No. 370 June 5, 2024 27

IN THE COURT OF APPEALS OF THE 

STATE OF OREGON

William LOCKNER 

and Adam Handwerger,

Plaintiffs-Appellants,

v.

FARMERS INSURANCE COMPANY OF OREGON,

Defendant-Respondent.

Multnomah County Circuit Court

20CV31169; A178057

Shelley D. Russell, Judge.

Argued November 30, 2023.

Nicholas A. Thede argued the cause for appellants. Also 

on the briefs were Kyle A. Sturm and Foreman Sturm & 

Thede LLP.

Francis J. Maloney argued the cause for respondent. Also 

on the briefs was Maloney Lauersdorf Reiner PC.

Before Shorr, Presiding Judge, Mooney, Judge, and Pagán,

Judge.

MOONEY, J.

Affirmed.
28 Lockner v. Farmers Ins. Co. of Oregon

MOONEY, J.

Farmers Insurance denied coverage for damage to 

plaintiffs’ rental property caused by their tenant’s personal 

use of methamphetamine in the insured dwelling.1 Plaintiffs 

appeal the Stipulated General Judgment entered in favor of 

Farmers and against plaintiffs.2 They assign error to the 

trial court’s order granting Farmers’ motion for summary 

judgment and denying plaintiffs’ cross-motion for partial 

summary judgment. They challenge the court’s ruling that 

the damage is excluded from coverage under the policy’s 

contaminants exclusion because, in their view, the tenant’s 

personal use of methamphetamine constituted “vandalism,” 

which they argue is covered under the policy. We conclude 

that the trial court correctly determined that coverage was 

barred under the contaminants exclusion. Accordingly, we 

affirm.

I. STANDARD OF REVIEW

This appeal concerns the trial court’s ruling on 

cross-motions for summary judgment. Because the facts 

are not disputed, we review the trial court’s ruling on those 

motions for errors of law to determine whether either party 

is entitled to prevail as a matter of law. ORCP 47 C; Windmill 

Inns of America, Inc. v. Cauvin, 299 Or App 567, 568, 450 

P3d 1013 (2019).

II. UNDERLYING FACTS

Plaintiffs’ tenant and/or her guests smoked methamphetamine inside the insured dwelling, causing property 

damage in the form of methamphetamine residue. Testing 

indicated significant levels of methamphetamine discharge, 

or residue, within the dwelling and in the HVAC system. 

That residue would not have been present in the absence of 

the tenant’s personal use of methamphetamine inside the 

dwelling.

1 We do not reach Farmers’ cross-assignment of error challenging (1) plaintiff Handwerger’s ability to claim an insurable interest in the property, or (2) the

scope of plaintiff Lockner’s insurable interest, because our resolution of this 

appeal obviates the need for us to do so. For ease of reference only, we refer to 

plaintiffs without distinction unless the context requires otherwise.

2 The stipulated judgment contains the parties’ agreement that “the foregoing [judgment] shall not have any impact on the parties’ appellate rights.”
Cite as 333 Or App 27 (2024) 29

Lockner filed a claim under his Farmers “all-risk” 

landlord’s insurance policy for the costs associated with 

removing the residue. Farmers denied coverage under a 

provision in the policy that excludes coverage for damages 

“consisting of, or caused directly or indirectly by * ** [the] 

release, discharge or dispersal of contaminants, pollutants, 

insecticides, or hazardous gasses or chemicals[.]”

III. PROCEDURAL BACKGROUND

Plaintiffs sued Farmers for breach of contract. 

Farmers moved for summary judgment, seeking dismissal 

on the grounds that coverage was barred by the contaminants exclusion contained within the policy. Plaintiffs 

opposed Farmers’ motion and, in turn, sought partial summary judgment in their favor, arguing that the damage 

resulted from “vandalism” which is covered under the policy. The trial court agreed that coverage was excluded by 

the contaminants exclusion and granted judgment in favor 

of Farmers. Judgment was entered and this appeal followed.

IV. THE PARTIES’ ARGUMENTS

On motion for summary judgment, Farmers argued 

that it had no obligation to cover plaintiffs’ insurance claim 

because the insurance policy expressly excluded such coverage. Plaintiffs opposed Farmers’ motion by relying on 

our decision in Largent v. State Farm Fire & Casualty Co., 

116 Or App 595, 842 P2d 445 (1992), in which we held that 

an insurance policy exclusion for “contamination” did not 

exclude coverage for damage caused by the tenants or their 

associates “through the operation of an illegal methamphetamine laboratory.” Id. at 597. Plaintiffs continue to rely on 

Largent, arguing that Largent is dispositive because the 

exclusion in that case is “indistinguishable” from the exclusion here. They contend that whether residual methamphetamine contamination results from the production of methamphetamine or the personal use of methamphetamine, 

under Largent, the contaminants exclusion does not apply 

to bar coverage. Farmers responds that the contaminants 

exclusion in this case is distinguishable from the exclusion 

in Largent and that coverage is excluded.
30 Lockner v. Farmers Ins. Co. of Oregon

To support their own motion for partial summary 

judgment, plaintiffs argued, and continue to argue, that the 

tenant’s personal use of methamphetamine constituted vandalism, and that “because vandalism is not excluded, it is 

therefore covered under the terms of this ‘all-risk’ policy.” 

They argue that vandalism set into motion the process that 

resulted in the methamphetamine residue damage, and that 

coverage is required by operation of the “efficient proximate 

cause” rule. Farmers does not agree that the personal use 

of methamphetamine constitutes vandalism, and it resists 

plaintiffs’ invocation of the “efficient proximate cause” rule. 

It argues that plaintiffs’ mischaracterization of the act of 

smoking methamphetamine as vandalism does not result 

in coverage because the contaminants exclusion eliminates 

coverage.

V. ANALYSIS

A. The Insurance Policy

We begin with the insurance policy because the 

parties’ intentions about what the policy covers and what it 

does not cover are determined from the terms of the policy 

itself. Groshong v. Mutual of Enumclaw Ins. Co., 329 Or 303, 

307, 985 P2d 1284 (1999). We read and interpret the policy 

terms “according to what we perceive to be the understanding of the ordinary purchaser of insurance.” Coelsch v. State 

Farm Fire and Casualty Co., 298 Or App 207, 214, 445 P3d 

899 (2019).

Section I of the policy, entitled “Losses Insured,” 

states that

“[Farmers] insure[s] for accidental direct physical loss 

to property described in Coverage A and B, except as provided in Section I - Losses Not Insured.”

That is a coverage provision that “define[s] the universe 

of claims that are covered by the policy[.]” ZRZ Realty v. 

Beneficial Fire & Casualty Ins., 222 Or App 453, 473, 194 

P3d 167 (2008). The “Section I - Losses Not Insured” section 

states, in part:

“[Farmers does] not insure for loss either consisting of, 

or caused directly or indirectly by:
Cite as 333 Or App 27 (2024) 31

“* * * * *

“12. Vandalism * ** if the dwelling has been vacant for 

more than 30 days just before the loss.

“* * * * *

“13. (f). release, discharge or dispersal of contaminants, pollutants, insecticides, or hazardous gasses or 

chemicals[.]”

Subsections 12 and 13(f) are exclusions. We will refer to 

the exclusion under subsection 12 as the “vandalism exclusion” and the exclusion under subsection 13(f) as the “contaminants exclusion.” “Under Oregon law, the purpose of 

an exclusion in an insurance policy is to eliminate coverage 

that, were it not for the exclusion, would otherwise exist.” 

ZRZ Realty, 222 Or App at 473.

The parties agree that the residue caused by the 

tenant’s personal use of methamphetamine constitutes 

direct physical loss to the insured property. That loss would, 

thus, be covered under the policy unless coverage is eliminated by a policy exclusion.

B. The Vandalism Exclusion

Farmers did not deny coverage under the vandalism exclusion. The insured property had not been vacant 

for more than 30 days during the relevant time period and, 

therefore, even if smoking methamphetamine can be characterized as an act of vandalism, that exclusion would not 

provide a basis to exclude coverage here. Plaintiffs argue 

that “because vandalism is not excluded, it is therefore covered * * *.” They contend that “[u]nder the efficient proximate 

cause rule, [they] are entitled to coverage because covered 

vandalism was the predominate and initiating cause of the 

property damage.”3 But as we will explain, the personal use 

of methamphetamine is not vandalism and the rule would 

3 The efficient proximate cause rule provides that when “a peril specifically 

insured against sets other causes in motion” that lead “in an unbroken sequence” 

from the act to the loss, then the “insured peril is regarded as the proximate 

cause of the entire loss.” Gowans v. N. W. Pac. Indem. Co., 260 Or 618, 621, 489 

P2d 947, reh’g den, 260 Or 618, 491 P2d 1178 (1971). It is a rule of insurance law 

that can be used to determine the relevant cause of a loss, where multiple causes 

exist, for the purpose of determining insurance coverage.
32 Lockner v. Farmers Ins. Co. of Oregon

not apply here because the record establishes only one relevant cause of damage.

The word “vandalism” is not defined by the policy, 

but it is otherwise generally defined to mean the “willful 

or malicious destruction or defacement of things of beauty 

or of public or private property.” Webster’s Third New Int’l 

Dictionary 2532 (unabridged ed 2002). The record contains 

no evidence that plaintiffs’ tenant intended to cause damage to the insured dwelling by smoking methamphetamine. 

Plaintiffs rely on Hatley v. Truck Insurance Exchange, 261 

Or 606, 494 P2d 426, adh’d to on reh’g, 261 Or 606, 495 P2d 

1196 (1972), to support their proposition that “vandalism” 

includes acts that are “reasonably certain or likely to result 

in damage[.]” But there is no evidence that smoking methamphetamine was an act that plaintiff’s tenant knew or 

should have known was likely to cause property damage. 

And it is not “obvious that some damage to the grounds or 

the building would probably result if they were subjected to 

[the personal use of methamphetamine].” Id. at 618. We note 

also that Hatley concerned an insurance policy endorsement 

that expressly broadened coverage to include loss due to 

“vandalism and malicious mischief,” and that the question 

was whether certain water damage exclusions applied to 

bar that coverage. Here, the damage is covered as “direct 

physical loss to the property” except to the extent that it is 

excluded by other provisions in the policy. Just as in Hatley, 

the question of whether covered damage is subject to policy 

exclusions must be answered and we will turn to that next.4

C. The Contaminants Exclusion

We turn to the question of whether the contaminants exclusion applies to exclude coverage. Farmers contends that the plain language of the policy, including in 

particular the “dispersal of contaminants” exclusion, bars 

coverage. Plaintiffs do not claim that the language of the 

contaminants exclusion is ambiguous, and we agree that 

it is not. And because there is no genuine dispute that the 

methamphetamine residue is itself a contaminant, it is clear 

4 Our conclusion that smoking methamphetamine is not vandalism obviates 

the need for us to further address plaintiff’s argument concerning the efficient 

proximate cause rule.
Cite as 333 Or App 27 (2024) 33

that the contaminants exclusion applies. In so concluding, 

we reject plaintiffs’ argument that under Largent and subsequent cases,5

 contamination exclusions do not, as a matter 

of law, exclude “coverage for property damage caused by the 

release of methamphetamine inside the property.”

The Largent policy excluded coverage for loss

“consisting of, or directly and immediately caused by ** * 

‘wear and tear; marring; deterioration; inherent vice; latent 

defect; mechanical breakdown; rust; mold; wet or dry rot; 

contamination; smog, smoke from agricultural smudging or 

industrial operations; settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundations, walls, 

floors, roofs or ceilings; birds, vermin, rodents, insects or 

domestic animals.’”

Largent, 116 Or App at 597. (Emphasis omitted.) The comparable exclusion in this case, however, excludes coverage for 

loss

“consisting of, or caused directly or indirectly by: the 

release, discharge or dispersal of contaminant[s].”

In Largent, we concluded that the exclusionary language 

was not applicable to the plaintiff’s loss due to a tenant’s 

production of methamphetamine, a process that involves 

“heating and chemical reaction” and results in the “discharge of airborne vapor and particulates[.]” Id. at 597. We 

noted that the exclusion placed “contamination” in a list of 

other terms such as “wear and tear,” that represented gradual processes. Id. at 598. We agreed that the exclusion did 

not apply to the methamphetamine operation because the 

exclusion barred coverage for loss due to damage that occurs 

over time, and not to sudden damage such as that which 

occurs from the production of methamphetamine. Id.

The exclusion at issue here is worded differently 

from the exclusion in Largent. It is much more similar to 

the exclusion we analyzed in Fleming v. United Services 

Automobile Assn., which likewise excluded coverage for 

damage caused by the “discharge, dispersal, seepage, migration release or escape of pollutants.” 144 Or App 1, 925 P2d 

5 Plaintiffs also cite to Farmers Ins. Co. v. Trutanich, 123 Or App 6, 858 P2d 

1332 (1993) and Shaffer v. State Farm Fire & Casualty Co., 120 Or App 70, 852 

P2d 245 (1993).
34 Lockner v. Farmers Ins. Co. of Oregon

140 (1996), rev’d on other grounds, 329 Or 449, 988 P2d 378 

(1999). In Fleming, we clarified that the two main factors 

that guided our decision in Largent were that “the word 

‘contamination’ [in Largent] was surrounded in the exclusion by other terms, e.g., ‘wear and tear,’ denoting gradual 

processes,” and that “the single word ‘contamination’ upon 

which the insurer in Largent relied [did] not communicate 

anything approximating the particularity of the exclusion 

[in Fleming.]” Fleming, 144 Or App at 46.

As in Fleming, the exclusion here excludes coverage for loss due to the release or dispersal of contaminants. 

The exclusion is a stand-alone exclusion and is not part of 

a broader exclusion for “wear and tear” or other terms that 

denote gradual processes. It bars coverage specifically for 

loss “either consisting of or caused directly or indirectly” by 

the release of contaminants. Importantly, the parties have 

agreed that plaintiffs’ damage was caused by the tenant’s 

personal use of methamphetamine and that the damage consists of the cost incurred to remove the residue that resulted 

from that methamphetamine use. That loss is excluded by 

the plain language of the exclusion because the residue is 

itself a contaminant that was caused, either directly or indirectly, by the release of methamphetamine as the tenant 

smoked the drug in the insured dwelling.

Finally, we are not persuaded by plaintiffs’ assertion 

that this interpretation of the policy would “eviscerate the 

principal coverage” the policy provides. Plaintiffs argue that 

the interpretation of the exclusion advanced by defendant is 

“unreasonable” because it would apply to exclude coverage 

for smoke damage, an “obvious and inevitable byproduct[] 

of fire,” which is “indisputably covered.” We rejected a similar argument in Fleming, noting that any damage directly 

caused by fire, including smoke damage, would fall under 

the policy’s fire coverage. Id. at 6. The damage here consisted of methamphetamine residue caused by the release of 

contaminants through the smoking of methamphetamine, 

and coverage is, thus, barred by the contaminants exclusion. The trial court did not err in ruling that Farmers was 

entitled to prevail as a matter of law.

Affirmed.