Uptown Mkt., LLC v. Ohio Sec. Ins. Co.

• Decision Date: 08 February 2018
• Docket Number: 3:16–cv–01961–BR
• Citation: 286 F.Supp.3d 1160
• Parties: UPTOWN MARKET, LLC, Plaintiff, v. OHIO SECURITY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Oregon

286 F.Supp.3d 1160

UPTOWN MARKET, LLC, Plaintiff,

v.OHIO SECURITY INSURANCE COMPANY, Defendant.

3:16–cv–01961–BR

United States District Court, D. Oregon.

Signed February 8, 2018

FREDERICK M. MILLARD, DOUGLAS M. BRAGG, 419 Fifth St., Oregon City, OR 97405, (503) 305–7806, Attorneys for Plaintiff

JOHN A. BENNETT, MATTHEW E. HEDBERG, Bullivant Houser Bailey PC, 300 Pioneer Tower, 888 S.W. Fifth Ave., Portland, OR 97204, (503) 228–6351, Attorneys for Defendant

OPINION AND ORDER

BROWN, Senior Judge.

This case comes before the Court on Defendant Ohio Security Insurance Company's Motion (# 25) for Summary Judgment or, Alternatively, Motion for Partial Summary Judgment and Plaintiff Uptown Market, LLC's Motion (# 27) for Partial Summary Judgment on Defendant's Affirmative Defenses.

For the reasons that follow, the Court GRANTS Defendant's Motion for Summary Judgment and DENIES as moot Plaintiff's Motion for Partial Summary Judgment.

BACKGROUND

The following facts are taken from the Joint Statement of Agreed Upon Facts (# 20) and the materials the parties submitted in support of their Motions. Accordingly, these facts are undisputed unless otherwise noted.

Plaintiff is the sole tenant of a building located at 6620 Southwest Scholls Ferry Road in Tigard, Oregon. The building is owned by Uptown Market Property, LLC (Uptown Property).¹ Plaintiff conducts a beer-brewing and retail-sales business in the leased building.

The obligations and responsibilities of Plaintiff and Uptown Property are set forth in their Lease and include the following relevant provisions: (1) Uptown Property is required to have standard multi-peril insurance covering the building and other improvements, but that insurance does not include Plaintiff's trade fixtures, improvements, and other property on the leased premises; (2) Uptown Property is not liable for injury to "goods, stock, merchandise, or any other property" of Plaintiff and is required to have its own insurance to cover risks to Plaintiff's property; (3) any improvements, alterations, and other work performed on the property are considered the property of Uptown Property with the exception of Plaintiff's trade fixtures; and (4) Uptown Property is responsible for "structural repairs and maintenance and repairs necessitated by structural disrepair or defects," repair and maintenance of the "foundation of the Building," and repair of "floors, and floor coverings when such repairs are made necessary because of failure of [Uptown Property] to keep the structure in repair."

As noted, Uptown Property is the owner of the building. The loan for purchase of the building is secured by an installment note, and the building is the collateral for the loan. Uptown Property also granted a Deed of Trust to the bank "to all real property" located at 6620 S.W. Scholls Ferry Road. Pursuant to the loan agreement, Uptown Property was required to provide the bank "with evidence of insurance coverage" to ensure that the bank did not have to purchase insurance to protect its own interests in the building.

Plaintiff is a guarantor of the loan on the property, and Plaintiff granted to the bank "a security interest in all property in which [Plaintiff] has an ownership interest which is now or in the future in the possession of [the] [b]ank to secure payment under the [Guaranty] Agreement."

Defendant issued a Commercial Package Insurance Policy to Plaintiff as the named insured for the period of January 22, 2014, to January 22, 2015. Uptown Property is not named as an insured under Defendant's Policy. On November 18, 2014, a policy-change endorsement added U.S. Bank as a loss payee for business personal property under the Loss Payable Provisions of the Policy.

Subject to its terms, conditions, limitations, and exclusions, Defendant's Policy provides:

A. Coverage

We will pay for direct physical loss or damage to Covered Property at the premises described in the Declarations [6620 S.W. Scholls Ferry Road] caused by or resulting from any Covered Cause of Loss.

Under the "Building and Personal Property Coverage Form" of the Policy, "Covered Property " is described in Section A as "Building , meaning the building or structure described in the Declarations," "Your Business Personal Property located in or on the building described in the Declarations," and "Personal Property of Others ." The "Property Not Covered " is listed in Section A.2. of the Policy and includes, among other things, "[f]oundations of buildings, structures, machinery or boilers." Under a Custom Protector Plus Endorsement, "Foundations" is deleted from the "Property Not Covered" under Section A.2. and instead is included within the "Coverage Extensions" of Section A.5. of the Policy.

Under the "Causes of Loss—Special Form" of the Policy, "Covered Causes of Loss" means "Risks Of Direct Physical Loss" unless the loss is excluded. Section B.1. of the Policy sets out the following exclusions:

1. We will not pay for loss or damages caused directly or indirectly by any of the following. Such loss or damages is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

* * *

b. Earth Movement

* * *

(4) Earth sinking (other than sinkhole collapse,) rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface.

* * *

g. Water

* * *

(4) Water under the ground surface pressing on, or flowing or seeping through:

(a) Foundations, walls, floors or paved surfaces;....

On approximately January 5, 2015, Plaintiff discovered a portion of the concrete floor in the building had "sunk" seven or eight inches. The parties agree the only property owned by Plaintiff that was damaged were "taps at the bar" that do not drain properly. The taps are operational, but the drains are not.

On January 6, 2015, Plaintiff submitted an insurance claim to Defendant under the Policy. On that date an insurance adjuster-representative for Defendant met with Plaintiff about its claim. Defendant subsequently retained Jon Burks, a project engineer with PT & C/LWG Forensic Consulting, to determine the cause of the damage reported by Plaintiff.

On September 4, 2015, Burks inspected the building. On October 7, 2015, Burks issued a report in which he concluded the cracking of the concrete slab-on-grade floor at the building was consistent with long-term and ongoing nonuniform movement of the underlying soils as well as subsequent differential movement of the concrete slab; the concrete floor was built out-of-level, and that condition had been exacerbated by nonuniform movement of the underlying soils; and the cracking and out-of-level concrete floor surface and separations of the counter-bar's laminate and cove base finishes were not the result of a spontaneous or concentrated introduction of moisture into the underlying soil such as that from a recent plumbing leak.

On October 8, 2015, Defendant denied Plaintiff's claim on the basis that there was not any coverage for its loss. Defendant specifically relied on the "Earth Movement Exclusion" of the Policy.

Plaintiff then retained Jeffery Lewis, a structural engineer with West Coast Forensics, to investigate the cause of the damage to the building and to recommend possible repairs. On November 12, 2015, Lewis inspected the premises. On December 13, 2015, Lewis issued his report in which he found significant settlement of the floor slab had occurred with the maximum settlement located under the walk-in cooler; the cooler had settled with the floor slab and the doors were "racked" even though the cooler had been leveled; a water-supply line had leaked significantly during the month of January 2015, and water usage for the month was approximately 65,000 gallons higher than the previous month's usage; and a plumber reported he could not find a physical break in the main sewage line for the building, but the main line was "sagging badly" and was probably broken. Lewis also concluded the slab damage was directly related to the water leak (i.e. , the leaking high-pressure pipe caused underlying soils to erode and to wash away through the failed sewer main line); settlement was responsible for the slab slope in its entirety; and some of the slab cracks were from shrinkage during the original construction, but some of the slab cracks were fresh and associated with the high-pressure water leakage.

On June 21, 2016, Plaintiff filed a complaint against Defendant and another party in Oregon state court. Plaintiff later filed an amended complaint naming only Defendant. On September 30, 2016, Defendant was served with summons and complaint. Plaintiff alleges claims against Defendant for breach of contract and breach of the implied covenant of good faith and fair dealing.

On October 20, 2016, Defendant removed the state-court case to this Court and filed its Answer. Defendant denies Plaintiff's claims and asserts the Policy exclusions as an affirmative defense.

On December 4, 2016, the parties filed their respective Motions for Summary Judgment.

STANDARD

Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Washington Mut. Inc. v. United States , 636 F.3d 1207, 1216 (9th Cir. 2011). See also Fed. R. Civ. P. 56(a). The moving party must show the absence of a dispute as to a material fact. Rivera v. Philip Morris, Inc. , 395 F.3d 1142, 1146 (9th Cir. 2005). In response to a properly supported motion for summary judgment, the nonmoving party must go beyond the pleadings and show there is a genuine dispute as to a material fact for trial. Id. "This burden is not a light one .... The non-moving party must do more than show there is some 'metaphysical doubt' as to the material facts at issue." In re Oracle Corp. Sec. Litig. , 627 F.3d...