The insured Association alleged that the loss was covered under the Policy as a collapse caused by hidden decay of weight-bearing structural members and sought benefits of $5,078,320.25, costs and disbursements, and attorneys' fees. State Farm denied that the Policy covered the alleged conditions at Nestani and moved for summary judgment on the grounds that the claimed loss did not occur during the Policy period, and that any loss did not arise from a collapse caused by hidden decay as defined in the Policy.
The court reasoned that under Oregon law, the insured had the initial burden of establishing conditions of coverage, then the insurer has the burden of proving that the policy excludes coverage, and finally the burden to show an exception to an exclusion falls back upon the insured. The court found that the Association failed to establish that it met the conditions of coverage under the Policy, or that its loss was covered as an exception to the exclusion for decay.
The court found that the term "commencing" during the policy period in relation to collapse coverage was ambiguous, finding that ""commencing" may be reasonably read to include each identifiable instance of collapse, regardless of whether similar loss occurred prior to the Policy period. However, plaintiff fails to prove that any identifiable loss commenced during the effective Policy period, January 1, 2005 through January 1, 2007. Repeatedly, plaintiff's experts denied that it was possible to prove when the purported collapse of structural members occurred."
The court stressed further:
Here, plaintiff has the burden to set forth specific facts to show loss commencing during the Policy period. Plaintiff does not, and, according to its own experts, cannot identify a specific instance of collapse that occurred during the Policy period; thus, I would have to assume, based on speculative probability, that a structural member fell into pieces during the Policy period. The court cannot take such a leap. For the same reasons, plaintiff fails to show that it brought legal action within two years after the date on which the property loss occurred. Under the statutorily mandated language of the Policy, actions brought more than two years after occurrence of the loss are barred. . . . Defendant argues that any loss was caused by severe decay that began decades ago, and that plaintiff cannot prove that the loss occurred after June 4, 2006. Plaintiff again maintains that the inception of loss is each instance of collapse, and that Perrault's testimony creates a genuine issue of fact that instances of collapse occurred after June 4, 2006. Plaintiff is correct that the inception of loss begins at the point of collapse, not the point of decay, . . . However, Perrault's speculative deposition testimony does not create a genuine issue of fact for summary judgment. Plaintiff fails to present specific facts showing that an instance of loss occurred after June 4, 2006. Accordingly, plaintiff cannot show that it brought suit within two years after occurrence of the loss to meet that condition of coverage.
The court additionally refused to follow the Malbco case regarding the definition of collapse, but instead looked to the express definition of collapse in the policy requiring "actual falling down." The court further found that the term "sudden" as used in the policy contained a temporal element and refused to follow the reasoning in McCormick and Baxter in this regard.
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