969 F. Supp. 2d 1271
D. Or.2013Background
- Westbrook Apartments (48 units) underwent renovations in 2007–2008; Plaintiffs contracted to buy and took possession in late 2008. Sequoia issued CMP policies covering Aug. 15, 2008–Aug. 15, 2009 and Aug. 15, 2009–Aug. 15, 2010.
- Plaintiffs hired Western Architectural (WA) in June 2011; WA issued an invasive building-envelope report (July 1, 2011) describing defects and "potential collapse conditions." Plaintiffs submitted a Notice of Claim to Sequoia on Sept. 26, 2011 attaching the WA report.
- Sequoia retained West Coast Forensics (engineer Jeffrey Lewis) who inspected Nov. 2, 2011 and found no evidence of any abrupt "collapse" as defined in the policy; most units remained occupied.
- In state court (Nov. 2011) Plaintiffs sued developers; in May 2012 Plaintiffs sued Sequoia for breach of the insurance policy after Sequoia denied coverage (Dec. 22, 2011) under the policy's Additional Coverage — Collapse.
- Plaintiffs later asserted (in response to summary-judgment motion) that ceilings in units 11 and 21 "abruptly caved in" on Dec. 16, 2009 and Jan. 1, 2010 respectively. Those alleged unit-specific collapses were not disclosed to Sequoia in the Sept. 2011 notice and were first identified to Sequoia in Nov. 2012 briefing.
- Court held Sequoia's summary-judgment motion: primary issues were (1) whether plaintiffs produced evidence of a covered "collapse" during the policy period and (2) whether plaintiffs gave timely notice of those collapses; Court granted summary judgment for Sequoia.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Definition/interpretation of "collapse" under policy | Phrase "abrupt falling down or caving in" is ambiguous and should be read to cover abrupt events that render occupancy unsafe (per Malbco) | Definition requires both abrupt falling/caving and that the building/part cannot be occupied for its intended purpose; mere danger or damage insufficient | Court assumed plaintiff's broader definition without deciding ambiguity but found no evidence of covered collapse in any event |
| Existence/timing of collapse in units 11 & 21 | Peterson, Hoff, and Smagala declarations: ceilings "abruptly caved in" on Dec. 16, 2009 and Jan. 1, 2010; Hoff opines areas were uninhabitable | Sequoia's engineer Lewis inspected (Nov. 2011) and found no evidence of abrupt collapse; WA report noted only potential conditions; units remained occupied for years | Evidence too speculative and insufficient for a rational trier of fact to find abrupt, covered collapses occurred during policy period; summary judgment for Sequoia |
| Timeliness of notice of the alleged collapses | Plaintiffs contend collapse dates fall within tolling/limitations and that Sequoia was not prejudiced by late disclosure | Sequoia: collapses not disclosed in Sept. 2011 notice; plaintiffs first told Sequoia of unit-specific collapses in Nov. 2012; insurer prejudiced because it lost chance to investigate, inspect pre-repair, and pursue subrogation | Court found actual prejudice and plaintiffs’ delay was unreasonable; failure to give prompt notice justifies denial |
| Burden of proof on coverage/notice | Plaintiffs bear burden to prove coverage and timely notice; argued evidence sufficed | Sequoia argued plaintiffs failed to meet their burden | Court applied burden to plaintiffs and concluded they failed to produce persuasive evidence on collapse and notice issues; granted summary judgment for Sequoia |
Key Cases Cited
- Washington Mut. Ins. v. United States, 636 F.3d 1207 (9th Cir.) (summary-judgment standard applied)
- Anderson v. Liberty Lobby, 477 U.S. 242 (U.S.) (definition of genuine dispute and standard for summary judgment)
- Malbco Holdings, LLC v. AMCO Ins. Co., 629 F. Supp. 2d 1185 (D. Or. 2009) (interpreting "collapse" provision to include abrupt events that render occupancy unsafe)
- Gerke v. Travelers Cas. Ins. Co. of Am., 815 F. Supp. 2d 1190 (D. Or.) (two-part Oregon inquiry on notice: prejudice and reasonableness)
- Ass’n of Unit Owners of Nestani v. State Farm Fire & Cas. Co., 670 F. Supp. 2d 1156 (D. Or.) (insured bears burden to establish timely notice)
- Lusch v. Aetna Cas. & Sur. Co., 272 Or. 593 (Or.) (purpose of notice requirement is to allow insurer adequate investigation)