Smith v. Truck Ins. Exch. Inc. (farmers Ins.)

• Decision Date: 20 April 2011
• Docket Number: No. 09C13784; A142954.
• Citation: 242 Or.App. 202,255 P.3d 615
• Parties: Sherrie SMITH, Plaintiff–Appellant,v.TRUCK INSURANCE EXCHANGE, INC. (Farmers Insurance); and Parham Insurance Agency, Inc., Defendants–Respondents.
• Court: Oregon Court of Appeals

242 Or.App. 202

255 P.3d 615

Sherrie SMITH, Plaintiff–Appellant,

v.TRUCK INSURANCE EXCHANGE, INC. (Farmers Insurance); and Parham Insurance Agency, Inc., Defendants–Respondents.

No. 09C13784; A142954.

Court of Appeals of Oregon.

Argued and Submitted Jan. 20, 2011.Decided April 20, 2011.

Meagan A. Flynn, Portland, argued the cause for appellant. With her on the briefs was Preston Bunnell & Flynn, LLP.Beth Cupani argued the cause for respondents. With her on the brief were Francis J. Maloney, III, and Maloney Lauersdorf Reiner, PC.Before SERCOMBE, Presiding Judge, and BREWER, Chief Judge, and CARSON, Senior Judge.BREWER, C.J.

Plaintiff, an alleged third-party beneficiary under a motor vehicle insurance policy, appeals from a judgment dismissing, for failure to state facts sufficient to constitute a claim for relief (ORCP 21 A(8)), and failure to prosecute the action by the real party in interest (ORCP 26 A), this action for breach of contract, negligence, and declaratory judgment. We conclude that the trial court lacked authority to adjudicate plaintiff's claim for declaratory judgment under ORS 28.110, because plaintiff failed to join the named insured as a party to that claim. In addition, we conclude that the trial court properly dismissed plaintiff's negligence claim for failure to state a claim. However, we conclude that the trial court erred in dismissing plaintiff's claim for breach of contract on the grounds that defendants urged before the trial court.

Because this action was dismissed at the pleading stage, we liberally construe the pleadings and consider as true the facts alleged in plaintiff's complaint and all reasonable inferences that may be drawn from those facts. ORCP 12 A; Simonsen v. Ford Motor Co., 196 Or.App. 460, 462, 102 P.3d 710 (2004), rev. den., 338 Or. 681, 115 P.3d 246 (2005). In her complaint, plaintiff alleged that she was injured in a motor vehicle collision and, as a result, incurred medical expenses and wage loss in excess of $100,000. The collision was the fault of a driver whose liability insurance provided only $25,000 in coverage. At the time of the collision, plaintiff was driving a 2004 Ford Ranger that had been loaned to her by Greer, the owner of MD & D Construction.

Plaintiff further alleged that MD & D maintained an insurance policy (the policy) with defendant Truck Insurance Exchange (Truck) that included substantial underinsured motorist (UIM) coverage benefits as well as personal injury protection (PIP) coverage for medical expenses and wage loss for injuries to occupants of an insured vehicle. Shortly before loaning the vehicle to plaintiff, Greer called defendant Parham Insurance Agency (Parham) and asked that the Ranger be added to the MD & D policy. Parham sold insurance as an agent of various insurers, including Truck. Based on the statements of Parham, Greer “reasonably believed that he had insurance which covered the vehicle and therefore, loaned the vehicle to plaintiff.” However, Truck denied plaintiff's claim for PIP and UIM benefits under the MD & D policy.

In her claim for breach of contract, plaintiff alleged that she was a third-party beneficiary of the policy and that Truck had refused to pay the benefits that she claimed under the policy. In her declaratory judgment claim, plaintiff realleged those operative facts in support of her request for a judgment that the policy was in force and effect when she was injured and that she was covered under the PIP and UIM provisions of the policy. In her negligence claim, plaintiff alleged, in addition to the other facts alleged in the complaint, that Parham was negligent in failing to procure the insurance that Greer had requested before the collision.

Defendants filed a motion to dismiss the complaint. As noted, the sole grounds for the motion were defendants' assertions that the complaint failed to state facts sufficient to constitute claims for relief and that plaintiff was not the real party in interest in the action. Defendants argued that the complaint was insufficient under ORCP 21 A(8) because plaintiff was “a stranger” to the insurance policy who was, at most, an “indirect third party beneficiary” who had “no relationship whatsoever to Parham.” Defendants argued that the only real party in interest under the policy was MD & D and that, because plaintiff had failed to join MD & D as a party, the action must be dismissed under ORCP 26 A. Defendants made no separate argument that the court lacked authority to adjudicate the declaratory judgment claim under ORS 28.110, nor did defendants argue that the action should be dismissed because MD & D was a necessary party under ORCP 29.

At the hearing on defendants' motion to dismiss, the trial court opined that the complaint was deficient because, in the absence of MD & D's joinder, plaintiff lacked “standing” to assert the breach of contract and negligence claims. In the ensuing order granting the motion to dismiss, the court afforded plaintiff “leave to re-plead and/or bring in any other necessary parties by” a date certain. After plaintiff failed to file an amended pleading, the court entered a judgment dismissing the action.

On appeal, plaintiff reiterates her arguments before the trial court that, as a third-party beneficiary of the policy and Parham's undertaking to obtain the requested insurance coverage for MD & D, she has stated claims for breach of contract and negligence as a real party in interest seeking PIP and UIM benefits or equivalent damages on the ground that those losses are personal to her. Defendants reply that,

“[a]lthough plaintiff argues that she is someone who will be benefitted from the judgment, there is no evidence that she falls into any class of persons who benefit from the terms of the insurance contract. Plaintiff argues only that she made a claim under the policy owned by MD & D Construction. However, she failed to allege any relationship to the vehicle, or to the insurance contract at issue. Plaintiff also fails to provide any of the policy provisions that would support her status as the real party in interest.”

In addition, for the first time on appeal, defendants rely on ORCP 29 A, which provides:

“A person who is subject to service of process shall be joined as a party in the action if (1) in that person's absence complete relief cannot be accorded among those already parties, or (2) that person claims an interest relating to the subject of the action and is so situated that the disposition in that person's absence may (a) as a practical matter impair or impede the person's ability to protect that interest or (b) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of their claimed interest. If such person has not been so joined, the court shall order that such person be made a party. If a person should join as a plaintiff but refuses to do so, such person shall be made a defendant, the reason being stated in the complaint.”

According to defendants:

“The trial court correctly determined that MD & D Construction, the policyholder, is a necessary party to any action on the insurance contract. In the absence of MD & D Construction, complete relief cannot be accorded amongst the parties to the lawsuit, and allowing the lawsuit to move forward without them would leave Truck and Parham at risk of incurring multiple and inconsistent obligations.”

We begin with the sufficiency of plaintiffs' complaint to state a claim for breach of contract; in this case, that issue is inextricably entwined with defendants' argument that plaintiff is not a real party in interest with respect to that claim. ORCP 21 A(6) provides that a complaint may be dismissed on the ground that “the party asserting the claim is not the real party in interest.” The rule flows from ORCP 26 A, which requires that

“[e]very action shall be prosecuted in the name of the real party in interest. An executor, administrator, guardian, conservator, bailee, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party authorized by statute may sue in that party's own name without joining the party for whose benefit the action is brought[.]”

Case law describes the rule as recognizing two classes of persons who may be regarded as “real parties in interest” under ORCP 26 A. First, there is the class of parties who will be “ ‘benefited or injured by the judgment in the case.’ ” Association of Unit Owners v. Dunning, 187 Or.App. 595, 607, 69 P.3d 788 (2003) (quoting Pulkrabek v. Bankers' Mortgage Corp., 115 Or. 379, 238 P. 347 (1925)). Second, there is the class of persons who are “statutorily authorized to bring an action.” Id.

To be sure, plaintiff's complaint in this case is not artfully framed. However, giving plaintiff the benefit of all reasonable inferences flowing from the facts alleged in the complaint, we conclude that she has adequately stated a claim for breach of contract as well as her real-party-in-interest status for purposes of that claim. From the allegations that Greer, MD & D's owner, asked Parham to add the 2004 Ranger to the existing insurance policy, which included particular PIP and UIM benefits for occupants of a covered vehicle, and that, based on Parham's statements, Greer reasonably believed that the Ranger was covered, the following inferences reasonably flow: (1) that Truck issued the policy; (2) that Parham was acting as Truck's agent; (3) that, as Truck's agent, Parham promised to add the Ranger to the policy; and (4) that plaintiff was claiming PIP and UIM benefits under the policy. In addition, the allegations that Greer loaned the Ranger to plaintiff because he believed from his conversation with Parham that the vehicle was covered under the policy and that plaintiff was injured in a collision and, therefore, was entitled to PIP and UIM benefits, are...