28 F. Supp. 3d 1125
D. Or.2014Background
- Meltebeke Built Paradise Homes (Meltebeke) built the Alkemades’ home in 1994 on expansive clay soils; movement and damage (cracks, sticking doors/windows, tile damage) began ~18 months later and recurred despite multiple remedial attempts.
- By 2002 engineers confirmed Meltebeke knew the home was on expanding soils and that soils were damaging the house; helical piers were installed in 2002–2003 but ultimately failed to stop further movement.
- Additional damage (cracking, cosmetic and structural issues, broken plumbing, out-of-level slab) occurred both before and after the pier installation; Meltebeke had repeatedly attempted repairs and warranties.
- The Alkemades sued Meltebeke in state court (settlement produced a stipulated judgment); prior insurers defended/paid; Meltebeke assigned claims against later insurers (Quanta and GFIC) to the Alkemades.
- Quanta (2005–2006) and GFIC (2006–2007; 2008–2011) denied coverage based on the policy’s known-loss/known-damage exclusion; Alkemades claim the post-pier damage was new and covered.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer had duty to defend under policy’s known-loss exclusion | Alkemades: post-pier damage was "new" discrete damage (e.g., plumbing), so not pre-known and thus covered | Quanta/GFIC: post-pier damage is a continuation/resumption of pre-existing, known damage from expansive soils; exclusion applies | Court: No duty to defend — complaint alleges recurring damage from same cause known to insured pre-policy |
| Scope of “property damage” for known-loss provision (general vs. specific) | Alkemades: insurer must show insured knew of each specific instance/type of damage pre-policy | Insurers: knowledge of same-cause, same-type recurring damage is sufficient to trigger exclusion | Court: Knowledge of the same underlying cause and recurring symptoms is enough; exclusion applies |
| Ambiguity of terms “continuation, change or resumption” | Alkemades: terms could be ambiguous and construed for insured | Insurers: terms have ordinary meanings; unambiguous to average purchaser | Court: Terms are unambiguous; construed according to policy language; favor of insured rule inapplicable because no ambiguity |
| Whether prior case law (e.g., Desert Mountain/Valley Forge) mandates different result | Alkemades: relies on cases holding pre-knowledge of cause may be insufficient where discrete later damage appears | Insurers: those cases differ on facts and policy language; here insured undisputedly knew widespread, recurring problem | Court: Distinguishes Desert Mountain and Valley Forge; those decisions are inapposite given undisputed pre-policy knowledge here |
Key Cases Cited
- Hoffman Constr. Co. of Alaska v. Fred S. James & Co. of Oregon, 313 Or. 464 (court must ascertain parties’ intent from policy language)
- North Pacific Ins. Co. v. American Mfrs. Mut. Ins. Co., 200 Or. App. 473 (policy language read from perspective of ordinary purchaser)
- School Dist. v. Mission Ins. Co., 58 Or. App. 692 (duty to defend broader than duty to indemnify; complaint-based inquiry)
- Ferguson v. Birmingham Fire Ins. Co., 254 Or. 496 (complaint controls duty to defend analysis)
- Desert Mountain Props. Ltd. P’ship v. Liberty Mut. Fire Ins. Co., 225 Ariz. 194 (distinguishable — insured lacked pre-policy knowledge of widespread problem)
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard on genuine issues)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (nonmoving party must present specific facts showing genuine issue)