ANNA J. BROWN, District Judge.
This matter comes before the Court on Plaintiff Allstate Insurance Company's Motion (#15) for Summary Judgment. For the reasons that follow, the Court
Defendant Rosalie Dalzell is the owner and operator of a rental unit located at 3823 N. Overlook, Portland, Oregon (the Unit).
On October 9, 2011, Dalzell obtained a Homeowners Insurance Policy from Plaintiff Allstate Insurance Company related to the Unit.
In March 2012 Defendants Hector Cepeda and Pilar Wright submitted an application to rent the Unit through Performance Properties, a rental management company. On March 13, 2012, Cepeda and Wright's rental application was accepted. At some point Cepeda and Wright agreed to rent the Unit, and they signed a one-year lease to begin April 22, 2012.
On May 9, 2012, Cepeda drove to the Unit from Los Angeles to drop off "some belongings" before Cepeda and Wright moved into the Unit later in May. On May 9, 2012, Cepeda met Dalzell for the first time. Cepeda spent the day on May 9, 2012, unloading his belongings into the Unit and stayed overnight in the Unit.
On May 10, 2012, Cepeda drove back to Los Angeles.
On May 17, 2012, Cepeda and Wright received a call from Performance Properties advising them that Dalzell no longer wanted to rent the Unit to Cepeda and Wright. According to Cepeda and Wright, Dalzell accused Cepeda of reversing a deadbolt lock on the Unit that caused Cepeda to have access to the attic. Performance Properties advised Cepeda and Wright that Dalzell had moved all of their belongings into the garage, had changed the locks on the Unit, and "had tried to file a police report" regarding the allegedly reversed deadbolt.
Ultimately Cepeda and Wright had to find another place to live.
On April 3, 2015, Cepeda and Wright filed an action in Multnomah County Circuit Court against Dalzell in which they alleged (1) Dalzell refused to rent the Unit to Cepeda and Wright because of their national origin in violation of Oregon Revised Statute § 659A.421; (2) Dalzell refused to rent the Unit to Cepeda and Wright because they have two sons, ages 8 and 11, in violation of Oregon Revised Statute § 659A.421; and (3) Dalzell
At some point Dalzell tendered defense of Cepeda and Wright's state-court action to Allstate pursuant to Dalzell's Homeowners Policy.
On September 18, 2015, Allstate filed a Complaint for Declaratory Relief in this Court in which Allstate seeks a declaration that it does not have a duty to defend or to indemnify Dalzell in the underlying action.
On January 5, 2016, Allstate filed a Motion for Summary Judgment as to both the duty to defend and the duty to indemnify. The Court took Allstate's Motion under advisement on February 18, 2016.
Allstate seeks summary judgment on the ground that discrimination in the rental of property is an intentional act, and, therefore, it is not an occurrence under the policy. In addition, or in the alternative, Allstate asserts the actions of Dalzell alleged in the state-court complaint are excluded from coverage by the Intentional Acts Exclusion in Dalzell's policy. Allstate, therefore, seeks a declaration that it is not obligated to defend or to indemnify Dalzell and requests the Court to issue an order permitting Allstate to withdraw from the defense of Dalzell in the underlying action.
Dalzell asserts Cepeda and Wright do not allege any "intent to harm" in their state-court complaint. According to Dalzell, therefore, Cepeda and Wright's claims allege an occurrence under the policy and are not excluded from coverage by the Intentional Acts Exclusion. Thus, Dalzell asserts Allstate is not relieved from the obligation to defend or to indemnify Dalzell in the underlying action.
Under Oregon law the construction of a contract is a question of law for the court. Holloway v. Republic Indem. Co. of Am., 341 Or. 642, 649 (2006) (citing Hoffman Const. Co. of Alaska v. Fred S. James & Co. of Ore., 313 Or. 464, 470 (1992)). The Court's task is to "ascertain the intention of the parties to the insurance policy." Id. at 649-50 (citing Or. Rev. Stat. § 742.016). The Court accomplishes this task "based on the terms and conditions of the insurance policy." Id.
"If an insurance policy explicitly defines the phrase in question, [the Court] appl[ies] that definition." Id. at 650. See also Joseph Educ. Ass'n v. Joseph Sch. Dist. No. 6, 180 Or.App. 461, 467 (2002).
Id.
When "evaluating whether an insurer has a duty to defend[,] the court looks only at the facts alleged in the complaint" and the terms of the policy. Ledford v. Gutoski, 319 Or. 397, 400 (1994). See also Nat'l Union Fire Ins. Co. of Pittsburgh v. Starplex Corp., 220 Or.App. 560, 573 (2008) ("[w]hether an insurer has a duty to defend an action against its insured depends on two documents: the complaint and the insurance policy.").
The duty to indemnify "is independent of the duty to defend." Ledford, 319 Or. at 403 (citation omitted). "Even when an insurer does not have a duty to defend based on the allegations in the initial complaint, the facts proved at trial on which liability is established may give rise to a duty to indemnify if the insured's conduct is covered." Id. (citation omitted). "In order for summary judgment to be appropriate on the duty to indemnify, there must be no genuine issue of material fact, and the moving party must be entitled to judgment as a matter of law." Id. (citations omitted).
Dalzell's insurance policy with Allstate provides in pertinent part:
Compl., Ex. 2 at 34 (emphasis in original). The policy also provides the following limitation of coverage:
Id (emphasis in original). The policy contains the following definitions:
Compl., Ex. 2 at 17-18 (emphasis in original).
As noted, "[w]hether an insurer has a duty to defend an action against its insured depends on two documents: the complaint and the insurance policy." Starplex Corp., 220 Or. App. at 573. Cepeda and Wright allege three claims in their complaint: two for discrimination in violation of Oregon Revised Statute § 659A.421 and one claim for negligence.
As noted, Cepeda and Wright do not specifically allege in their First and Second Claims for violation of § 659A.421 that Dalzell intended to cause them harm when she allegedly refused to rent the premises to them because of either their national origin or their familial status. The Oregon Supreme Court, however, has recognized the nature of certain acts necessarily gives rise to a mandatory inference that there was the intent to harm. See Nielsen v. St. Paul Co., 283 Or. 277, 281 (1978) ("There are some intentional acts the nature of which is such that it must necessarily be concluded that there was an intention to injure."). In addition, the Oregon Court of Appeals has held when the intent to injure is inferred, the insured's conduct is not an "accident" or "occurrence" under a liability policy. See Falkenstein's Meat Co. v. Maryland Cas. Co., 91 Or.App. 276, 279-80 (1988).
In Falkenstein's Meat an employee sued the insured alleging the insured company changed the employee's job position and reduced his hours of work in retaliation for his complaints that the insured "was not providing a safe place of employment and that the vehicle which he was assigned to operate was unsafe." 91 Or. App. at 278. The insured tendered defense of the employee's action to its insurance company. The insurance company refused to defend on the ground that the alleged conduct by the insured was not an occurrence and was specifically exempt from coverage under an intentional-acts exclusion. Id. The insured brought a declaratory judgment action "to determine whether [the insurance company] had a duty to defend" the employee's action. The insured asserted the employee's complaint "involve[d] an occurrence" within the meaning of the policy because the complaint did not allege the insured "intended the harm which occurred as a result of the conduct." Id. at 279. The insurance company, in turn, asserted the allegation of retaliation by the employer "involve[d] intentional rather than accidental conduct and, therefore, [was] not within the policy definition of `occurrence.'" Id. The Oregon Court of Appeals concluded plaintiff's complaint did "not allege a specific type of intentional harm. However, retaliatory and discriminatory conduct pursuant to [Oregon's Whistleblower statute,] ORS 654.062(5) (a) [,] are acts from which an intention to cause harm must necessarily be inferred." Id. at 280. The court, therefore, concluded the conduct alleged in the employee's complaint was not an "occurrence," and, therefore, the insurer did not have a duty to defend the employer. Id.
In Groshong. v. Mutual of Enumclaw Insurance Company, 143 Or.App. 450 (1996), the court examined the holding of Falkenstein's Meat in the context of a claim for housing discrimination based on familial status in violation of the Fair Housing Act (FHA), 42 U.S.C. § 3601. Specifically, the plaintiff in the underlying FHA action alleged she inquired about renting a second-floor apartment in an apartment complex owned by the insured. The apartment manager informed the plaintiff that the apartment complex "did not allow small children on the second floor because of safety concerns." Id. at 452. As a result, the plaintiff was unable to rent a unit in the apartment complex. The United States Department of Justice brought an action on behalf of the plaintiff against the apartment-complex owner for housing discrimination in violation of the FHA. The apartmentcomplex owner tendered defense of the action to his insurance company. The insurance company, however, declined to defend the apartment-complex owner. The apartment-complex owner entered into a settlement and consent order with the Department of Justice and the plaintiff. The insurance company declined to indemnify the apartment-complex owner. The apartment-complex owner then filed an action against his insurance company asserting the company had breached its insurance contract by failing to defend and to indemnify the apartment-complex owner. The insurance company asserted it had declined to defend and to indemnify the apartment-complex owner on the ground that, among other things, it "would be against public policy to provide insurance coverage for a claim of intentional housing discrimination." Id. at 454. The trial court entered a judgment for the insurance company on other grounds, and the apartment-complex owner appealed. The Oregon Court of Appeals affirmed the judgment for the insurance company and concluded Oregon public policy "preclude[d] insurance coverage" for the discrimination claim. Id. The Court of Appeals noted Oregon's frequently reiterated policies that "[i]nsurance coverage for the protection of one who intentionally inflicts injury upon another is against public policy," and "[t]here are some intentional acts the nature of which is such that it must necessarily be concluded that there was an intention to injure." Id. at 457 (quotations omitted). The court noted it had previously concluded "disparate treatment" discrimination claims like the claim at issue in Groshong "necessarily allege[] intentional injury," and, therefore, disparate-treatment discrimination claims did not fall within an insurance policy's express coverage for "any negligent act, error or omission of the insured." Id. (quotation omitted). The court noted it had not, however, resolved "whether intentional discrimination would be uninsurable as a matter of policy." Id. at 458 (quotation omitted). The court then
Id. at 458-59. Although Groshong involved a claim of housing discrimination based on familial relations under the FHA, the court's holding in Groshong is equally applicable to the claims of Cepeda and Wright for housing discrimination based on national origin or familial relations in violation of § 659A.421. See McGary v. City of Portland, 386 F.3d 1259, 1270-71 (9
Dalzell asserts Allstate has a duty to defend in this matter because Cepeda and Wright also allege claim for negligence, which, by definition, is not an intentional tort and, therefore, may be an occurrence under the policy and/or is not excluded by the Intentional Acts Exclusion.
In their negligence claim Cepeda and Wright allege in pertinent part that
Compl., Ex. A at 9-10. Dalzell asserts courts have held violations of the FHA do not require discriminatory intent, and, in any event, Cepeda and Wright have not alleged any intent in their negligence claim. According to Dalzell, therefore, in their Third Claim for negligence Cepeda and Wright allege an "occurrence" under the policy, and, thus, coverage is not excluded under the Intentional Acts Exclusion.
The Ninth Circuit has repeatedly held FHA claims alleging disparate-treatment discrimination in housing such as those at issue here require a "showing of discriminatory intent." Massbaum v. WNC Mgmt, 361 F. App'x 904, 905 (9
Even though Cepeda and Wright couch their Third Claim in the rubric of negligence, they are, in fact, asserting a claim for discrimination in housing under§ 659A.421. The Oregon Supreme Court has made clear that when analyzing the duty to defend, "a court's focus should be on the conductn alleged in the claim rather than the label given to the claim. See, e.g., Ledford, 319 Or. 397. Here Cepeda and Wright allege Dalzell had a duty to "abide by § 649A.421" and to avoid violating that statute and Dalzell created the risk of harm by refusing to rent to Cepeda and Wright due to their national origin and/or familial status. Under the cloak of negligence Cepeda and Wright's Third Claim is, in fact, one for violation of § 659A.421, and, as with their First and Second Claims, the Court must infer an intent to discriminate. The Court, therefore, concludes public policy also precludes a duty to defend as to the Third Claim of Cepeda and Wright.
Accordingly, the Court grants Allstate's Motion for Summary Judgment as to the issue of the duty to defend, declares Allstate is not obligated to defend Dalzell in the underlying action, and declares Allstate may withdraw from the defense of Dalzell in the underlying action.
Allstate also moves for summary judgment as to its alleged duty to indemnify Dalzell in the underlying action. As noted, the duty to indemnify "is independent of the duty to defend." Ledford, 319 Or. at 403 (citation omitted). "Even when an insurer does not have a duty to defend based on the allegations in the initial complaint, the facts proved at trial on which liability is established may give rise to a duty to indemnify if the insured's conduct is covered." Id. (citation omitted). "In order for summary judgment to be appropriate on the duty to indemnify, there must be no genuine issue of material fact, and the moving party must be entitled to judgment as a matter of law." Id. (citations omitted).
As noted, in Groshong the Oregon Court of Appeals also addressed whether the insurer had a duty to indemnify the apartment-complex owner against the claims of housing discrimination in violation of the FHA. The court first concluded the allegations in the complaint "facially state[d] a claim of `disparate treatment'" even though the underlying complaint did not specifically state it was a claim for disparate treatment:
Id. at 461. The Court of Appeals then concluded: "Because public policy precludes insurance coverage of such discrimination, [the insurer] cannot be liable for failing to defend or indemnify [the apartment-complex owner] against [the underlying plaintiff's] claims." Id. (citing Isenhart v. Gen. Cas. Co. of Am., 233 Or. 49, 53 (1962) ("We hold that a clause in contract of insurance purporting to indemnify the insured for damages recovered against him as a consequence of his intentional conduct in inflicting injury upon another is unenforceable by the insured on the ground that to permit recovery would be against public policy. Therefore, the insurance policy in the present case must, in effect, be regarded as excluding such coverage.")
Cepeda and Wright allege Dalzell refused to rent the Unit to them on the basis of their national origin or familial status. As in Groshong, Dalzell's refusal was not "framed in facially neutral terms," but instead applied to "persons falling within a statutorily protected class." Cepeda and Wright's state-court complaint, therefore, alleges disparate-treatment housing discrimination. Thus, as in Groshong, the Court concludes Allstate "cannot be liable for failing to . . . indemnify" because "public policy precludes insurance coverage of such discrimination."
Accordingly, the Court grants Allstate's Motion for Summary Judgment as to the issue of its duty to indemnify Dalzell.
For these reasons, the Court
IT IS SO ORDERED.
