine Road Co......
  • Chapter 5
    • United States
    • Full Court Press Business Insurance
    • Invalid date
    ...A.3d 154 (2010). North Carolina: Smith v. Heath, 703 S.E.2d 194 (N.C. App. 2010). Oregon: Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 237 Or. App. 468, 240 P.3d 67 (2010). Pennsylvania: Burton v. Republic Insurance Co., 845 A.2d 889, 893 (Pa. Super. 2004). Rhode Island: Bliss Mine Road Co......
  • CHAPTER 6 Duty to Defend and Insured Litigation
    • United States
    • Full Court Press Insurance for Real Estate-Related Entities
    • Invalid date
    ...Corp. v. Scottsdale Insurance Co., 79 A.D.3d 927, 913 N.Y.S.2d 733 (2010). Oregon: Fred Shearer and Sons, Inc. v. Gemini Insurance Co., 237 Or. App. 468, 240 P.3d 67 (2010). But see: Fifth Circuit: VRV Development L.P. v. Mid- Continent Casualty Co., 630 F.3d 451 (5th Cir. 2011); Looney Ric......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT