395 P.3d 892
Or. Ct. App.2017Background
- Hunters Ridge is a mixed-use condominium (ground-floor commercial; upper-floor residential). WGC subcontracted to install siding on Buildings B and C (25 and 20 residential units respectively, plus several commercial units).
- WGC failed to appear in underlying construction-defect litigation; default judgments were entered against it and later assigned to the condominium association, which then issued writs of garnishment against WGC’s insurer, American Family Mutual Insurance Company (AFM).
- AFM denied coverage relying primarily on a policy exclusion for “Multi-Unit New Residential Construction (Greater Than Eight Units)” and other exclusions (faulty-work and damage to the insured’s own work). The trial court granted AFM summary judgment on the residential-construction exclusion and denied the association’s summary judgment; the association appealed.
- The association argued the residential-construction exclusion is ambiguous as to mixed-use buildings and should be construed for coverage; AFM argued the exclusion plainly covered any condominium with >8 residential units even if mixed-use.
- AFM also sought partial summary judgment excluding attorney fees and costs from coverage; the trial court denied that motion. AFM requested a jury trial on disputed factual issues in the garnishment proceeding; the trial court denied it.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy exclusion for “Multi-Unit Residential Building” applies to mixed‑use condominium buildings | Exclusion is ambiguous; ordinary purchaser would read listed terms (apartment, townhouse) as residential-only, so mixed‑use Buildings B & C are covered | Definition includes any condominium with >8 residential units (so mixed‑use condos fall within exclusion) | Exclusion ambiguous; construed against insurer to mean exclusively residential structures only. Trial court erred granting AFM summary judgment. |
| Whether plaintiff was entitled to summary judgment that AFM must pay the full judgment amounts | Judgment awards prove WGC became legally obligated for covered property damage; no genuine issue of fact | AFM showed disputed issues: settlement/allocation and whether judgments included excluded faulty‑work or damage to WGC’s own work | AFM raised genuine factual disputes via expert declaration; trial court correctly denied plaintiff summary judgment. |
| Whether attorney fees and litigation costs in the underlying judgments are excluded from AFM’s obligation | Those fees/costs are recoverable as consequential damages or as “costs taxed against the insured” under the policy | Fees and defense expenses are not "damages" nor "costs taxed" (term excludes attorney fees) | Term "costs" ambiguous; reasonable to include attorney fees and expert expenses; construed for insured. Trial court did not err denying AFM’s partial summary judgment. |
| Whether ORS 18.782 bars a jury trial in a contested garnishment hearing resolving insurance coverage | (Plaintiff) No meaningful disputed facts requiring a jury | (AFM) Statute mandates bench trial but that infringes Article I, §17 right to jury on contract/coverage issues | Legislature intended garnishment hearings under ORS 18.782 to be tried to the court; but as applied to insurance coverage disputes mirroring breach‑of‑contract claims, statute is unconstitutional to the extent it denies jury trial. AFM entitled to jury on disputed facts. |
Key Cases Cited
- Hoffman Constr. Co. v. Fred S. James & Co., 313 Or. 464 (policy interpretation is question of law)
- Dewsnup v. Farmers Ins. Co., 349 Or. 33 (ambiguities in insurance policies construed against drafter)
- Holloway v. Republic Indem. Co. of Am., 341 Or. 642 (apply defined policy terms; analyze term context and plain meaning)
- FountainCourt Homeowners v. FountainCourt Dev., 360 Or. 341 (insurer bears burden to prove exclusions; garnishment coverage requires evaluating what insured became legally obligated to pay)
- Brownstone Homes Condo. Assn. v. Brownstone Forest Hts., 358 Or. 223 (garnishee may raise defenses insurer could have asserted against insured)
- Molodyh v. Truck Ins. Exch., 304 Or. 290 (historical practice: jury trial on factual issues concerning insurance policy)