323 P.3d 337
Or. Ct. App.2014Background
- Leach leased and operated a motocross track at the Fair and Expo Center, insured by Scottsdale under a CGL policy.
- Policy provides $1,000,000 bodily injury and property damage coverage and defense duties, but includes an Athletic Participant exclusion.
- Warberg sustained serious injuries in a practice session on Leach’s track; Warberg sued Leach and others in Warberg I.
- Leach tendered Warberg’s complaint to Scottsdale, which denied coverage and defense based on the Athletic Participant exclusion.
- Warberg settled, and Leach entered a stipulated judgment ($1,500,000) against Leach; an Assignment and Covenant Not to Execute were executed.
- Warberg later sued Scottsdale in Warberg II for breach of the contract, triggering Scottsdale’s summary judgment motion in this action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Issue preclusion bars Scottsdale’s summary judgment? | Leach: Warberg II’s findings preclude; issue actually litigated and essential | Scottsdale: Warberg II did not resolve the exclusion issue as final | Issue preclusion does not bar it. |
| Does the Athletic Participant exclusion apply to injuries during practice for Leach’s event? | Warberg injuries arose from practice; exclusion must be limited to contest/exhibition | Exclusion broadly applies to injuries during practice for Leach-sponsored events | Exclusion applies only when injury is during practice for preparing for a Leach-sponsored contest/exhibition. |
| Did the duty to defend arise under the policy despite the exclusion? | Ambiguity in Warberg’s complaint requires defense if any covered claim could be. | Exclusion forecloses duty to defend | Duty to defend exists; record ambiguity favors insured. |
| Did the duty to indemnify exist given the Athletic Participant exclusion? | Record could show Warberg not within the exclusion if practice was recreational | Exclusion bars indemnity as a matter of law | No; record could establish Warberg not within exclusion; triable fact. |
| Did Stubblefield covenant not to execute extinguish Scottsdale’s indemnity obligation? | Covenant not to execute may extinguish liability under Stubblefield | Covenant unconditionally releases insurer’s liability | Ambiguity as to severability; fact issues remain; not entitled to summary judgment. |
Key Cases Cited
- Stubblefield v. St. Paul Fire & Marine Ins. Co., 267 Or 397 (1973) (rule: covenant may extinguish insurer’s indemnity obligation when unambiguously extinguishing insured liability)
- Ledford v. Gutoski, 319 Or 397 (1994) (duty to defend based on face of complaint and policy; ambiguity resolved in insured’s favor)
- Hoffman Constr. Co. v. Fred S. James & Co., 313 Or 464 (1992) (policy interpretation framework for insurance exclusions)