Twigg v. Admiral Ins. Co. , 324 Or. App. 259 ( 2023 )

259
Argued and submitted April 19, 2022, affirmed February 15, petition for review
allowed July 20, 2023 (371 Or 308)
See later issue Oregon Reports
Weston TWIGG,
an individual, and
Carrie Twigg, an individual,
Plaintiffs-Appellants,
v.
ADMIRAL INSURANCE COMPANY,
a Delaware company,
Defendant-Respondent.
ADMIRAL INSURANCE COMPANY,
Third-Party Plaintiff,
v.
RAINIER PACIFIC DEVELOPMENT LLC,
an Oregon limited liability company,
Third-Party Defendant.
Multnomah County Circuit Court
19CV36547; A175084
525 P3d 478
This appeal concerns whether an insurance company, defendant Admiral
Insurance Company (Admiral), had a duty to indemnify its insured, Rainier
Pacific Development LLC (Rainier Pacific), and pay a portion of an arbitra-
tion award that plaintiffs Weston and Carrie Twigg (the Twiggs) had obtained
against Rainier Pacific on a breach of contract claim. After the Twiggs obtained
the arbitration award, they sued Admiral in court for breaching its insurance
policy with Rainier Pacific and failing to pay a portion of Rainier Pacific’s liabil-
ity to the Twiggs. That policy provided coverage for “property damage” caused by
an “occurrence” or “accident.” Following cross-motions for summary judgment by
Admiral and the Twiggs, the trial court concluded that the applicable insurance
policy did not provide coverage for Rainier Pacific’s liability to the Twiggs and
granted Admiral’s motion and denied the Twiggs’ cross-motion. The Twiggs now
appeal. Held: The Court of Appeals concluded that the trial court did not err in
granting Admiral’s motion and denying the Twiggs’ motion. An insurer’s duty
to indemnify for an insured’s liability in a prior legal proceeding is based on the
nature of the insured’s liability in the underlying legal action. Here, the Twiggs’
arbitration claim was a claim for breach of contract, and they never contended
that Rainier Pacific’s liability arose from a breach of a separate duty of care.
Thus, the liability here arose solely from breach of a contractual duty, which is
not liability arising from an accident.
Affirmed.
260 Twigg v. Admiral Ins. Co.
Stephen K. Bushong, Judge.
Emily Sarah Miller argued the cause and filed the briefs
for appellants. Also on the briefs was Miller Insurance Law
LLC.
Jacqueline Tokiko Mitchson argued the cause for respon-
dent. On the brief were R. Daniel Lindahl, John A. Bennett,
Richard L. Williams, and Bullivant Houser Bailey PC.
Before Shorr, Presiding Judge, and Mooney, Judge, and
Pagán, Judge.
SHORR, P. J.
Affirmed.
Cite as 324 Or App 259 (2023) 261
SHORR, P. J.
This appeal concerns whether an insurance com-
pany, defendant Admiral Insurance Company (Admiral), had
a duty to indemnify its insured, Rainier Pacific Development
LLC (Rainier Pacific), and pay a portion of an arbitration
award that plaintiffs Weston and Carrie Twigg (the Twiggs)
had obtained against Rainier Pacific on a breach of contract
claim. After the Twiggs obtained the arbitration award,
they sued Admiral in court for breaching its insurance
policy with Rainier Pacific and failing to pay a portion of
Rainier Pacific’s liability to the Twiggs under the arbitra-
tion award. Following cross-motions for summary judgment
by Admiral and the Twiggs, the trial court concluded that
the applicable insurance policy did not provide coverage
for Rainier Pacific’s liability to the Twiggs. The court con-
cluded that Admiral’s insurance policy with Rainier Pacific
applied to property damage caused by an “occurrence,”
meaning an “accident” caused by Rainier Pacific, but that
Rainier Pacific’s liability to the Twiggs in the arbitration
proceeding arose instead from its breach of an agreement
with the Twiggs. The court, therefore, granted Admiral’s
motion for summary judgment and dismissed the Twiggs’
claim against Admiral for breaching the insurance policy
and failing to provide coverage.
The Twiggs now appeal from the general judgment
of dismissal that dismissed their claim against Admiral
for breach of an insurance policy agreement. The Twiggs
assign error to the grant of Admiral’s motion for summary
judgment and the denial of their cross motion for summary
judgment.1 For the reasons explained below, we conclude
that the trial court did not err in granting Admiral’s motion
and denying the Twiggs’ motion. We therefore affirm the
trial court’s judgment dismissing the Twiggs’ breach of con-
tract claim.
1
There is a general rule that may limit our review of an order denying a
motion for summary judgment. We do not repeat that rule or its exceptions here.
We merely note that, as is the case here, “[i]n an appeal from a judgment that
results from cross-motions for summary judgment, if both the granting of one
motion and the denial of the other are assigned as error, then both are subject to
review.” Eden Gate, Inc. v. D&L Excavating & Trucking, Inc., 178 Or App 610, 622,
37 P3d 233 (2002).
262 Twigg v. Admiral Ins. Co.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. The Factual Background from the Summary Judgment
Record
“On review of cross-motions for summary judgment,
we view the record for each motion in the light most favor-
able to the party opposing it to determine whether there is
a genuine issue of material fact and, if not, whether either
party is entitled to judgment as a matter of law.” O’Kain v.
Landress, 299 Or App 417, 419, 450 P3d 508 (2019). “A mate-
rial fact is one that, under applicable law, might affect the
outcome of a case.” Zygar v. Johnson, 169 Or App 638, 646,
10 P3d 326 (2000), rev den, 331 Or 584 (2001). We state the
facts consistently with that standard.
The summary judgment record in support of both
Admiral’s and the Twiggs’ motions primarily consisted of
two items: (1) key portions of the record from the arbitration
dispute between the Twiggs and their construction contrac-
tor Rainier Pacific and (2) the applicable insurance policy
between Admiral and its insured Rainier Pacific. We begin
with the relevant arbitration proceeding.
1. The arbitration proceeding
We summarize the key allegations and facts from
the arbitration proceeding between the Twiggs and Rainier
Pacific. The genesis of the dispute occurred in February 2011
when the Twiggs hired Rainier Pacific to construct a new
home on a buildable lot that they had purchased. The con-
struction process was not completed within the agreed-upon
time. Both during the construction process and after they
moved into their home, the Twiggs alerted Rainier Pacific
to a number of construction problems and deviations from
the construction plans. Among the many issues they raised,
the Twiggs complained that the garage floor was sloped and
cracked. The Twiggs spent considerable time negotiating
with Rainier Pacific to complete or redo several aspects of
the construction. Ultimately unsatisfied due to the lack of
progress, the Twiggs hired an attorney to pursue a claim
against Rainier Pacific.
The Twiggs first filed an arbitration claim against
Rainier Pacific in June 2015 (the first arbitration). That first
Cite as 324 Or App 259 (2023) 263
arbitration predated the arbitration proceeding that under-
lies the insurance coverage claim at issue here. In the first
arbitration, the Twiggs alleged that Rainier Pacific had not
constructed the home in accordance with the approved plans
and specifications. Among other things, the Twiggs alleged
that there was “[i]improper reverse sloping of the garage floor
over [the] living space, which has resulted in standing water
and leaks to the interior of the home.” The first arbitration
claim did not proceed to a hearing but rather was settled
in September 2017 by an agreement between the Twiggs
and Rainier Pacific known as the “Repair Agreement.” That
agreement is central to this insurance coverage dispute.
The Repair Agreement required Rainier Pacific to
make a number of repairs, including correcting the slope and
drainage issues of the garage floor. The Repair Agreement
required that repairs be completed by mid-December 2017.
It also provided for a number of stipulated remedies in the
event of noncompliance with the agreement. The agreement
provided that disputes would be arbitrated before a desig-
nated arbitrator.
In May 2018, the Twiggs, having concluded that
the repair work was still not completed, filed the arbitration
claim against Rainier Pacific that underlies the insurance
coverage dispute before us. The arbitration claim, as is typ-
ical of the more informal arbitration process, does not set
forth numbered allegations or labelled claims. The claim is
set out in a letter to the arbitrator, which, as a whole, alleges
that Rainier Pacific failed to perform its obligations under
the Repair Agreement with respect to a number of items in
the home, including the garage floor. The letter commences
with the contention that the dispute “follows breach of a
repair-based Settlement Agreement,” which agreement was
attached as the first exhibit. Among other allegations, the
Twiggs alleged that, although Rainier Pacific had attempted
to correct the slope in the garage by installing a “concrete
overlay,” the slope had not been corrected. They further
alleged that, “[m]oreover, [Rainier Pacific] failed to carry
the slab’s control joints up through the lightweight concrete
pour, which is required by the manufacturer[,] [ARDEX].”
They contended that, as a result, the sloped garage floor
still created water issues for the house. The Twiggs sought
264 Twigg v. Admiral Ins. Co.
remedies under the Repair Agreement, including the cost
for another contractor to complete the repairs, liquidated
damages, and attorney fees. Rainier Pacific understood the
claim to be based on breach of the settlement agreement;
in its answer, it noted that it was answering the Twiggs’
allegations regarding Rainier Pacific’s breach of the Repair
Agreement.
In the arbitration, the Twiggs presented an expert
report that criticized Rainier Pacific’s installation of the
ARDEX concrete flooring product that had been intended
to level the garage floor. The expert report noted that, con-
trary to the manufacturer’s specification that required all
construction joints to be carried through the floor, “[n]one
of the construction joints have been carried through.” The
Twiggs submitted an exhibit with photos of cracking and
other issues in the garage floor. They also raised issues as to
several other defects in their home that Rainier Pacific had
failed to repair.
In October 2018, the arbitrator issued a decision.
The arbitrator first noted that the Twiggs “asserted a claim
for breach of a settlement agreement.” The arbitrator iden-
tified the Repair Agreement as “the operative contract for
this matter” and noted that the agreement had resolved
the Twiggs’ claims for defective construction that had been
alleged in the first arbitration. The arbitrator concluded
that, with the exception of the garage floor, Rainier Pacific
had “almost entirely failed to perform or complete any of”
the items in the Repair Agreement.
As to the garage floor, the arbitrator concluded that
the floor repairs had been completed, but that the installa-
tion was “defective” and contrary to the manufacturer’s spec-
ifications. The arbitrator later noted that there was evidence
that the cost to repair the garage floor was $150,000, which
“figure may serve as a starting point for the determination
of damages.” The arbitrator concluded that Rainier Pacific,
“through its consistent failure to diligently prosecute the
work, and through its defective efforts to repair the garage
slab, materially and substantially breached the [Repair]
Agreement.” The arbitrator then awarded $604,594.80,
which was based on evidence of an estimate for the total cost
Cite as 324 Or App 259 (2023) 265
of repairs for all of the items that Rainier Pacific had not
repaired, including the garage floor. The arbitrator finally
concluded that the Twiggs’ “relief is based upon common-law
principles of breach of contract.” In January 2019, the trial
court entered a judgment on the arbitration award against
Rainer Pacific for $604,594.80.
2. The relevant insurance policy
The Twiggs contend that Rainier Pacific tendered
the arbitration claim to that company’s insurer, Admiral,
but that Admiral denied coverage. The Twiggs initially
alleged that Admiral was responsible for providing cover-
age for a “large portion” of the $604,594.80 in damages that
Rainier Pacific had caused to the Twiggs’ property through
negligent repair work. When they moved for summary judg-
ment, however, the Twiggs contended that Admiral was
contractually obligated to cover $150,000, an amount they
maintained represented “accidental property damage to the
new garage floor.” In its answer, Admiral admitted that it
had received a tender of the claim from Rainier Pacific but
denied that it was obligated to cover the claim.
We turn to the relevant insurance policy that
Admiral issued to Rainier Pacific. The applicable “commer-
cial general liability coverage” policy was effective as of
August 9, 2017. The relevant “Coverage A” section of the pol-
icy covering bodily injury and property damage liability pro-
vides that it covers “ ‘property damage’ only if: (1) [t]he * * *
‘property damage’ is caused by an ‘occurrence’.” Property
damage is defined to include “[p]hysical injury to tangible
property.” Central to this dispute, an occurrence is defined
as “an accident, including continuous or repeated exposure
to substantially the same general harmful conditions.”
The Twiggs note that there is a separate “Coverage
B” section for “personal and advertising liability” coverage
that generally excludes liability “arising out of a breach of
contract.” That type of breach-of-contract exclusion does
not appear in the relevant Coverage A section. The Twiggs
further observe that the policy includes an endorsement
excluding residential construction activities, but that exclu-
sion “does not apply to repair or remodeling of single-family
266 Twigg v. Admiral Ins. Co.
dwellings which were or are certified for occupancy prior
to commencement of such repair or remodeling work per-
formed by you or on your behalf.”
Two other exclusions are relevant to this appeal.
First, the policy contains an endorsement excluding pre-
existing damages, which include “[a]ny damages arising
out of or related to * * * ‘property damage’ * * * which first
occurred prior to the inception date of this policy” and “[a]ny
damages arising out of or related to * * * ‘property damage’
* * * which are in the process of settlement, adjudgment or
‘suit’ as of the inception date of this policy.” Additionally,
Coverage A lists two exclusions at sections “j(5)” and “j(6)”
that provide that the insurance does not apply to
“j. Damage To Property
“ ‘Property damage’ to:
“* * * * *
“(5) That particular part of real property on which you
or any contractors or subcontractors working directly or
indirectly on your behalf are performing operations, if the
‘property damage’ arises out of those operations; or
“(6) That particular part of any property that must
be restored, repaired or replaced because ‘your work’ was
incorrectly performed on it.”2
B. The Parties’ Cross-Motions for Summary Judgment and
the Trial Court’s Ruling
As noted, the Twiggs contended in the trial court
that Admiral had a duty under the applicable insurance
policy to provide coverage for the damage to their garage
floor caused by Rainier Pacific’s negligent repair work. The
Twiggs alleged a breach of contract claim, contending that
Admiral had breached its duties under the applicable insur-
ance policy to provide coverage for its insured. Admiral
2
There are further definitions and limitations in the policy that are relevant
to the j(5) and j(6) exclusions. However, because neither the trial court nor we
ultimately reach any issues involving those exclusions, we do not set them forth
here. Like the trial court, we also do not reach whether Rainier Pacific’s liability
is excluded from coverage under the insurance policy’s j(5), j(6), or preexisting
damage exclusions, because we conclude that there is not coverage in the first
instance.
Cite as 324 Or App 259 (2023) 267
moved for summary judgment against that claim and raised
two issues. First, it contended that the policy provided cov-
erage only for property damage caused by an “occurrence,”
defined as an accident, and that Rainier Pacific’s liability
in the arbitration arose solely from a breach of the repair
agreement. Second, it contended that the arbitration award
resulted from the original construction work done by Rainier
Pacific in 2013, which was outside the relevant policy peri-
ods and excluded under the policy’s preexisting damage
exclusion.
The Twiggs cross-moved for summary judgment in
their favor on their breach of contract claim. They argued
that Rainier Pacific’s liability arose from its negligent repair
work on their home’s garage floor, including failing to carry
through the existing joints when pouring the new ARDEX
flooring product. They contended that the defective construc-
tion work qualified as an “occurrence” or accident under the
relevant insurance policy. They further argued that the lia-
bility arose from the repair work that occurred during the
policy period and not from the original construction work.
As a result, they argued that the damage was covered by
the policy and that the pre-existing damage exclusion did
not apply.
The trial court granted Admiral’s summary judg-
ment motion and denied the Twiggs’ cross-motion for sum-
mary judgment. The court concluded that Rainier Pacific’s
liability in the arbitration arose from its breach of contrac-
tual duties and not from a covered “occurrence” or accident.
Thus, the court concluded that the damage was not covered
under the policy.
The trial court largely relied on Oak Crest Const. Co.
v. Austin Mutual Ins. Co., 329 Or 620, 998 P2d 1254 (2000),
which we discuss below. The court provided its reasoning:
“[H]aving carefully studied the Oak Crest case, in
light of the arbitration award in this case finding that
Rainier Pacific * * * had breached its contract, the repair
contract, which was a settlement agreement of the origi-
nal construction defect claim; and that that contractual
breach was based on its * * * faulty workmanship in install-
ing the repair that it had agreed to install, in my view is
268 Twigg v. Admiral Ins. Co.
indistinguishable in any material way from the shoddy
workmanship at issue in the Oak Crest case.
“And I do not see that there is a general breach of a
duty of due care that would distinguish this case from Oak
Crest. And so I’m required to follow the Oregon Supreme
Court’s ruling.
“I’m bound by that ruling until the [Supreme Court]
decide[s] that that ruling maybe is not quite as nuanced as
they had intended as a matter of insurance coverage law.
But they haven’t said that yet. Maybe they’ll get an oppor-
tunity to say that it in this case.”
Having concluded that there was no coverage in the first
instance, the trial court did not reach alternative argu-
ments Admiral raised under the policy’s j(5), j(6), and pre-
existing damage exclusions. After issuing its ruling on the
summary judgment motions, the court entered a judgment
of dismissal.
II. LEGAL ANALYSIS
We begin our analysis with the applicable legal
standard. When parties cross-move for summary judgment,
each party “has the burden of demonstrating that there are
no material issues of fact and that the movant is entitled
to judgment as a matter of law.” Eden Gate, Inc. v. D&L
Excavating & Trucking, Inc., 178 Or App 610, 622, 37 P3d
233 (2002). “There is no genuine issue of material fact if,
‘based upon the record before the court viewed in a manner
most favorable to the adverse party, no objectively reason-
able juror could return a verdict for the adverse party on the
matter that is the subject of the motion for summary judg-
ment.’ ” Smith v. Central Point Pawn, LLC, 296 Or App 341,
342, 438 P3d 436 (2019) (quoting ORCP 47 C).
As the parties have framed the coverage issue in
their briefing, this appeal does not involve an issue of dis-
puted fact but concerns a legal issue: namely, whether the
applicable Admiral insurance policy provides coverage for
the legal liability incurred by Rainier Pacific in the under-
lying arbitration proceeding. We agree that, at least here,
that is a legal issue. See FountainCourt Homeowners v.
FountainCourt Develop., 360 Or 341, 357-58, 380 P3d 916
Cite as 324 Or App 259 (2023) 269
(2016) (stating that whether an insurer is obligated under
a policy to cover its insured’s liability arising from litiga-
tion generally presents “questions of law” that are deter-
mined “by reference to (a) the contract [or the policy] and
(b) the judgment and record in the underlying proceeding,”
although there may be fact issues relating to coverage exclu-
sions developed in the subsequent coverage litigation). The
insured—or here, the Twiggs, standing in for the insured
Rainier Pacific—bears the burden to prove coverage, and
the insurer, Admiral, bears the burden to prove exclu-
sions from coverage. Id. at 360. Under this policy, a covered
“occurrence” is a prerequisite to coverage and, therefore, the
Twiggs bore the burden in the trial court to prove a cov-
ered occurrence. See id. (noting “no ambiguity” that prov-
ing an occurrence under the relevant policy “relate[d] to
coverage”).
When interpreting insurance policies, Oregon
courts “determine the intention of the parties based on
the terms and conditions of the insurance policy.” Hoffman
Construction Co. v. Fred S. James & Co., 313 Or 464, 469,
836 P2d 703 (1992). We interpret the policy “from the per-
spective of an ordinary purchaser of insurance.” Bighorn
Logging Corp. v. Truck Ins. Exchange, 295 Or App 819, 828,
437 P3d 287, rev den, 365 Or 195 (2019) (internal quotation
marks omitted). For defined terms in the policy, we look
to the policy’s definitions. Id. at 829. Undefined terms are
interpreted according to their plain meaning. Id. If there is
more than one plausible interpretation of an undefined term,
“we examine the word or phrase in the context in which it
is used in the policy and the broader context of the policy
as a whole.” Id. If ambiguity or reasonable doubt remains
regarding the meaning of a policy word or phrase in the con-
text of the entire policy, that doubt is resolved against the
drafter, the insurance company, and in favor of the insured.
Id.
The Twiggs contend that Admiral’s insurance pol-
icy’s definition of “occurrence,” which is defined as “an acci-
dent,” can reasonably be understood by an insured to cover
damage caused by “mistakes” in work performed pursu-
ant to a repair contract. They contend that that holds true
270 Twigg v. Admiral Ins. Co.
“irrespective of whether the liability is stated in terms of
contract damages, negligence damages, both, or another
form of damages.”
As explained below, we disagree with that conten-
tion, in the context of this case, because the issue of cover-
age necessarily depends on the nature of the insured’s lia-
bility in the prior litigation, or here, arbitration. As noted
above, the policy provides that it covers “ ‘property damage’
only if” the “ ‘property damage’ is caused by an ‘occurrence.’ ”
Property damage is defined to include “physical injury to
tangible property,” and an occurrence is defined as “an acci-
dent, including continuous or repeated exposure to substan-
tially the same general harmful conditions.”
There is no doubt that a repair contractor’s negligent
work that accidentally caused damage to physical property
could give rise to an occurrence under the policy, namely
“an accident, including continuous or repeated exposure to
substantially the same general harmful conditions.” See,
e.g., FountainCourt Homeowners, 360 Or at 348, 361-65 (con-
cluding that a jury’s finding that an insured subcontractor
negligently damaged physical property gave rise to coverage
under a policy that required proof of an “occurrence,” which
was also defined as “an accident, including continuous or
repeated exposure to substantially the same general harm-
ful conditions”); cf. Kisle v. St. Paul Fire & Marine Ins., 262
Or 1, 6, 495 P2d 1198 (1972) (concluding that the term “acci-
dent” “has a tortious connotation” such that “[d]amage solely
caused by failure to perform a contract is not recoverable
in tort” (emphasis added)). But an insurer’s duty to indem-
nify for an insured’s liability in a prior legal proceeding is
based on the nature of the insured’s liability in the underly-
ing legal action. “In order for the duty to indemnify to arise,
the insured must be liable for harm or injury that is cov-
ered by the policy.” Ledford v. Gutoski, 319 Or 397, 405, 877
P2d 80 (1994). “[T]he 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. at 403. The duty to indem-
nify is independent of the duty to defend, which may arise
merely if the underlying complaint could “impose liability
for conduct covered by the policy” or the “complaint provides
any basis for which the insurer provides coverage.” Id. at
Cite as 324 Or App 259 (2023) 271
400 (emphasis in original). The duty to indemnify following
a legal determination of the insured’s liability is different.
As the Supreme Court has explained:
“What the insured is legally obligated to pay as damages
can be determined only by reference to the underlying
action, which determined the insured’s legal obligation to
pay damages. Thus, in the subsequent proceeding, [a party]
is not * * * entitled to second-guess or retry ‘the nature of
[the insured’s] liability.’ ”
FountainCourt Homeowners, 360 Or at 357 (emphasis in
original).
The court continued:
“[T]he subsequent proceeding requires the court to eval-
uate—as a matter of contract law—what, precisely, the
insured has become legally obligated to pay as damages
in the prior proceeding, in order to determine whether the
policy covers those damages. In other words, [a party] can-
not, in a subsequent proceeding, retry [the] insured’s lia-
bility, or alter the nature of the damages awarded in that
proceeding.”
Id. With that in mind, we turn to the nature of the insured
Rainier Pacific’s liability and damages that arose in the
prior legal proceeding.
As we noted at the outset, the Twiggs’ arbitration
claim was presented as a claim for breach of contract. It was
defended by Rainier Pacific as a breach of contract claim.
And, significantly, the arbitrator understood it to be a breach
of contract claim. It concluded that Rainier Pacific, “through
its consistent failure to diligently prosecute the work, and
through its defective efforts to repair the garage slab, mate-
rially and substantially breached the [Repair] Agreement.”
It is true that the Twiggs presented issues regarding
Rainier Pacific’s negligence in its original construction work
as context for the claim, and further presented allegations
regarding Rainier Pacific’s subsequent defective repair
work done pursuant to the Repair Agreement. However,
those allegations sought to prove the sole breach-of-contract
claim, and the arbitrator ultimately agreed that Rainier
Pacific breached its contractual duties under the Repair
272 Twigg v. Admiral Ins. Co.
Agreement. Indeed, the Twiggs acknowledge in their brief-
ing before us that they “had pled a single contract claim for
the purpose of invoking the Repair Contract’s ‘Stipulated
Remedies’ provision.”
Liability for damages arising from breach of a
contract is not covered under the insurance policy. As dis-
cussed, the insurance policy covers property damage caused
by an “occurrence,” which is defined as “an accident, includ-
ing continuous or repeated exposure to substantially the
same general harmful conditions.” The liability here arises
solely from breach of a contractual duty, which is not liabil-
ity arising from an accident. Of course, liability could arise
from both breach of a contractual duty and breach of an
independent duty of care not to tortiously damage property.
But, as the trial court concluded, the Supreme Court’s deci-
sion in Oak Crest Const. Co. guides the resolution of that
problem. In that case, the plaintiff was a contractor who
had agreed to provide a custom home, including cabinets
and other woodwork, to homeowners. 329 Or at 622-23. The
plaintiff had hired a subcontractor to paint the cabinets and
woodwork, but the paint had not cured properly. Id. at 624.
As a result, the plaintiff spent $10,000 stripping and refin-
ishing the cabinets and woodwork. Id. The plaintiff sued its
insurer, which had provided the plaintiff with a commercial
liability policy, seeking to require the insurer to cover the
$10,000 expense under the policy. Id. at 622-23. That policy,
like the one at issue here, provided that the insurer would
cover property damage caused by an occurrence, which
was nearly identically defined as “an accident and includes
repeated exposure to similar conditions.” Id. at 622. The
Supreme Court held that the plaintiff’s damages were not
covered under the policy, because they arose from the plain-
tiff’s contractual duty to the homeowners, and there was no
evidence in the record to support that they were caused by
an “accident” or the subcontractor’s breach of a duty of care.
Id. at 624, 628-29. “This court has indicated that there can
be no ‘accident,’ within the meaning of a commercial liabil-
ity policy, when the resulting damage is merely a breach of
contract.” Id. at 626. Considering the indistinguishable cir-
cumstances presented in this case, we agree with the trial
court that Admiral was entitled to summary judgment as a
Cite as 324 Or App 259 (2023) 273
matter of law because Rainier Pacific’s liability in the arbi-
tration was based solely on the breach of a contractual duty
and not the result of an accident.
Oak Crest Const. Co. clearly acknowledges that lia-
bility in some cases involving a contract may arise under
both contract and tort theories, which could give rise to cov-
erage under a policy covering property damage arising from
an accident. Id. at 627-28. For instance, there may be cover-
age where the insured’s liability arose from an independent
breach of the duty of care. Id. at 629; see also Abraham v.
T. Henry Construction, Inc., 350 Or 29, 40, 249 P3d 534 (2011)
(concluding that a party to a contract may bring a claim in
negligence for property damage if the claim is cognizable
in the absence of a contract and the contract’s terms do not
supplant the common law duty of care or otherwise limit the
right to such a claim). Here, however, although the Twiggs’
arbitration claim raised issues regarding Rainier Pacific’s
defective construction in making repairs under the Repair
Agreement, they never contended that Rainier Pacific’s lia-
bility arose from a breach of a separate duty of care. Rather,
the arbitration claim alleged that Rainier Pacific’s liability
arose solely from breach of its contractual duties.
Finally, the Twiggs contend that reliance on Oak
Crest Const. Co. is misplaced here because the interpretation
of this insurance policy depends on its particular text and
the common understanding of its terms to an ordinary pur-
chaser of insurance. See Botts v. Hartford Acc. & Indem. Co.,
284 Or 95, 101, 585 P2d 657 (1978) (stating that, in interpret-
ing insurance policies, the court is “guided by the principle
that it is the common understanding of the term which must
be used and not its technical meanings”). But our opinion is
based on consideration of the policy’s defined and undefined
terms, namely, that liability resulting from a contract claim
is not property damage caused by an “occurrence,” defined
in the policy as an “accident.” We have reviewed the policy,
and nothing in the text of the relevant coverage provisions
or those provisions in the context of the entire policy could
reasonably be understood to provide for coverage of Rainier
Pacific’s liability that arose solely from its breach of its con-
tractual duties under the Repair Agreement. As a result,
274 Twigg v. Admiral Ins. Co.
the trial court did not err in granting Admiral’s motion for
summary judgment and denying the Twiggs’ cross-motion
for summary judgment after concluding that the insurance
policy did not cover Rainier Pacific’s liability for contract
damages resulting from the arbitration claim.
Affirmed.