# Valdez v. Nationwide Insurance Company of America

> District Court, D. Oregon · September 30, 2022

URL: https://www.frixlaw.com/law-library/cases/10395232

## Case

- **Court:** District Court, D. Oregon
- **Decided:** September 30, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10395232

## How later opinions describe it (automated extraction)

- declining to find that a binder existed, but noting that “it is possible for a binder to be made part of an application for insurance”

## Opinion text

UNITED STATES DISTRICT COURT
DISTRICT OF OREGON
PORTLAND DIVISION

SAUL VALDEZ,

Plaintiff,
Case No. 3:20-CV-01196-YY
v.
OPINION AND ORDER
NATIONWIDE INSURANCE COMPANY
OF AMERICA,

Defendant.

YOU, Magistrate Judge.
Plaintiff Saul Valdez brings this action against defendant Nationwide Insurance Company
of America alleging a claim for breach of contract, including counts for breach of express
contract terms and implied covenant of good faith and fair dealing. First Am. Compl., ECF 21.
This court has jurisdiction pursuant to 28 U.S.C. § 1332 (diversity). Not. Removal ¶¶ 4-7, ECF
1.
Plaintiff has filed a motion for partial summary judgment, seeking dismissal of all of
defendant’s affirmative defenses. ECF 18. Defendant has filed a motion for summary judgment,
seeking dismissal of all of plaintiff’s claims. ECF 22. For the reasons explained below,
plaintiff’s motion for partial summary judgment is GRANTED IN PART as to defendant’s
fourth and fifth affirmative defenses and otherwise denied, and defendant’s motion for summary
judgment is GRANTED IN FULL.

I. Summary Judgment Standard
Under Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary judgment
if the movant shows that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” The party moving for summary judgment bears the
initial responsibility of informing the court of the basis for the motion and identifying portions of
the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate
the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). Once the moving party does so, the nonmoving party must “go beyond the pleadings”
and “designate ‘specific facts showing that there is a genuine issue for trial.’” Id. at 324 (citing
FED. R. CIV. PRO. 56(e)).

In determining what facts are material, the court considers the underlying substantive law
regarding the claims. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). Otherwise stated,
only disputes over facts that might affect the outcome of the suit preclude the entry of summary
judgment. Id. A dispute about a material fact is genuine if there is sufficient evidence for a
reasonable jury to return a verdict for the non-moving party. Id. at 248-49. A “scintilla of
evidence” or “evidence that is merely colorable or not significantly probative” is insufficient to
create a genuine issue of material fact. Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th
Cir. 2000). The court “does not weigh the evidence or determine the truth of the matter, but only
determines whether there is a genuine issue for trial.” Balint v. Carson City, Nev., 180 F.3d

1047, 1054 (9th Cir. 1999). “Reasonable doubts as to the existence of material factual issue are
resolved against the moving parties and inferences are drawn in the light most favorable to the
non-moving party.” Addisu, 198 F.3d at 1134 (citation omitted).

II. Factual Background
This action arises out of a dispute over insurance coverage. On May 15, 2020, plaintiff
called defendant, seeking to add an insurance policy to one of his properties (referred to hereafter
as “the property”). Clark Decl., Ex. A at 1, ECF 24-1. Defendant’s representative asked plaintiff
a series of questions about the property to gather information and gauge eligibility. Id. at 2-12.
After plaintiff answered those questions, the representative informed plaintiff that he would
“receive an email from [defendant] with documents” within a couple of weeks for his review and
signature. Id. at 2-13.
At some point over the next six days, defendant emailed plaintiff an application and
insurance binder for his review and signature via DocuSign. Plaintiff signed the application on

May 21, 2020, and defendant mailed plaintiff a physical copy of the policy (sans application) on
either May 21 or 22, 2020. See Webb Decl., Ex. 2 at 7, ECF 20-2; Second McClain Decl. ¶¶ 4-7,
ECF 33. Around that time, and in accordance with the company’s underwriting guidelines for
newly-insured properties, defendant opened an independent investigation to verify the
information plaintiff had provided about the property. First McClain Decl. ¶ 5, ECF 23. A third-
party independent investigator visited the property on May 28, 2020, and provided a report to
defendant, who received it on June 2, 2020. Id. ¶¶ 5-6.
On May 31, 2020, a fire occurred at the property, resulting in a total loss. See Webb
Decl., Ex. 3 at 1, ECF 20-3. Plaintiff reported the fire to defendant that day, and three days later,

defendant’s representatives obtained plaintiff’s formal statement about the fire. Id.; Clark Decl.,
Ex. L, ECF 24-12. While investigating plaintiff’s claim for coverage, defendant concurrently
continued to evaluate and assess the property’s eligibility for insurance coverage. See First
McClain Decl. ¶¶ 8, 9, 11, ECF 23

When plaintiff did not receive any adjustments or payments from defendant, he filed this
civil action in Multnomah County Circuit Court on July 10, 2020. Compl., ECF 1-1. Roughly a
month-and-a-half later, on August 25, 2020, defendant issued a letter to plaintiff declaring that
the insurance policy for the property was rescinded “back to the 05/15/2020 inception date.”
Webb Decl., Ex. 5 at 1, ECF 20-5. The letter explained that plaintiff “at the time of application,
misrepresented, concealed, or omitted multiple points of important (i.e., material) information”
and that “[i]f truthful information had been provided, [defendant] would not have accepted the
application for multiple underwriting reasons.” Id.; see also id. at 2 (listing reasons why
plaintiff’s policy was rescinded). The legality of defendant’s decision to rescind plaintiff’s
policy is central to resolving the parties’ cross-motions for summary judgment.

III. Overview of the Parties’ Motions
The parties have filed cross-motions for summary judgment, and while the respective
motions significantly overlap in argumentation, they seek distinct outcomes. Plaintiff’s motion
seeks summary judgment on all five of defendant’s affirmative defenses: (1) policy recission, (2)
breach of policy condition, (3) real party in interest, (4) lack of insurable interest, and (5) failure
to state a claim. ECF 18. In its response to plaintiff’s motion, defendant stipulated “to the
dismissal of its Fourth and Fifth Affirmative Defenses.” Def. Opp. Pl. Mot. Summ. J. 3, ECF 25.
Therefore, defendant concedes summary judgment on its fourth and fifth affirmative defenses.
Defendant’s motion seeks summary judgment on plaintiff’s claim for breach of contract,
which includes two counts: breach of express contract terms and the implied covenant of good
faith and fair dealing.1 ECF 22.

IV. Defendant’s Motion for Summary Judgment—Plaintiff’s Express Breach Claim
Plaintiff’s claim for breach of contract alleges that defendant’s denial of and refusal to
pay plaintiff’s damages constitutes an express breach of contract. First Am. Compl. ¶¶ 1-14,
ECF 21. Defendant seeks summary judgment on this claim, arguing there is no genuine issue of
material fact that it legally rescinded its insurance contract with plaintiff and it is entitled to
prevail as a matter of law. Def. Mot. Summ. J. 8-28, ECF 22.
A. Legal Elements
Oregon’s Insurance Code requires that all fire insurance policies contain a provision
regarding concealment, misrepresentations, or fraud by the insured. The pertinent statute, O.R.S.

§ 742.208, provides:
(1) Subject to subsections (2) and (3) of this section, this entire policy shall be
void if, whether before or after a loss, the insured has willfully concealed or
misrepresented any material fact or circumstance concerning this insurance or the
subject thereof, or the interest of the insured therein, or in case of any fraud or
false swearing by the insured relating thereto.

(2) All statements made by or on behalf of the insured, in the absence of fraud,
shall be deemed representations and not warranties. No such statements that arise
from an error in the application shall be used in defense of a claim under the
policy unless:
(a) The statements are contained in a written application; and
(b) A copy of the application is indorsed upon or attached to the policy
when issued.

1 In its motion, defendant noted that during conferral, plaintiff “agree[d] to voluntarily dismiss
his “Second Claim for Relief (Tortious Interference with Business Relationships).” Def Mot.
Summ. J. 1, ECF 22. In fact, plaintiff has filed an amended complaint in which he does not
allege that claim. First Am. Compl., ECF 21.
(3) In order to use any representation by or on behalf of the insured in defense of
a claim under the policy, the insurer must show that the representations are
material and that the insurer relied on them.

O.R.S. § 742.208.2 The statute thus requires four distinct elements for an insurer to void a fire
insurance policy based on misstatements: (1) the insured willfully concealed, misrepresented, or
falsely swore any fact or circumstance concerning the insurance; (2) the statements were
contained in a written application that was either indorsed upon or attached to the policy; (3) the
representation was material, and (4) the insurer relied on that representation. Id.
There are three other notable facets when analyzing claims under this section of the
Insurance Code. First, all reliance-related elements are interpreted in a manner consistent with
common law. See Eslamizar v. Am. States Ins. Co., 134 Or. App. 138, 143 (1995), rev. den., 322
Or. 228 (1995) (“[T]he language of the statute gives no indication that the legislature intended
the term ‘reliance’ to mean anything other than what it ordinarily means as an element of a
common law fraud claim.”). Second, the insurer bears the burden of proof for demonstrating
each element of a claim of voidance. Mutual of Enumclaw Ins. v. McBride, 295 Or. 398, 407
(1983) (interpreting the standard of proof for O.R.S. § 743.612, the predecessor statute for
O.R.S. § 742.208). And third, “when policy language matches the requirements of the statute,”
as it does in this case, the court “approaches the issue of interpretation of the policy as a matter
of statutory construction.” Eslamizar, 134 Or. App. at 142.

2 As defendant notes, O.R.S § 742.013 offers guidance on how, in certain circumstances,
misrepresentations and incorrect statements in an application for insurance may prevent a
recovery under the policy. However, defendant’s primary argument is that the policy issued to
plaintiff was voidable (and legally void), which is a legally distinct principle from an argument
that recovery is barred due to misrepresentations.
B. Misrepresentation or Concealment Concerning the Insurance
The first element that an insurer must demonstrate to void a fire insurance policy is that

the insured either willfully concealed, misrepresented, or falsely swore any fact or circumstance
concerning the insurance. O.R.S. § 742.208(1).3 Defendant proffers, with evidence, at least six
distinct examples where plaintiff’s representations on his application differed from the true state
of the property. Def. Mot. Summ. J. 11-17, ECF 22. Each inconsistency is described below.
First, plaintiff represented on his application that the property was not “currently
undergoing extensive remodeling or additions.” Webb Decl., Ex. 2 at 4, ECF 20-2. But just a
couple of days before the fire, plaintiff held a meeting at the property with his realtor, Rosemary
Crites, and architect, Adam Lawler, to “study how many affordable town homes could be built
on the property.” Clark Decl., Ex. R at 9:06 – 9:11, ECF 24-18. Crites later provided deposition
testimony that the property was “being remodeled, for sure,” Clark Decl., Ex. S at 2:17 – 2:21,

ECF 24-19, and Lawler’s photographs of the property on the date of the meeting indicate that the
interior—including the walls, flooring, electrical, plumbing fixtures, etc.—was substantially
incomplete. See Clark Decl., Ex. T at 1-2, ECF 24-20. Plaintiff conceded during his deposition
that “the electrical [work] wasn’t complete” (Clark Decl., Ex. P at 9:06 – 9:12, ECF 24-16); and
there was no finished flooring (id. at 13:04 – 13:09); no hung sheetrock (id. at 13:10 – 13:20); no
installed countertops or appliances (id. at 13:21 – 14:07); no bathroom fixtures or toilets (id. at
14:08-14:17); and no insulation or wood paneling in the upstairs sections (id. at 14:18 – 14:23).
Thus, contrary to plaintiff’s representations, the property was undergoing extensive remodeling
at the time he applied for insurance.

3 O.R.S. § 742.208(3) separately requires that the (false) representation be material. That
element is analyzed in a separate section below.
Second, and in a similar vein, plaintiff also represented that the property was suitable for
occupancy, specifically as a one-family home. Webb Decl., Ex. 2 at 4-5, ECF 20-2. But in his

deposition, plaintiff’s architect, Lawler, opined that he did not believe “an inspector would give a
certificate of occupancy for a building in the condition it was in at that time.” Clark Decl., Ex. R
at 10:24 – 11:01, ECF 24-18. Indeed, Lawler refused to describe the property “as a house or a
dwelling necessarily. There appeared to be no specific occupancy when I went there.” Id. at
3:18 – 3:21. Plaintiff also conceded, during his deposition, that the property was, at the time of
the fire, not suitable for occupancy by a residential tenant. Clark Decl., Ex. P at 14:24 – 15:03,
ECF 24-16. Plaintiff’s claim that the property was ready for occupancy was therefore untrue.
Third, plaintiff claimed on his application that there was no “business on [the] premises”
of the property. Webb Decl., Ex. 2 at 4, ECF 20-2. But while providing his recorded statement
about the fire to defendant’s representatives, plaintiff admitted that the property was “rented to

[his] company,” Conexion Latina.4 Clark Decl., Ex. L at 8, ECF 24-12. During his deposition,
plaintiff suggested that his accountant had recommended this rental arrangement (i.e., plaintiff
renting the property to his own company) so that he could claim the rent as an expense. Clark
Decl., Ex. P at 20:21 – 21:11, ECF 24-16. And in his recorded statement, plaintiff noted that he
kept an office at the property and worked there roughly “five days a week.” Clark Decl., Ex. L
at 9-10, ECF 24-12. Thus, by his own admission, plaintiff was running his business on the
premises of the property, and his representation that there was no “business on [the] premises”
was false.

4 Plaintiff is a self-employed “community advocate” and owns Conexion Latina, which is a
company that assists clients with immigration paperwork, taxes, and government complaints.
Fourth, plaintiff denoted on his application that the property was not subject or liable to
any additional insured parties or interests. Webb Decl., Ex. 2 at 2, ECF 20-2 (spaces left blank).

However, records from the Multnomah County Assessor reveal that the deed on the property was
in the name of plaintiff’s property management company, Renaissance Properties, LLC. Clark
Decl., Ex. G at 1, ECF 24-7; id., Ex. P at 22:11 – 22:19, ECF 24-16. Moreover, the LLC’s
interest was not only the sole interest on the property, but was also subject to a loan in the
amount of $460,000 with interest. Clark Decl., Ex. H at 28, 54-59, ECF 24-8. Therefore,
plaintiff’s representations regarding the lack of additional interests and financing on the property
were inaccurate.
Fifth, plaintiff claimed that there was “no prior insurance” on the property. Webb Decl.,
Ex. 2 at 5, ECF 20-2. But Christopher Stout, the individual who sold the property to plaintiff,
testified that the property was insured for at least the first year after the sale. Clark Decl., Ex. O

at 3:14 – 3:22, ECF 24-15. When questioned about this at his deposition, plaintiff conceded that
the property “was previously insured on an occasion, [but the insurance company] drove by and
said the property needed to be – had needed siding repair and windows – windows replaced. So
they cancelled the policy.” Clark Decl., Ex. P at 4:05 – 4:18, ECF 24-16. Thus, by his own
admission, plaintiff’s property had previously been insured, making his assertion that there was
“no prior insurance” untrue.
Finally, plaintiff indicated on his application that the condition of the dwelling was
“[e]xcellent.” Webb Decl., Ex. 2 at 4, ECF 20-2. Yet both the third-party inspector and
plaintiff’s architect, Lawler, observed that the windows of the property were boarded up in late

May 2020, close in time to when plaintiff submitted his application to defendant. Clark Decl.,
Ex. C at 1, 5, 7, ECF 24-3 (descriptions and photos showing boarded windows and broken glass);
Clark Decl., Ex. R at 7:20 – 8:03, ECF 24-18. Both individuals also confirmed the presence of
graffiti on the property, and the third-party inspector observed that the property contained an

“attractive nuisance” of inoperable vehicles, junk appliances, farm equipment, and excessive
trash and debris. Id. In his recorded statement, plaintiff acknowledged that the property had
been painted with graffiti “a couple of months ago.” Clark Decl., Ex. L at 4, ECF 24-12. And
during his deposition, plaintiff revealed that squatters previously inhabited the property,
requiring him to “call[] the police repeatedly” for resolution. Clark Decl., Ex. P at 17:25 –
18:15, ECF 24-16. These exterior conditions, combined with the undeveloped nature of the
property’s interior, would not be considered “excellent” under any reasonable definition of the
term.
Plaintiff does not dispute the admissibility or accuracy of defendant’s submitted evidence
surrounding his alleged misrepresentations. He instead summarily suggests that there remains “a

genuine dispute of fact as to whether [he] willfully misrepresented any information in the
application.” Pl. Opp. Def. Mot. Summ. J. 6-7, ECF 31.
“[I]nsurance fraud or false swearing is a purely [a] civil dispute[, and accordingly], . . .
the measure of proof . . . is by a preponderance of the evidence.” McBride, 295 Or. at 407.
In civil cases the word “wilful,” as ordinarily used in courts of law, does not
necessarily imply anything blamable, or any malice or wrong toward the other
party, or perverseness or moral delinquency, but merely that the thing done or
omitted to be done was done or omitted intentionally. It amounts to nothing more
than this: that the person knows what he is doing, intends to do what he is doing,
and is a free agent.

Putnam v. Oregon Dep't of Just., 58 Or. App. 111, 115 (1982) (quoting Schulstad v. Hudson Oil
Company, Inc., 55 Or. App. 323 (1981)).
In attempting to demonstrate that his actions were not willful, plaintiff cites to the
transcript of his deposition and notes that he “answered [defendant’s] questions,” “followed its
instructions in applying for the policy,” and “trusted [defendant] to do the right thing.” Pl. Opp.
Def. Mot. Summ. J. 7, ECF 31 (citing Webb Decl., Ex. 6 at 2-8, ECF 20-6).5 But while plaintiff

did state these things with respect to the agent he was working with during his call on May 15,
2020, he says nothing about the signature he provided six days later, on May 21, 2020, when he
was prompted to review and confirm his application answers outside the presence of that agent.
That omission is telling, as the application and binder sent to plaintiff explicitly requested that he
independently “review” his provided answers and “declare that . . . all the foregoing statements,”
including statements related to the property, were true. Clark Decl., Ex. B at 1, 8, ECF 24-2.
On balance, defendant’s evidence, which demonstrates blatant misrepresentations
surrounding the condition and status of the property, along with plaintiff’s silence regarding his
state of mind when reviewing and signing the application, overwhelmingly tips the scales in
favor of a finding that plaintiff made willful misrepresentations when completing his application.

While this court, on summary judgment, must view the evidence in the light most favorable to
plaintiff, considering the repeated and glaring misrepresentations here, no reasonable juror would
find that plaintiff did not make them willfully. See Greenstein v. Wells Fargo Bank, N.A., 746 F.
App’x 637, 638 (9th Cir. 2018) (cited pursuant to Ninth Circuit Rule 36-3) (upholding dismissal
of breach of contract and implied covenant claims “because there is no evidence in the record
from which a reasonable juror could find” for the plaintiff).

5 Plaintiff’s counsel expounded on this claim during oral argument, alleging that certain portions
of the transcript of plaintiff’s call when applying for insurance may suggest that defendant’s
representative was asking leading questions. ECF 37. Even assuming that is true, it remains
undisputed that plaintiff still had the opportunity to independently review his answers—and was
prompted to do so by defendant—before signing the application and certifying that his answers
were truthful and correct.
C. Application Attached to the Policy
The second requirement to void a fire insurance policy is that the fraudulent statements

be “contained in a written application” and that “a copy of the application is indorsed upon or
attached to the policy when issued.” O.R.S. § 742.208(2). Plaintiff alleges, and defendant
concedes, that a copy of the application was not attached to the final policy that was issued to
plaintiff after approval. Pl. Reply Summ. J. 4, ECF 30. However, defendant argues that the
signed application was attached to a temporary binder of insurance, which serves as an insurance
policy when issued. D. Opp. P. Mot. Summ. J. 8-9, ECF 25. The core question is, in essence,
whether a temporary binder of insurance constitutes “the policy when issued” for purposes of
O.R.S. § 742.208(2).
This question, which is rooted in statutory interpretation, can be resolved by employing
the three-step analysis outlined by the Oregon Supreme Court:

The first step remains an examination of text and context. PGE [v. BOLI], 317 Or.
606,] 610–11 [(1992)] . . . . But, contrary to this court’s pronouncement in
PGE, we no longer will require an ambiguity in the text of a statute as a
necessary predicate to the second step—consideration of pertinent legislative
history that a party may proffer. Instead, a party is free to proffer legislative
history to the court, and the court will consult it after examining text and context,
even if the court does not perceive an ambiguity in the statute’s text, where that
legislative history appears useful to the court’s analysis. However, the extent of
the court’s consideration of that history, and the evaluative weight that the court
gives it, is for the court to determine. The third, and final step, of the
interpretative methodology is unchanged. If the legislature’s intent remains
unclear after examining text, context, and legislative history, the court may resort
to general maxims of statutory construction to aid in resolving the remaining
uncertainty.

State v. Gaines, 346 Or. 160, 171–72 (2009).
Although an examination of the text and context of O.R.S. § 742.208(2) does not
dispositively favor a particular side, various elements within it indicate support for defendant’s
interpretation. As a starting point, the plain text of the statute does not differentiate between a
temporary binder and a policy issued after the approval of an application approval (hereafter
“final policy”); it simply requires that the application be attached to “the policy when issued.”

Id. The absence of such a distinction is notable for two reasons.
First, definitions within the Oregon Insurance Code, which O.R.S. § 742.208(2) is a part
of, do not make the concept of a binder mutually exclusive with that of an insurance policy. The
Insurance Code defines “policy” as “the written contract or written agreement for or effecting
insurance, by whatever name called, and includes all clauses, riders, indorsements and papers
which are a part thereof and annuities.” O.R.S. § 731.122 (emphasis added). Put differently, the
Insurance Code does not require an insurance policy to be explicitly labeled as a “policy” to be
considered one; rather, it simply needs to be a written contract or agreement for effectuating
insurance that contains all clauses and related material. Id. In fact, O.R.S. § 742.043(1), which
pertains to binders specifically, refers to “[b]inders or other contracts for temporary insurance.”

(Emphasis added). And court decisions interpreting Oregon law have consistently found that
binders are contracts that effectuate insurance, albeit for a limited time. See, e.g., Cooper v. St.
Paul Surplus Ins. Co., No. CV 05-785 MO, 2006 WL 294794, at *2 (D. Or. Feb. 6, 2006) (“A
binder is a temporary insurance contract in effect until the insurer issues its formal policy or
rejects the application for insurance.”); Rediger v. Country Mut. Ins. Co., No. 6:16-CV-02263-
AA, 2021 WL 2006014, at *3 (D. Or. May 19, 2021) (“A ‘binder’ is a temporary insurance
contract that remains effective until permanent insurance is approved or disapproved.”) (citing
Baylor v. Continental Cas Co., 190 Or App. 25, 33 (2003)) (quoting United Pac. Ins. Co. v.
Truck Ins. Exch., 273 Or. 283, 289–90 (1975) (“A binder ordinarily evidences a contract for

temporary insurance until such time as issuance of permanent insurance is approved or
disapproved or some other temporary impediment is removed.”).
Second, the Insurance Code does contain sections that distinguish between temporary
binders and final policies. Again, O.R.S. § 742.043 discusses the “temporary” nature of a binder

and signals that an insurer “shall” issue a final policy “within 90 days after issue of a binder.”
O.R.S. § 742.043(1), (2). Plaintiff argues that O.R.S. § 742.043 “describes the relationship
between a binder and a policy, drawing a distinction between the two types of agreements,”
which indicates that the terms “binder” and “policy” are not necessarily interchangeable within
the context of the Insurance Code. P. Reply. Summ. J. 6-7, ECF 30. While the court agrees that
the terms “binder” and “policy” are not synonymous within the Insurance Code, that conclusion
does not prevent binders from qualifying as insurance policies. Indeed, in a similar interpretive
vein, the fact that the Oregon Legislature knew how to differentiate between a binder and a final
policy, yet instead chose the more general term “policy” when enacting O.R.S. § 742.208(2),
suggests that it intended for the statute to apply to all policies within the Insurance Code.

Third, legislative history supports the notion that binders can qualify as insurance policies
within the meaning of O.R.S. § 742.208. In Ives v. INA Life Ins. Co., the Oregon Court of
Appeals analyzed the legislative history of the statute, and wrote:
The requirement that a misrepresentation be in writing prevents problems of proof
that could arise if an insurer were permitted to deny a claim on the basis of an
alleged oral misrepresentation. The requirement that a “copy” of the application
be attached to the issued policy insures that the policyholder is provided with
everything that the insurer relies on in issuing the policy, i.e., the entire agreement
of the parties.

101 Or. App. 429, 433 (1990) (citing Oregon House legislative materials). The requirement that
the application be attached to the issued policy, in essence, serves as a consumer protection
mechanism, ensuring that the insured is aware of the terms of the policy when it is issued.
To be clear, the aforementioned analysis should not be interpreted to suggest that all
insurance binders must be considered policies for the purpose of O.R.S. § 742.208(2). It is
possible that a binder may not contain any details associated with coverage, and thus not provide
the policyholder “with everything that the insurer relies on in issuing the policy.” Ives, 101 Or.

App. at 433; see also Brock v. State Farm Mut. Auto. Ins. Co., 195 Or. App. 519, 531 (2004)
(declining to find that a binder existed, but noting that “it is possible for a binder to be made part
of an application for insurance”). Indeed, plaintiff suggests just that, characterizing the binder in
this case as a “two-sentence temporary binder contained within the application.” Pl. Reply
Summ. J. 4, ECF 30; see Clark Decl., Ex. B at 8, ECF 24-2. But while the text of the binder
itself is indeed short, the entire document provided to plaintiff—the binder and application—
contains crucial details about the policy that was being contracted for, including a “Coverages
and Limits of Liability” section that indicated the type of policy (form Special (DP-3)),
replacement cost coverage ($514,124), “other structure” coverage ($51,520), personal liability
coverage ($500,000), medical payment coverage per person and occurrence, deductible amount,

and premium amount. See Clark Decl., Ex. B, ECF 24-2. Thus, plaintiff was provided with
“everything that the insurer [relied] on in issuing the policy, i.e., the entire agreement of the
parties.” Ives, 101 Or. App. at 433. Therefore, in this case, the binder produced to plaintiff
meets the definition of a “policy” under O.R.S. § 742.208.
Plaintiff disagrees with this interpretation and raises a number of arguments in addition to
the ones previously mentioned. First, he notes that O.R.S. § 742.043, which outlines the
interactions between binders and final policies, requires that “within 90 days after issue of a
binder[,] a policy shall be issued in lieu thereof.” Plaintiff seizes upon the final three words—“in
lieu thereof”—to argue that the final policy “replaces the binder in both form and function, to the

mutual exclusion of the binder.” Pl. Mot. Summ. J. 9, ECF 18. Thus, according to plaintiff, the
issuance of the final policy in his case rendered the binder invalid.
However, plaintiff’s argument is contrary to Oregon law. The plaintiff in Hansen v. W.
Home Ins. Co., made a similar argument, claiming “that [O.R.S. § 743.075(2), the predecessor

statute of O.R.S. § 742.043] operates to invalidate the oral binder once a written policy is issued
and delivered.” 89 Or. App. 68, 72 (1987). The Oregon Court of Appeals disagreed, holding:
ORS 743.075(2), as amended, however, does not invalidate a binder after 90 days,
but puts an affirmative obligation on the insurer to provide a policy within 90
days that conforms to the binder. It places the burden of compliance on the insurer
to avoid a lapse in coverage for risks against which the insured obtained a binder.

Id. In accordance with Hansen, the requirement that a final policy be issued “in lieu thereof” a
binder simply ensures that the insured receives a final policy within 90 days of obtaining a
binder, thus preventing a lapse in coverage. In other words, the issuance of a final policy does
not invalidate the existence or the validity of a binder.
Next, plaintiff argues that at least one other jurisdiction has interpreted the term “binder”
to be exclusive from a “policy.” In Springer v. Allstate Life Ins. Co. of New York, the New York
Court of Appeals6 interpreted a two-year “contestability period” within the state’s insurance code
to mean that the limitations period began running only after the issuance of the final policy, “not
when the risk of interim coverage first attaches.” 94 N.Y.2d 645, 650-51 (2000). The Springer
court noted that while the state’s legislature “could have chosen to measure the contestability
period by the period of coverage when a carrier issues a binder and later extends coverage in a
formal policy,” it chose not to do so. Id. (internal quotation marks omitted).
Springer’s holding, however, is not persuasive for two reasons. First, as defendant notes,
there exists a substantial disparity between New York law and Oregon law in how binders
interact with a final policy. Under New York law, an “insurer may modify the terms and limits

6 Despite being named a court of “Appeals”, the New York Court of Appeals is the final court of
appeal in the state’s judicial system (akin to a state’s “Supreme” Court).
of coverage and premium due after the binder is issued.” General Counsel Opinion 8-9-2005
(#1), 2005 WL 3980879 (NY INS BUL). This attribute may have led the Springer court to hold

that a binder and final policy constitute “two distinct agreements.” 94 N.Y.2d at 650. Under
Oregon law, by contrast, the final policy “includ[es] within its terms the identical insurance
bound under the binder,” O.R.S. § 742.043(2), and binders are “deemed to include all the usual
terms of the policy as to which the binder was given . . . , except as superseded by the clear and
express terms of the binder.” O.R.S. § 742.043(1); see Stuart v. Pittman, 350 Or. 410, 417-20
(2011) (discussing O.R.S. § 742.043). This requirement seemingly bolsters defendant’s
argument that a binder can serve as a “policy” in the context of O.R.S. § 742.043.
Second, a wholesale application of Springer to the instant dispute would create an
outcome that is contrary to the statute’s intended design. Adopting the Springer holding, which
treated a binder and final policy as two mutually exclusive items, would necessitate that a binder

could never serve as a “policy” in the context of O.R.S. § 742.208(2). Under that interpretation,
insurers would either have to refrain from issuing binders or assume the risk that a policyholder
could include a misrepresentation on the application and still claim coverage during the period
the binder was in effect. Such a consequence would go against the legislative intent behind
O.R.S. § 742.208, which is “to discourage insurance fraud.” McBride, 295 Or. at 407 (noting
that the enactment of O.R.S. § 743.612, the predecessor to O.R.S. § 742.208, evinced “a general
public policy to discourage insurance fraud”).
In sum, the binder produced to plaintiff meets the definition of a “policy” under O.R.S. §
742.208, and because plaintiff’s application was attached to that binder when it was provided to

plaintiff, the second element of the statute is met.
D. Representations Were Material
The next requirement to successfully void a fire insurance policy is that the

“representations are material.” O.R.S. § 742.208(3). In the context of an application for
insurance, “[i]t may be broadly stated that a false answer is material if the insurer would not have
accepted the application had a truthful answer been given.” Bunn v. Monarch Life Ins. Co., 257
Or. 409, 412 (1970). In certain circumstances, including this one, the determination of
materiality can be made by the court. Mut. Life Ins. Co. of New York v. Chandler, 120 Or. 694,
700-01 (1927) (“Some precedents have been cited where the question was one of fact . . . but
where a direct question is asked by the very terms of the policy, a true answer is made
material.”).
Here, there is no question that plaintiff’s misrepresentations on the application were
material. The declaration of Shawn McClain, a compliance specialist involved in rescinding

plaintiff’s policy, establishes at least six misrepresentations that, according to the insurer’s
underwriting guidelines, would have required defendant to either issue a completely different
policy or decline coverage for the property altogether. See First McClain Decl. ¶ 10, ECF 23
(guidelines prohibit coverage for properties undergoing extensive renovations); ¶ 12 (guidelines
prohibit coverage for properties that are vacant); ¶ 15 (properties that were the subject of prior
insurance coverage application were ineligible for coverage); ¶ 17 (limited liability companies
are ineligible for dwelling and fire insurance policies); ¶ 19 (premises used for business
operations are ineligible for dwelling fire insurance policies); and ¶ 14 (poor condition and
history of vandalism generally leads to declination of coverage). McClain’s declaration makes

clear that had plaintiff provided accurate answers about the condition of the property, defendant
“would not have accepted the application” for insurance. Bunn, 257 Or. at 412. Thus, plaintiff’s
misrepresentations on his application were material.

E. Reasonable Reliance on Representations
Lastly, to void a fire insurance policy, an insurer must demonstrate that it relied upon the
applicant’s material misrepresentations. O.R.S. § 742.208(3). An insurer can establish a prima
facie case of reliance by demonstrating that (1) “it approved the policy in the ordinary course of
business,” (2) the false representations within the application were a but-for cause in issuing the
policy, and (3) the insurer had a legal right to rely on the application information. Crawford v.
Standard Ins. Co., 49 Or. App. 731, 736 (1980). Once an insurer establishes a prima facie case,
the burden shifts to the insured to provide “evidence that the insurer had, or was chargeable
with, knowledge of facts which revealed the falsity of the representations prior to reliance.” Id.
Here, defendant has proffered evidence sufficient to establish a prima facie case of

reliance. As discussed earlier, McClain’s declaration establishes at least six misrepresentations
that, according to defendant’s underwriting guidelines, would have required defendant to either
issue a completely different policy or decline coverage for the property altogether. And as to
whether defendant had a “legal right” to rely on the plaintiff’s representations in his application,
Oregon law does not impose any duty on an insurer “to investigate an application.” Kraus v.
Prudential Ins. Co. of Am., 799 F.2d 502, 504 (9th Cir. 1986); see also Kentner v. Gulf Ins. Co.,
297 Or. 470, 476 (1986), modified on reh’g, 298 Or. 69 (1984) (“[T]he clear and convincing
standard of proof . . . in fraud cases does not apply to proof of misrepresentation under O.R.S. §
743.612 . . . [T]he purpose of this statute is to discourage insurance fraud, and the purpose would

be thwarted . . . if we were to adopt a scienter element that is more difficult to prove.”).
Because defendant has established a prima facie case of reliance, the burden shifts to
plaintiff to demonstrate that the “insurer had, or was chargeable with, knowledge of facts which

revealed the falsity of the representations prior to reliance.” Crawford, 49 Or. App. at 736.
Plaintiff’s attempt to argue such—by claiming that defendant had ample notice and sufficient
time to rescind the policy but failed to do so—falls short of the mark. Plaintiff specifically
asserts that the report from defendant’s third-party inspector, which was received on June 2,
2020, provided information for defendant to decline coverage. See Pl. Opp. Def. Mot. Summ. J.
5-7, ECF 31 (noting the inspector’s high “hazard score” and various property observations).
Plaintiff also observes that defendant did not provide his attorney with the final policy until June
10, 2020, i.e., “eight days after receiving the inspection report.” Id. at 6.
This argument is flawed for at least two reasons. First, there is evidence that the final
policy was printed on May 21, 2020, and mailed to plaintiff either that day or the following

day—over a week before defendant received the third-party inspector’s report on June 2, 2020.
See Second McClain Decl. ¶¶ 4-5 , ECF 33 (attesting that, according to the computer program
that defendant uses, the policy was printed on May 21, 2022, and would have been mailed that
day or the following day if it did not “make it to print output for mailing that day”); Williams
Decl., Ex. A at 1, ECF 34-1 (screenshot of defendant’s internal databases showing that the final
policy was generated on May 21, 2020). And second, even if the production of the final policy
to plaintiff’s attorney on June 10, 2020, constituted its issuance, defendant was still in the early
stages of independently confirming the third-party inspector’s observations. See First McClain
Decl. ¶ 8, ECF 23 (describing how the report was reviewed by the underwriting department on

June 11, 2020, and an investigation was commenced), ¶ 9 (attesting that photographs were
received on June 16, 2020, from Portland Fire and Rescue regarding the condition of the
property as of February 2020); ¶ 11 (explaining how defendant learning from PacifiCorp on July
2, 2020, that the electricity to the property had been disconnected for the 17 months leading to

the fire). Thus, plaintiff’s argument—that defendant “had, or was chargeable with, knowledge
of the facts which revealed the falsity of the representations prior to reliance”—is not
persuasive. Crawford, 49 Or. App. at 736.
In sum, defendant has established the four elements required under O.R.S. § 742.208 to
effectuate a successful voidance of plaintiff’s fire insurance policy. Because defendant has
successfully voided the policy, plaintiff’s claim for breach of the express terms of that contract
falls. Defendant’s motion for summary judgment is therefore appropriate for plaintiff’s claim
alleging an express breach of the contract.
V. Defendant’s Motion for Summary Judgment—Plaintiff’s Implied Covenant Claim
Plaintiff also alleges that defendant’s denial of coverage constitutes a violation of the

implied covenant of good faith and fair dealing. First Am. Compl. ¶¶ 10-14, ECF 21. In
support of this argument, plaintiff claims that defendant failed to “properly [] investigate the loss,
adjust the claim, and pay [him] for the losses sustained as a result of the fire.” Id. ¶ 12.
This claim suffers from two clear defects. First, at a fundamental level, “[e]very contract
contains an implied covenant of good faith and fair dealing.” Stevens v. Foren, 154 Or. App. 52,
57-58 (1998) (citing Uptown Heights Associates v. Seafirst Corp., 320 Or. 638, 645 (1995)). But
if the contract is successfully voided, then there are no implied covenants for the parties to
comply with. See, e.g., Jolma v. Steinbock, 40 Or. App. 657, 670 (1979) (“[T]he contract was
void; therefore, plaintiffs have no enforceable claim against [defendant] [in] express contract or

in [q]uantum meruit.”).
Second, even if the contract remained valid, an “implied covenant cannot contradict an
express contractual term, nor otherwise provide a remedy for an unpleasantly motivated act that

is permitted expressly by the contract.” Zygar v. Johnson, 169 Or. App. 638, 645 (2000). Put
differently, “a party invoking an express contractual right does not, merely by doing so, violate
the duty of good faith.” Stevens, 154 Or. App. at 59. Here, the terms of the binder and
application that plaintiff signed warned:
Most of the information needed to issue a policy comes directly from you.
However, on occasion, we will need additional information or need to verify
information we have.
. . .
We may cancel or rescind this policy if the insured has willfully or intentionally
made any misstatements, misrepresentations, omissions, or concealments on the
part of the insured that are fraudulent or material to our interests.”

Webb Decl., Ex. 2 at 7, ECF 20-2. In verifying and ultimately rescinding plaintiff’s policy,
defendant was merely performing an express contractual right: “verifying information” provided
by plaintiff and ultimately determining that the insured made misrepresentations sufficient to
rescind the policy. Because plaintiff does not allege any facts demonstrating the breach of any
contractual expectation beyond the contract’s express terms, his implied covenant claim fails,
and defendant’s motion for summary judgment must be granted as to this claim as well.
VI. Plaintiff’s Motion: Summary Judgment on Defendant’s Affirmative Defenses
Plaintiff’s motion seeks summary judgment on defendant’s three remaining affirmative
defenses: (1) policy recission, (2) breach of policy condition, and (3) real party in interest. ECF
18. The first two are easily resolvable via the analysis above: (1) defendant successfully voided
its policy with plaintiff in accordance with O.R.S. § 742.208, and thus, policy recission is an
acceptable affirmative defense; (2) plaintiff breached an express provision of the policy by
misrepresenting material facts on his application, and thus, that affirmative defense is acceptable
as well. Therefore, summary judgment in plaintiff’s favor is improper for defendant’s first two
affirmative defenses.

Defendant’s third affirmative defense alleges that plaintiff is not the real party in interest
for insurance coverage and it instead should be plaintiff’s property management company,
Renaissance Properties, LLC, because the LLC holds the deed and financing to the building.
Plaintiff claims that this distinction is merely semantic, as he is the sole owner and operator of
Renaissance Properties. However, having found that the policy was successfully voided as to
any party, the court need not reach defendant’s argument that plaintiff is not the proper party in
interest. Accordingly, plaintiff’s motion for summary judgment on defendant’s third affirmative
defense is denied as moot.
ORDER
Plaintiff’s motion for summary judgment (ECF 18) is GRANTED IN PART as to

defendant’s fourth and fifth affirmative defenses and otherwise denied, and defendant’s motion
for summary judgment (ECF 22) is GRANTED IN FULL.
DATED September 30, 2022.

/s/ Youlee Yim You
Youlee Yim You
United States Magistrate Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10395232. Public record. Not legal advice.