Tualatin Valley Housing v. Truck Ins., 0306-06731.

• Decision Date: 27 September 2006
• Docket Number: A126232.,0306-06731.
• Citation: 208 Or. App. 155,144 P.3d 991
• Parties: TUALATIN VALLEY HOUSING PARTNERS, Appellant, v. TRUCK INSURANCE EXCHANGE, Respondent.
• Court: Oregon Court of Appeals

144 P.3d 991

208 Or. App. 155

TUALATIN VALLEY HOUSING PARTNERS, Appellant, v. TRUCK INSURANCE EXCHANGE, Respondent.

0306-06731.

A126232.

Court of Appeals of Oregon.

Argued and Submitted February 6, 2006.

Decided September 27, 2006.

Robert E.L. Bonaparte, Portland, argued the cause for appellant. With him on the briefs was Shenker & Bonaparte, LLP.

Beth Cupani, Portland. argued the cause for respondent. With her on the brief were Lisa E. Lear and Bullivant Houser Bailey PC.

Before LANDAU, Presiding Judge, and SCHUMAN, Judge, and MITCHELL, Judge pro tempore.

LANDAU, P.J.

This is an insurance coverage dispute in which the principal issue is whether defendant insurer is obligated, under an apartment owners policy of insurance that it issued to plaintiff, to pay for damage to plaintiff's apartment building resulting from the manufacture of methamphetamine in one of the apartment units. Defendant maintains that it is not obligated to pay for the damage, because the policy is subject to an exclusion for damage arising out of criminal acts committed by anyone with an interest in the property, including tenants. Plaintiff maintains that the exclusion for criminal acts does not apply, because tenants do not have an "interest" in rented premises and because, in any event, the methamphetamine was produced without the knowledge or cooperation of the actual tenant. The trial court agreed with defendant and entered summary judgment accordingly. We affirm.

The relevant facts are not in dispute. Plaintiff owns the Fircrest Manor Apartments, an apartment building in Beaverton. Plaintiff purchased an apartment owners property insurance policy from defendant. Among other things, the policy obligated defendant to pay "for direct physical loss of or damage to" plaintiff's apartment building, subject to certain exclusions and limitations. Among the exclusions is one for loss or damage caused by or resulting from the following:

"Dishonest or criminal acts by you, anyone else with an interest in the property, or any of your or their partners, employees, directors, trustees, authorized representatives or anyone to whom you entrust the property for any purpose:

"(1) Acting alone or in collusion with others;

"(2) Whether or not occurring during the hours of employment.

"This exclusion does not apply to acts of destruction by your employees; but theft by employees is not covered."

Plaintiff rented one of its Fircrest Manor apartments to Brigette Burney and two minors. In June 2002, police officers investigating a robbery discovered a "clandestine methamphetamine laboratory" in the utility room of Burney's apartment. According to the police report, at the time of the discovery of the lab, Burney was in the apartment with a man by the name of Martin Arthur. Burney told the officers that she was unaware of the drug activities taking place in her apartment. Arthur told the officers that the lab belonged to him. Both Burney and Arthur were arrested and charged with manufacturing a controlled substance within 1,000 feet of a school. See ORS 475.888. Burney later pleaded no contest to the charges and was convicted.

Following the discovery of the lab in Burney's apartment, plaintiff sent to her a termination notice explaining that her rental agreement was being terminated because she had been "caught manufacturing illegal substances in [her] unit." When Burney did not quit the premises, plaintiff filed an action in justice court for forcible entry and detainer against Burney, presenting the termination notice letter in support of its complaint. The justice court issued an order of restitution in plaintiff's favor.

In September 2002, plaintiff filed a claim under its apartment owners policy for the damage to Burney's unit caused by the manufacture of methamphetamine. Defendant denied the claim. Plaintiff then initiated this action against defendant for, among other things, breach of contract. Plaintiff alleged that it had suffered $225,000 in damage to the apartment, which defendant refused to cover. Defendant answered and, among other things, alleged the applicability of the criminal acts exclusion as an affirmative defense.

Defendant moved for summary judgment on the breach of contract claim on the ground that any damage or loss resulting from the methamphetamine lab in Burney's apartment was subject to the exclusion for criminal acts committed by persons with an interest in the property. Plaintiff opposed the motion on the ground that tenants are, as a matter of law, not persons with an "interest" in a rented apartment. According to plaintiff, persons with an "interest" in the property are limited to those with an ownership interest in the premises. In the alternative, plaintiff argued that, even if the exclusion applies to apartment tenants, there remains a genuine issue of material fact in this case about whether the damage to the unit was caused by the tenant, Burney, as opposed to another person, Arthur.

The trial court granted defendant's motion. Plaintiff asked for clarification of the court's ruling with respect to its argument about the degree to which Burney actually caused the damage to the apartment. The trial court responded that the damage was caused by the operation of the lab, in which Burney participated. According to the trial court, under the terms of the policy, the particular degree of her participation is immaterial.

On appeal, plaintiff argues that the trial court erred in granting defendant's motion for summary judgment. In plaintiff's view, the court erred both in concluding that, as a matter of law, the criminal acts exclusion applies to apartment tenants and in neglecting to find that there remains a genuine issue of material fact concerning the degree of the tenant's involvement in the criminal acts. We address each of those arguments in turn.

In reviewing a trial court's decision to grant summary judgment, we view the facts in the light most favorable to the nonmoving party to determine whether there are genuine issues of material fact and whether the moving party was entitled to judgment as a matter of law. ORCP 47 C. In this case, plaintiff's first argument is that, even assuming that the damage was caused by the actions of a tenant, the criminal acts exclusion does not apply as a matter of law. That argument is one of contract interpretation— specifically insurance policy interpretation— which we review as a matter of law in light of the interpretive principles set out in Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 469-70, 836 P.2d 703 (1992).

Under Hoffman, our objective is to ascertain the intention of the parties "based on the terms and conditions of the insurance policy." Id. at 469, 836 P.2d 703. We begin with the wording of the policy, applying any definitions that are supplied by the policy itself and otherwise presuming that words have their plain, ordinary meanings. Id. at 469-70, 836 P.2d 703. If, from that vantage point, we find only one plausible interpretation of the disputed terms, our analysis goes no further. Id. If we find that the disputed terms are susceptible to more than one plausible interpretation, however, we examine those terms in the broader context of the policy as a whole. Hoffman, 313 Or. at 470, 836 P.2d 703. If our consideration of the policy's broader context fails to resolve the ambiguity, then we will construe the policy against the drafter, in this case, defendant. Id. at 470-71, 836 P.2d 703. In all events, interpretation of an insurance policy is a question of law that is confined to the four corners of the policy without regard to extrinsic evidence. Andres v. American Standard Ins. Co., 205 Or.App. 419, 424, 134 P.3d 1061 (2006).

The exclusion at issue in this case applies to dishonest or criminal acts by "you," that is the policyholder, "anyone else with an interest in the property, or any of your or their partners, employees, directors, trustees, authorized representatives or anyone to whom you entrust the property for any purpose." The exclusion applies whether the person acts "alone or in collusion with others."

The policy does not define the term "interest." In ordinary parlance, an "interest" refers to a "right, title, or legal share in something" or "something in which one has a share of ownership or control." Webster's Third New Int'l Dictionary 1178 (unabridged ed 2002). Similarly, Black's Law Dictionary 729 (5th ed. 1979) defines "interest" as "[t]he most general term that can be employed to denote a right, claim, title, or legal share in something." As the term is ordinarily used, therefore, an "interest" is inherently broad, denoting not merely an ownership relationship but any legal share or right of control.

A "tenant," by definition, ordinarily refers to one who enjoys a legal right of occupancy. Webster's defines it as "one who holds or possesses real estate * * * by any kind of right (as in fee simple, in common, in severalty, for life, for years, or at will)." Id. at 2354. Black's defines it as "one who holds or possesses land or tenements by any kind of right or title, whether in fee, for life, for years, at will, or otherwise." Id. at 1314. In turn, Black's defines a "tenancy" as "an interest in realty which passes to the tenant, and a possession exclusive even to that of landlord, except as lease permits landlord's entry." Id. at 1313 (emphasis added). Relevant statutes similarly employ the term in its ordinary sense, defining "tenant" as a person "entitled under a rental agreement to occupy a dwelling unit to the exclusion of others." ORS 90.100(41). At common law, tenants likewise are routinely referred to as having an "interest" in the property that they have the right to occupy. See, e.g., Pacific First Bank v. New Morgan Park Corp., 319 Or. 342, 353, 876 P.2d 761 (1994) (addressing validity of restraint on alienation "without the consent of the landlord of the tenant's interest in the leased property");...