Opinion
Civ. 1:19-cv-01896-CL
06-10-2021
CROMAN CORPORATION, Plaintiff, v. NAVIGATORS SPECIALTY INSURANCE COMPANY, Defendant,
FINDINGS & RECOMMENDATION
MARK CLARKE, UNITED STATES MAGISTRATE JUDGE.
This insurance coverage case comes before the Court on a Motion for Summary Judgment filed by Defendant Navigators Specialty Insurance Company ("Navigators, "), ECF No. 19, and a Motion for Partial Summary Judgment filed by Plaintiff Croman Corporation ("Croman"), ECF No. 20. The Court heard oral argument on the cross motions on September 22, 2020. ECF No. 37. For the reasons set forth below, Defendant's Motion for Summary Judgment should be DENIED and Plaintiff s Motion for Partial Summary Judgment should be GRANTED.
LEGAL STANDARD
Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, affidavits, and admissions on file, if any, show "that there is no genuine dispute as to any material fact and the [moving party] is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Substantive law on an issue determines the materiality of a fact. T. W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). Whether the evidence is such that a reasonable jury could return a verdict for. the nonmoving party determines the authenticity of the dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party shows the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings and identify facts which show a genuine issue for trial. Id. at 324.
Special rules of construction apply when evaluating a summary judgment motion: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. T. W. Elec., 809 F.2d at 630-31.
BACKGROUND
I. Factual Background
Plaintiff Croman is an Oregon corporation which provides services for aerial fire suppression, helicopter logging, and heavy lift constructions using its fleet of helicopters. Compl. ¶¶1, 5. ECF No. 1-1. "In support of, and as part of, its helicopter logging, firefighting, and heavy-lift operations, Croman's operations include fuel support trucks on the ground that carry 'Jet A' aviation fuel and other supplies to job sites set up near those operations." Id. at ¶ 6. "All of Croman's logging and firefighting operations (and some aerial, heavy-lift operations) involve its helicopters and their support vehicles and person nel." Hanan Decl. ¶ 4. ECF No. 21.
Defendant Navigators is. an insurance company based in New York. Compl. ¶ 2. Navigators issued a Contractors Pollution Liability Toolkit II Policy (the "Pollution Policy") to Croman. Id. at ¶ 7. The Pollution Policy provides $5 million in coverage for "operations pollution liability" for the period from December 31, 2018 to December 31, 2020. Id. Croman maintains a separate insurance policy from a different insurance provider to protect against liability from an accident involving its helicopters after they take flight. Hanan Decl. ¶.8.
On August 5, 2019, one of Croman's.trucks was returning from a job site near Medford, Oregon when it overturned, spilling 3, 000 gallons of Jet A aviation fuel on to the road and an adjacent ditch. Compl. ¶.8; Hanan Decl. ¶ 5. Croman hired a contractor to clean up. the spill, remediate the damaged soils, and establish monitoring wells at the spill site. Hanan Decl. ¶ 6. Croman's costs for the clean-up and remediation totaled over $3.1 million. Id.
Croman made a timely claim against the Pollution Policy for the loss caused by the spill. Compl. ¶ 9. On August 20, 2019, Navigators denied Croman's claim, asserting that transportation of aviation fuel to helicopters was not covered under the Pollution Policy. Id. at ¶ 10.
On October 21, 2019, Croman brought an action for breach of contract against Navigators in Oregon state court. Compl. ¶¶ 12-16. On November 22, 2019, Navigators removed the case to federal court. ECF No. 1.
II. The Pollution Policy
In relevant part, the Pollution Policy provides that Navigators "will pay on behalf of the insured the loss the insured becomes legally obligated to pay because of a pollution incident that takes place in the coverage territory, is caused by your work, and results in: (a) a claim for bodily injury, property damage or environmental damage if such injury or damage takes place during the policy period; or (b) emergency response costs you incur responding to environmental damage." Hanan Decl. Ex. 1, at 8. ECF No. 21-1.
Endorsement No. 4 of the Pollution Policy defines "your work" as "(a) The work or operations listed in the Schedule below and performed by you or on your behalf; (b) materials, parts or equipment furnished in connection with such work or operations noted in paragraphs a above; (c) transportation in connection with the work or operations listed in the Schedule below and wrongful delivery during such transportation; and (d) your use of a waste disposal facility in connection with the work or operations listed in the Schedule below." Hanan Decl. Ex. 1, at 36. The "Schedule of Work or Operations" in Endorsement No. 4 provides for:
Logging and firefighting operations performed on the ground. Policy does not provide coverage for helicopter contracting operations.Hanan Decl. Ex. 1, at 36.
DISCUSSION
The parties dispute the meaning and scope of the Pollution Policy's Schedule of Work or Operations and whether it excludes the August 5, 2019 crash and fuel spill.
I. Relevant Law Regarding Interpretation of Insurance Policies
A federal court, sitting in diversity, applies state law in interpreting an insurance policy. Travelers Prop. Cas. Co. of Am. v. ConocoPhillips Co., 546 F.3d 1142, 1145 (9th Cir. 2008). In Oregon, interpretation of an insurance policy is a question of law. Cain Petroleum Inc. v. Zurich Am. Ins. Co., 224 Or.App. 235, 241 (2008).
"The task in determining the meaning of a policy is to ascertain the intent of the parties, based on the wording of the policy itself." Cain Petroleum Inc., 224 Or.App. at 241 (internal citation omitted). "Issues of contractual intent are determined by the objective manifestations of the parties based on the terms that they use and not on what they subjectively believe that the terms mean." Employers Ins. of Wausau v. Tektronix, Inc., 211 Or.App. 485, 503 (2007).
In determining the parties' intent under Oregon law, courts follow the analytical framework set out in Hoffman Const. Co. of Alaska v. Fred S. James & Co. of Oregon, 313 Or. 464, 470-71 (1992). The Hoffman framework first requires the court to determine whether the insurance policy defines the provision, term, or phrase at issue. Id. at 469. If expressly defined, the court must apply the provided definition. Holloway v. Republic Indem. Co. of Am,, 341 Or. 642, 650 (2006).
When a policy does not define the phrase, the court must look to its plain meaning; a phrase has a plain meaning if it is susceptible to only one plausible interpretation. Holloway, 341 Or. at 650. If the court determines that there are two or more plausible interpretations of the phrase, the court must determine whether the interpretations "withstand scrutiny." Id. A phrase withstands scrutiny if it continues to be reasonable after the interpretations are examined in light of, inter alia, the particular context in which the phrase is used in the policy and the broader context of the policy as a whole. Id. The court must "construe the text of the policy as a whole, rather than view particular parts of the policy in isolation." Bresee Homes Inc. v. Farmers Ins. Exch., 353 Or. 112, 122(2012).
If a single interpretation withstands scrutiny, the court must apply that interpretation. Hoffman, 313 Or. at 472-73. Where more than one interpretation withstands scrutiny, the court must conclude that the phrase is ambiguous. Cain Petroleum, Inc., 224 Or.App. at 242 (explaining that "'ambiguity' is a term of art... referring] to multiple' reasonable interpretations of the policy wording in light of the context in which the disputed provisions are employed and in the context of the policy as a whole." (emphasis in original)). If the court concludes that a term or phrase is ambiguous under this framework, "the ambiguity cannot be permitted to survive," and the phrase must be construed against the drafter. Hoffman, 313 Or. 470.
II. Evidentiary Objections
As a preliminary matter, the Court must address the scope of material under consideration. "In all events, the interpretation of an insurance policy is a question of law that is confined to the four corners of the policy without regard to extrinsic evidence." Rhiner v. Red Shield Ins. Co., 228 Or.App. 588, 593 (2009); see also Alterra Am. Ins. Co. v. James W. Fowler Co., 347 F.Supp.3d 604, 612 (D. Or. 2018) ("Oregon courts do not consider extrinsic evidence when interpreting insurance policy language."). Although both parties have embraced this limitation and urge the Court to confine its consideration to the terms of the Pollution Policy itself, they have each submitted extrinsic evidence in support of their respective motions and both parties have objected to the other's submissions pursuant to Local Rule 56-1 (b).
Consistent, with Rhiner, the Court confines its consideration of the parties' motions to the terms of the Pollution Policy itself with respect to the correspondence and declarations submitted by the parties. This determination requires one important clarification, however. Subsection 2 of Section IV of the Pollution Policy provides:
By accepting this policy, you understand and agree that the statements in the application, including any supporting documentation submitted in connection with the application for this insurance, are made apart of this policy; are accurate and complete; that those statements are material representation you have made to us; and that we have issued this policy in reliance upon your representations.Hanan Decl. Ex. 1, at 18 (emphasis added).
Croman's application for the Pollution Policy, Hanan Decl. Ex. 1, at 38-49, has therefore been incorporated into the Pollution Policy itself and is not extrinsic evidence. Of note, the application asked Croman to "Describe the operations and services provided," to which Croman responded " Helicopter logging and firefighting." Id. at 39. The application also asked if Croman transported regulated or hazardous wastes or materials, to which Croman responded in the affirmative and disclosed that it transported 9, 000 gallons of Jet A fuel. Id. at .40. Croman then listed its fleet of ground vehicles, including fuel trucks. Id. at 41-44.
III. Scope of Coverage
The core of the dispute in this case is whether the crash and jet fuel spill causing the loss alleged in the Complaint comes within the bounds of the Pollution Policy and, in particular, the "Schedule of Work or Operations" covered by the Pollution Policy, which provides for:
Logging and firefighting operations performed on the ground. Policy does not provide coverage for helicopter contracting operations.Hanan Decl. Ex. 1, at 36.
Navigators contends that the Pollution Policy does not cover helicopter contracting operations or materials, parts, or equipment furnished in connection with helicopter operations. More specifically, Navigators contends that aviation fuel can only be used in connection with helicopter contracting operations and the Pollution Policy does not, therefore, cover transportation of aviation fuel or the August 5, 2019 crash and spill.
Croman agrees that the Pollution Policy does not cover incidents directly involving its helicopters, but contends that "logging and firefighting operations on the ground" necessarily includes refueling and supply operations for its helicopters, which are an inseparable part of Croman's overall "operations" for logging and firefighting. Croman contends that "operations" must be given a broader meaning to encompass that aspect of its work.
The key word in resolving the dispute is "operations." If "logging and firefighting operations performed on the ground," includes the transportation of jet fuel and does not run afoul of the term excluding coverage for "helicopter contracting operations," then Croman's injury will come within the terms of the Pollution Policy.
The term "operations" is not defined in the Pollution Policy. The Court therefore considers the "plain meaning" of the term, assisted by "various aids of interpretation to discern the parties' intended meaning." Groshong v. Mutual of Enumclaw Ins. Co., 329 Or. 303, 307-08 (1999). As relevant to the present case, the dictionary defines the term "operation" as meaning "performance of a practical work or of something involving the practical application of principles or processes," or "a method or manner of functioning," or "a business transaction especially when speculative." Operation Definition, Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/operation (last visited Nov. 30, 2020).
Applied to the Pollution Policy, the term "operations" could be read expansively, to encompass the entire "performance of a practical work" of logging and firefighting operations on the ground, which would include the transportation of jet fuel by truck to support the use of helicopters. On the other hand, an expansive reading of the term "operations" in the context of the excluded "helicopter contracting operations" would seem to encompass the transportation and supply of jet fuel as a necessary part of the "practical work" of helicopter contracting. The Court therefore concludes that the meaning of "operations" in the Pollution Policy is not, on its face, plain.
However, Hoffman provides that the term must be construed in the context of the whole policy. Hoffman, 313 Or. at 470 (courts examine the phrase in light of "the particular context in which that [phrase] is used in the policy and the broader context of the policy as a whole."). The broader context of the Pollution Policy includes, as previously discussed, Croman's application for the Policy. In that application, Croman disclosed that its "operations and services provided" were "helicopter logging and firefighting." Hanan Decl. Ex. 1, at 39. The application further disclosed that Croman transported large quantities of jet fuel using its fleet of trucks. Id. at 40-44. The term "operations" must, therefore, be understood to at least indirectly involve the use of helicopters. Returning to the clause at issue, the term "logging and firefighting operations" is modified by the phrase "performed on the ground," which serves to limit coverage to those aspects of Croman's "operations," that took place on the ground, i.e., not involving a helicopter in flight. This is consistent with the subsequent limitation that the Pollution Policy "does not provide coverage for helicopter contracting operations," which would be understood to exclude those aspects of Croman's operations that directly involve the use of a helicopter. Taking the Pollution Policy as a whole, the Court concludes that only Croman has offered a plausible interpretation of the disputed clause. The term "logging and firefighting operations performed on the ground" must include those aspects of Croman's logging and firefighting "operations" done on the ground in support of its helicopters, which would include the transportation of fuel for the helicopters.
However, even if the phrase "logging and firefighting operations performed on the ground" were ambiguous, Croman would still prevail. When "two or more competing, plausible interpretations prove to be reasonable after all other methods for resolving the dispute over the meaning of particular words fail, then the rule of interpretation against the drafter of the language becomes applicable, because the ambiguity cannot be permitted to survive." Hoffman, 313 Or. 470-71 (emphasis in original); see also Semler v. Chartis Prop. Cas. Co., 421 F.Supp.3d 999, 1005 (D. Or. 2019) ("Under Hoffman, reasonable is enough. Thus, because the [insured's] interpretation is reasonable, the disputed phrase is at least ambiguous and I must construe the LAAU clause against the insurer, pursuant to the third step of Hoffman"). Because Croman has supplied a reasonable interpretation of the disputed term, the Court should resolve the ambiguity in favor of Croman and against Navigators.
In applying that recommendation, the Court notes that Croman has only moved for partial summary judgment, seeking a finding that the Pollution Policy provides coverage for the fuel spill described in the Complaint. Navigators has indicated that it intends to pursue various affirmative defenses and urges the Court to defer ruling on summary judgment until the parties can conduct substantive discovery. Croman does not dispute that Navigators has raised affirmative defenses which will require additional discovery and further agrees that the granting of its Motion for Partial Summary Judgment will not prejudice Navigators in pursuing those defenses. The Court agrees and sees no cause to defer resolution of this motion.
Croman's Motion for Partial Summary Judgment should therefore be GRANTED and Navigator's Motion for Summary Judgment should be DENIED. The Court should conclude that the Pollution Policy provides coverage for the jet fuel spill described in the Complaint without prejudice to Navigator's ability to challenge coverage pursuant to the affirmative defenses raised in its Answer, which will be the subject of future motions.
CONCLUSION
Defendant's Motion for Summary Judgment, ECF. No. 19, should be DENIED. Plaintiffs Motion for Partial Summary Judgment, ECF No. 20, should be GRANTED.
SCHEDULING ORDER
The Findings and Recommendation will be referred to a district judge. Objections, if any, are due fourteen (14) days from service of the Findings and Recommendation. If no objections are filed, then the Findings and Recommendation will go under advisement on that date.
A party's failure to timely file objections to any of these findings will be considered a waiver of that party's right to de novo consideration of the factual issues addressed herein and will constitute a waiver of the party's right to review of the findings of fact in any order or judgment entered by a district judge. These Findings and Recommendation are not immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1) of the Federal Rules of Appellate Procedure should not be filed until entry of judgment.
It is so ORDERED.