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By Andrew Tull,
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Inside
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LEGISLATION • GOVERNMENT RELATIONS • POLITICS •
MArCh, 2013
• PAGE 9
HBA
News
HOME BUILDING
HBA
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PROTECTING
Oregon Update
Keep up to date with the Legislature, get
Jon’s report from IBS, plus other news
from the OHBA.
—See page 10
CEO Summary from IBS & NAHB
A brief overview of national housing projec-
tions, building materials updates, green build-
ing marketing, codes advocacy and more.
—See page 10
For those following the recent
trio of lawsuits filed against the
Land Conservation and Develop-
ment Commission for their review
of the most recent Urban Growth
Boundary Expansion, you’ll note
that LCDC’s decision, although a
major milestone in the process,
served to open the door to the ju-
dicial review phase of the UGB ex-
pansion process. One of the main
points called upon by the series
of appeals refers to Metro’s Ca-
pacity Ordinance and whether or
not population and employment
growth was adequately calculated
as part of the last Urban Growth
Boundary Expansion decision.
While the debate about the last
decision rages on, the discussion
about how to calculate capacity
for the next round of expansion
and efficiency discussions have
also quietly started.
Metro is now in the midst of
starting to prepare the initial set
of density calculations which will
pave the way for the release of
the 2014 Urban Growth Report.
The 2014 Urban Growth Report
will assess the Urban Growth
Boundary’s capacity to accommo-
date residential and employment
growth through the year 2035 and
will be the basis for many growth
management decisions in 2015 in-
cluding, any future urban growth
boundary expansions or efficiency
measures to address identified ca-
pacity gaps.
During each review period,
Metro typically forms a Technical
Advisory Group made up of public
sector planners as well as private
sector representatives and pro-
fessionals with residential, com-
mercial, and industrial develop-
ment experience. In addition to
the handful of planning directors,
builders, and realtors, this year’s
Technical Advisory Group has two
members from the Home Builder’s
Political Action and Government
Affairs Committee, both myself
and Jeff Bachrach.
To have been provided two
seats at the Group’s table during
these early stages of discussions
is a testament to the influence the
Portland Home Builder’s Political
Action and Government Affairs
Committees are current wielding
throughout the region. This is also
a statement about how important
we recognize it is to engage early
in the process. With involvement
at the earliest stages, we’re able
to ensure the preliminary deci-
By William R. Joseph,
Dunn Carney Allen Higgins & Tongue, LLP,
HBA Associate Director
Insurers are reminded to stay within
the eight corners of the complaint and
insurance policy when determining
coverage and to read both broadly in
favor of the insured
In
Bresee Homes, Inc. v. Farmers Insurance Ex-
change
, 353 Or 112 (2012)
(www.publications.
ojd.state.or.us/docs/S057573.pdf)
, the Oregon
Supreme Court reminded insurers that they
cannot look outside of the so-called “eight
corners” of the complaint and insurance policy
when determining whether a particular claim
is covered, and that they need to read both
broadly in favor of a finding of coverage.
There, homebuilder Bresee Homes pur-
chased liability insurance from Farmers Insur-
ance in 1999 that excluded so-called “complet-
ed operations” (this was prior to the CCB’s 2008
rule requiring such coverage). Bresee Homes
was ultimately sued by a homeowner over al-
legedly defective EIFS siding installation and
tendered the claim to Farmers Insurance, re-
questing a defense. Farmers Insurance denied
coverage based on the “product-completed”
exclusion. Bresee Homes filed a declaratory
judgment action, alleging that Farmers Insur-
ance breached the insurance contract by fail-
ing to defend against the claim. The trial court
granted Farmers Insurance’s motion for sum-
mary judgment and Bresee Homes appealed.
The Supreme Court reversed, finding that
Farmers Insurance erred in its coverage analy-
sis in three respects. First, it read the complaint
too narrowly in determining the complaint did
not allege any damages occurred during the
performance of the work. Rather, the court
found a broad reading of the complaint was
appropriate and, under such a reading, the
complaint could be interpreted as alleging at
least some of the damages occurred during
the work. Second, it inappropriately looked
beyond the allegations in the complaint to
the facts of the claim itself in support of its
narrow reading that the complaint. The court
reaffirmed that coverage is to be determined
within the so-called “eight corners” of the
complaint and insurance policy, when the al-
legations in the complaint are compared to
the coverage under the insurance policy, with
any ambiguities being interpreted broadly in
favor of a finding of coverage. Here, not only
did Farmers Insurance look beyond these
eight corners, but it also read both documents
too narrowly. Third, the court rejected Farmers
Insurance’s argument that, where coverage is
indeterminate, the burden is on the insured to
establish there is coverage. The court said the
burden is on the insurer to establish there is
no coverage. HBA participated in the appeal
by assisting in the filing of an amicus brief con-
tradicting Farmers Insurance’s position.
The dangers of allowing your contractor’s
license to lapse (and of tinkering with
statutory language)
In
Pincetich v. Nolan
, 252 Or App 42 (2012)
(http://www.publications.ojd.state.or.us/docs/
A144751.pdf), the Oregon Court of Appeals
ruled that the unintended consequences of
amendments sought by the Oregon Construc-
tion Contractors Board (“CCB”) to the rules
governing contractors are that unlicensed
contracts may now be able to sue for the costs
of unpaid work performed without a license.
In
Pincetich
, the court ruled that the tempo-
rary suspension of a construction contractor’s
CCB license during a project bars the contrac-
tor from commencing a lawsuit seeking com-
pensation for the work performed. The No-
lans contracted Pincetich to build their home.
Pincetich’s liability insurance lapsed during
the project and, as a result, the CCB suspend-
ed Pincetich’s contractor’s license. Just 14 days
later, Pincetich obtained replacement insur-
ance and his license was reinstated. However,
Pincetich continued performing work during
the insurance lapse and for approximately six
months thereafter once his license was re-
instated. When a subsequent dispute arose
between the Nolans and Pincetich wherein
Pincetich claimed the Nolans failed to pay
him in full, Pincetich filed suit to recover the
alleged underpayment.
The Nolans moved to dismiss Pincetich’s suit
under ORS 701.131, on the basis that the brief
suspension of Pincetech’s license barred him
frompursuing the claim. The trial court agreed
and dismissed the suit. Pincetich appealed and
the Court of Appeals held that the fact that
Pincetich was not continuously licensed dur-
ing the project barred his suit for compensa-
tion.
As such, the
Pincetich
decision provides a
warning to contractors to maintain their li-
censes continuously during their projects if
they want to be fully compensated.
A footnote in the
Pincetich
decision provides
a second warning to CCB. Specifically, the
court explained in footnote 3 that ORS 701.131
originally barred an unlicensed contractor
from commencing a “claim” in court. How-
ever, in 2007, the CCB sought amendments
to ORS 701.131, changing the word “claim” to
“court action” such that the statute now bars
an unlicensed contractor from commencing a
“court action.” While the CCB did not intend
to make any substantive changes to the law,
the court ruled this simple word substitution
did just that. By changing the language of
the statute to prohibit an unlicensed contrac-
tor from commencing a “court action” rather
than a “claim,” the court ruled the amend-
ments permit an unlicensed contractor to file
a counterclaim or third-party claim, even if
that claim seeks compensation for construc-
tion work. So, for instance, if an owner sues
an unlicensed contractor for failing to prop-
erly perform work, the unlicensed contractor
could file a counterclaim for payment for the
work performed without a license.
We will be watching to see whether the CCB
addresses this loophole during the 2013 legis-
lative session.
Insurers are reminded that they, and
not their insureds, bear the burden of
disproving coverage
In
Fountaincourt Homeowners’ Assoc. v. Foun-
taincourt Development, LLC
, Or App (2012),
the Oregon Court of Appeals reminded insur-
ers that they, and not their insureds, bear the
burden of disproving coverage.
In
Fountaincourt
, a condominium owner’s
association prevailed on a construction de-
fect claim against the general contractor and
a number of its subcontractors for the project.
One of the subcontractors sought coverage
from its insurer, American Family Insurance,
for its proportional share of liability. Liability
was based on proof of defects and damages
in multiple buildings built over an extended
period of time, some of which were covered
under American Insurance’s policy and oth-
ers of which were not. The jury was not asked
to apportion damages between the various
buildings and instead made a blanket judg-
ment against the subcontractor. American
Family argued it was not obligated to pay the
judgment against the subcontractor because
it could not tell what portion of the judgment
was covered and what portion was not cov-
ered. The trial court disagreed and American
Family appealed, arguing its insured subcon-
tractor bore the burden of establishing what
portion of the judgment was covered.
The Court of Appeal disagreed, ruling that
American Family was obligated to pay the
entire judgment against the subcontractor
because American Family, and not its insured
subcontractor, bore the burden of establish-
ing what portion of the judgment was cov-
ered. In support of its reasoning, the Court of
Appeal noted that Oregon followed the lead
of most other states in placing the burden on
the insurer to disprove coverage. The Court
also noted that American Family supplied the
subcontractor’s defense counsel, largely con-
trolled the litigation and could have requested
a segregated judgment had it deemed it nec-
essary.
American Family requested review from the
Oregon Court of Appeals, which was allowed.
The HBA participated in the appeal by assist-
ing in the filing of an amicus brief contradict-
ing American Family’s position. Oral argument
was held on November 20, 2012 and, to date,
the Court has not issued a ruling. Stay tuned.
As always, please feel free to contact me at
bjoseph@dunncarney.com
for more informa-
tion.
Bill Joseph is a partner at Portland law firm
Dunn Carney Allen Higgins & Tongue, LLP, and
a member of the firm’s Construction & Design
Team. His practice focuses on business litigation
and transactional law with a specific emphasis
on helping those in construction and related in-
dustries.
Legal cases affecting our industry
Recent court decisions
explore the relationship
between contractors
and insurers, as well as
contractor licensing
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