Masood v. Safeco Insurance Co. of Oregon ( 2016 )

638 December 8, 2016 No. 75
IN THE SUPREME COURT OF THE
STATE OF OREGON
Sohail MASOOD,
Respondent on Review,
v.
SAFECO INSURANCE
COMPANY OF OREGON,
an Oregon Insurance Company,
Petitioner on Review,
and
OVERLAND SOLUTIONS, INC.,
Defendant-Respondent,
and
A. O. A. WEST, INC.,
an Oregon corporation,
Defendant.
Sohail MASOOD,
Respondent on Review,
v.
SAFECO INSURANCE
COMPANY OF OREGON,
an Oregon Insurance Company,
Petitioner on Review,
and
A. O. A. WEST, INC.,
an Oregon corporation,
Defendant.
(CC CV 09-070-070; CV 10-060-761;
CA A149925 (Control), A149926;
SC S063921)
On respondent on review’s petition for attorney fees filed
May 26, 2016; considered and under advisement September 27,
2016.
Sara Kobak, Schwabe, Williamson & Wyatt, P.C.,
Portland, filed the petition for attorney fees and the reply
Cite as 360 Or 638 (2016) 639
for respondent on review. Also on the petition and reply were
David Axelrod and Jordan R. Silk.
R. Daniel Lindahl, Bullivant Houser Bailey PC, Portland,
filed the objections to the petition for attorney fees for peti-
tioner on review. Also on the objections was John A. Bennett.
Before, Balmer, Chief Justice, and Kistler, Walters,
Landau, Baldwin, and Brewer, Justices.*
LANDAU, J.
The petition for attorney fees is allowed. Respondent on
review is awarded $30,771 as attorney fees on review. The
award is effective upon the circuit court’s entry of judgment
on remand from the Court of Appeals.
Case Summary: After the Oregon Supreme Court had denied defendant’s
petition for review, plaintiff filed a petition, under ORS 742.061(1), for attorney
fees incurred in responding to that petition. Defendant objected, asserting that
plaintiff had not prevailed in an action “upon [a] policy of insurance” within the
meaning of ORS 742.061(1), because plaintiff’s action was for breach of a sep-
arate oral agreement. Held: (1) The determinative question was the source of
the insured’s claim; and (2) the source of plaintiff’s claim unmistakably was the
policy of insurance, because the very terms of the oral agreement referred to,
incorporated, and were predicated on the underlying policy.
The petition for attorney fees is allowed. Respondent on review is awarded
$30,771 as attorney fees on review. The award is effective upon the circuit court’s
entry of judgment on remand from the Court of Appeals.
______________
*  Nakamoto, J., did not participate in the consideration or decision of this
case.
640 Masood v. Safeco Ins. Co. of Oregon
LANDAU, J.
Plaintiff Masood petitions for an award of $30,771
in attorney fees incurred before this court in responding to
the petition for review filed by defendant Safeco Insurance
Company of Oregon. He claims entitlement to attorney fees
under ORS 742.061(1), which provides for such an award
when a plaintiff brings an action “upon any policy of insur-
ance” and obtains a recovery in excess of any previous tender
by the insurer on the policy. Defendant objects on the ground
that plaintiff has failed to meet the statutory requirements
for such an award. Defendant does not otherwise challenge
the amount or reasonableness of the fees requested. For the
reasons that follow, we award plaintiff the entirety of the
attorney fees that he requests.
The facts relevant to the petition are not in dis-
pute. Plaintiff purchased an insurance policy from defen-
dant that provided coverage for his house, other structures
on his property, personal property, and loss of use for up to
12 months. The policy also included “extended dwelling cov-
erage,” which provided additional coverage of 50 percent to
pay for unexpected repair or rebuilding costs that exceeded
the base amount of coverage for the house.
A fire completely destroyed plaintiff’s house and
its contents and damaged other structures on the property.
Plaintiff and defendant disagreed about what was owed
under the policy. In particular, the parties disagreed about
whether plaintiff was entitled to the extended dwelling cov-
erage without having to first actually replace the house.
Plaintiff contended that he had entered into an oral agree-
ment with one of defendant’s large-loss adjusters that obli-
gated defendant to pay the full dwelling coverage under the
policy, including the extended dwelling coverage. According
to plaintiff, the oral contract provided that defendant would
pay plaintiff “the full replacement cost of [plaintiff’s] Home
up to the express limits of The Policy, including its enhanced
coverage[.]”
Plaintiff brought an action for breach of contract
against defendant, based on its failure to pay the extended
dwelling coverage. Defendant responded with a counter-
claim for breach of contract, alleging that plaintiff had
Cite as 360 Or 638 (2016) 641
misrepresented the value of various fixtures that had been
destroyed in the fire. Defendant asserted that, under the
terms of the underlying policy of insurance, the policy is
void if the insured willfully conceals or misrepresents facts
material to the insurance and the insurer relies on those
misrepresentations.
After a lengthy and complicated trial, the jury
returned a special verdict finding for plaintiff on his breach
of contract claim and assessing damages in the amount of
the limits of the extended dwelling coverage. The jury also
found for defendant on the counterclaim, however.
The trial court declined to enter a judgment award-
ing plaintiff any damages. The court concluded that, in light
of the jury’s findings on the counterclaim, the insurance pol-
icy had been voided, and as a result, it was defendant who
was entitled to a judgment for all payments that it had made
under the policy up to that time.
Plaintiff appealed. The Court of Appeals concluded
that the trial court had erred in even sending the counter-
claim to the jury because there was no evidence that defen-
dant had reasonably relied on any misrepresentations by
plaintiff. Masood v. Safeco Ins. Co. of Oregon, 275 Or App 315,
365 P3d 540 (2015). In consequence, the court concluded,
there was no basis for voiding the policy and failing to enter
judgment for plaintiff in the full amount of the extended
dwelling coverage. The court reversed the judgment in
defendant’s favor on the counterclaim and remanded the
case to the trial court with instructions to enter judgment
for plaintiff in the amount of the jury’s award.
Defendant petitioned this court for review, and
plaintiff filed a response to that petition. We ultimately
denied defendant’s petition. Masood v. Safeco Ins. Co. of
Oregon, 359 Or 525, 379 P3d 515 (2016). Plaintiff now seeks
an award of $30,771 in attorney fees incurred before this
court, consisting of $24,501.50 for fees in responding to
defendant’s petition for review and $6,269.50 for fees in pre-
paring the petition for attorney fees. He contends that, given
the Court of Appeals’ decision, he is the prevailing party on
appeal and is entitled to fees under ORS 742.061. He asserts
that he satisfied all the requirements for an award of fees
642 Masood v. Safeco Ins. Co. of Oregon
under that statute. Specifically, he contends that he pre-
vailed on his action on the policy and, in addition, prevailed
on defendant’s counterclaim.
Defendant objects to an award of fees under ORS
742.061(1). First, defendant asserts that plaintiff did not
prevail in an action on the policy, as the statute requires.
Defendant argues that plaintiff’s action was for breach of
a new, separate oral agreement with its large-loss adjuster,
not on the policy itself. Second, defendant argues that plain-
tiff’s “alternate theory” that he is entitled to fees based on
his success in defeating defendant’s counterclaim likewise is
insufficient to justify an award of fees under ORS 742.061(1).
In defendant’s view, in defeating that counterclaim, plaintiff
failed to “recover” anything, as the statute requires.
We begin with the parties’ contentions about
whether plaintiff prevailed in an action “upon [a] policy of
insurance,” because it is dispositive. ORS 742.061(1) pro-
vides that, subject to exceptions not pertinent to this case, if
a plaintiff files a proof of loss with an insurer and settlement
is not made within six months, the plaintiff is entitled to an
award of attorney fees if the plaintiff brings an action “in
any court of this state upon any policy of insurance of any
kind or nature,” and the plaintiff’s recovery in that action
exceeds the amount of any tender that the defendant made
in that action. In this case, there is no dispute that plaintiff
filed a proof of loss, and no settlement occurred within six
months. Likewise, there is no dispute that the total amount
that plaintiff recovered exceeds any amount that defendant
may have tendered in this case. The issue is whether plain-
tiff’s subsequent action was one “upon [a] policy of insur-
ance” within the meaning of the statute.
This court’s decision in Travelers Insurance Co. v.
Plummer, 278 Or 387, 563 P2d 1218 (1977), is instructive
on that issue. In that case, the Plummers were involved
in an automobile accident. Travelers, their insurer, paid
them under their policy, in return for a “loan receipt” that
required them to pursue claims against any third persons
liable for their loss and to repay Travelers if they recovered
their damages. The Plummers then initiated a successful
action against the third party who had caused the accident.
Cite as 360 Or 638 (2016) 643
They tendered their recovery to Travelers, but deducted
from that recovery one-third as the fee for the attorney who
represented them in that action. Travelers objected to the
deduction and initiated an action to require the Plummers
to return the full amount of their recovery from the third
party. The Plummers ultimately prevailed, and the trial
court awarded attorney fees under the predecessor stat-
ute to ORS 742.061(1). Travelers appealed the attorney fee
award, arguing that the Plummers had not recovered in an
action “upon any policy of insurance” within the meaning
of that statute. According to Travelers, the action had been
based on the separate loan receipt, not the policy of insur-
ance. Id. at 389-92.
This court rejected Travelers’ argument. “The deci-
sive question,” the court explained, “is the source of the
insured’s claim.” Id. at 392. In that case, the source of the
insured’s claim was “the insurance policy, as it would be if
the company had never advanced the money and thereafter
demanded its return.” Id.; see also Williams v. Stockman’s
Life Ins., 250 Or 160, 172, 441 P2d 608 (1968) (insured was
entitled to attorney fees under predecessor to ORS 742.061
after prevailing in action with “declaratory judgment over-
tones,” because the “essential nature” of the action was to
recover under the insurance policy).
The determinative question is thus the source of the
insured’s claim. In this case, the source of plaintiff’s claim
for extended dwelling coverage unmistakably is the policy
of insurance that plaintiff purchased from defendant. No
doubt, there was a separate oral agreement between plain-
tiff and defendant’s large-loss adjuster. But the very terms
of that oral agreement referred to, incorporated, and were
predicated on the underlying policy. The subject of that
agreement was the policy, and the agreement cannot fairly
be understood without reference to that policy. It was that
defendant would pay to plaintiff “the full replacement cost
of [plaintiff’s] Home up to the express limits of The Policy,
including its enhanced coverage.” (Emphasis added.)
That plaintiff’s was an action “upon [a] policy of
insurance” is further demonstrated by defendant’s own
counterclaim. As we have noted, defendant asserted that,
644 Masood v. Safeco Ins. Co. of Oregon
under its policy of insurance, plaintiff could recover noth-
ing because plaintiff had concealed or misrepresented facts
material to determining coverage under that policy. Thus,
defendant invoked the very policy it now contends was not
at issue as the basis for its contention that plaintiff was
not entitled to recover the extended dwelling coverage.
Logically, the defense could apply only to the extent that
an insured otherwise is entitled to coverage under the pol-
icy. See American Federal Savings v. Rice, 76 Or App 635,
641, 711 P2d 150 (1985) (“[A] finding of coverage necessarily
must precede a finding that the coverage is voided [because
of fraud or misrepresentation].”).
Because we conclude that plaintiff’s action was
“upon [a] policy of insurance” within the meaning of ORS
742.061(1), we need not address whether defendant is cor-
rect about the insufficiency of plaintiff’s “alternative” the-
ory of recovery under the statute, based on his defeat of the
counterclaim. Defendant advances no other objection to the
requested award of fees.
The petition for attorney fees is allowed. Respondent
on review is awarded $30,771 as attorney fees on review.
The award is effective upon the circuit court’s entry of judg-
ment on remand from the Court of Appeals.