FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ALEXANDER MANUFACTURING, INC. 

EMPLOYEE STOCK OWNERSHIP No. 07-35812 PLAN AND TRUST,

Plaintiff-Appellant, D.C. No.  CV-06-00735-PK

v.

OPINION ILLINOIS UNION INSURANCE CO.,

Defendant-Appellee. 

Appeal from the United States District Court

for the District of Oregon

Paul J. Papak, Magistrate Judge, Presiding

Argued and Submitted

March 4, 2009—Portland, Oregon

Filed March 25, 2009

Before: Susan P. Graber, Raymond C. Fisher, and

Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Graber

3843
COUNSEL

Michael A. Maurer, Lukins & Annis, P.S., Spokane, Washington, for the plaintiff-appellant. 

Donald J. Verfurth, Carney Badley Spellman, P.S., Seattle,

Washington, for the defendant-appellee. 

OPINION

GRABER, Circuit Judge: 

Plaintiff Alexander Manufacturing, Inc. Employee Stock

Ownership Plan and Trust, the sole shareholder of Alexander

Manufacturing, Inc. (“AMI”), sued Defendant Illinois Union

Insurance Company, seeking to recover under an insurance

policy that Defendant had issued to AMI. Plaintiff was the

assignee of post-loss claims under the policy. The district

court held that, under Oregon law, the insurance policy’s antiassignment clause prevented post-loss assignment of the

claims to Plaintiff. We read the policy and Oregon law differently and, accordingly, reverse.

FACTUAL AND PROCEDURAL HISTORY

Plaintiff is an employee stock ownership plan, a pension

plan defined by 29 U.S.C. § 1002(2)(A) of the Employee

Retirement Income Security Act of 1974 (“ERISA”), which

was organized in Oregon effective in 1998. Plaintiff was the

sole shareholder of AMI. 

ALEXANDER MANUFACTURING v. ILLINOIS UNION 3845
Plaintiff filed an action against three of its former fiduciaries, William Klutho, Daniel Spofford, and Donald Thoreson, alleging breach of fiduciary duty under ERISA. These

same individuals were also former directors and officers of

AMI. Plaintiff also brought a derivative action against them,

alleging that they had breached certain duties owed as directors and officers of AMI. 

AMI had previously purchased an insurance policy from

Defendant, covering the period from January 1, 2003, to January 1, 2004. Under the insurance policy, AMI had “Directors

& Officers and Company” coverage with a limit of $1 million. AMI also had fiduciary liability coverage with an additional limit of $1 million. The policy contained an antiassignment clause, which stated that “[a]ssignment of interest

under this Policy shall not bind Insurer unless their consent is

endorsed hereon.” 

Plaintiff resolved the claims against Klutho, Spofford, and

Thoreson through a settlement agreement for $1.3 million.

The settlement agreement contained the following clause: 

Klutho, Spofford and Thoreson hereby each

assign to [Plaintiff] any and all claims and/or causes

of action each may possess against [Defendant]

relating to, but not by means of limitation any and all

rights or obligations relating to policy number

BMI20004728. It is not the intent of the parties

through this assignment to extinguish any claims

which Klutho, Spofford and Thoreson may have

against the insurance company, and this assignment

therefore, does not release Klutho, Spofford and

Thoreson from the liability, nor should it be construed in any way [to] affect any obligation of

indemnity on the part of the insurance company. 

The individuals paid $10,000 each and then assigned their

rights under Defendant’s insurance policy to Plaintiff. Plain3846 ALEXANDER MANUFACTURING v. ILLINOIS UNION
tiff agreed not to execute the remainder of the judgment

against the individuals and to bring the claim against Defendant instead. Defendant consented neither to the settlement

agreement nor to the assignment of the policy to Plaintiff. 

Plaintiff filed the present action against Defendant for

breach of the duty to indemnify and breach of the duty of

good faith and fair dealing. The parties filed cross-motions for

summary judgment on the issue of assignability of claims.

After briefing and oral argument, the district court granted

Defendant’s motion for summary judgment, denied Plaintiff’s

cross-motion for summary judgment, and dismissed the case.

Plaintiff timely appeals. 

STANDARDS OF REVIEW

We review de novo the district court’s grant of summary

judgment and may affirm on any ground supported by the

record. Dietrich v. John Ascuaga’s Nugget, 548 F.3d 892, 896

(9th Cir. 2008). We must determine, viewing the evidence in

the light most favorable to the nonmoving party, whether

there are any genuine issues of material fact and whether the

district court correctly applied the relevant substantive law.

Id.

DISCUSSION

A. Applicable Law

We have diversity jurisdiction, so we must follow Oregon

law with respect to the interpretation of the insurance policy.

Kabatoff v. Safeco Ins. Co. of Am., 627 F.2d 207, 209 (9th

Cir. 1980). Three decisions by the Oregon Supreme Court are

relevant to our analysis: Groce v. Fid. Gen. Ins. Co., 448 P.2d

554 (Or. 1968); Hoffman Constr. Co. of Alaska v. Fred S.

James & Co., 836 P.2d 703 (Or. 1992); and Holloway v.

Republic Indem. Co. of Am., 147 P.3d 329 (Or. 2006). 

ALEXANDER MANUFACTURING v. ILLINOIS UNION 3847
[1] Groce addressed an anti-assignment provision that is

almost identical to the provision in this case. The provision in

Groce read: “Assignment of interest under this policy shall

not bind the company until its consent is endorsed hereon.”

448 P.2d at 559 (alterations omitted). The insurer in Groce

had argued that the text of the provision prohibited the assignment of post-loss causes of action against the insurer without

the insurer’s endorsement. Id. The Oregon Supreme Court

rejected that argument summarily, stating:

But the contention that such a clause prohibits the

insured from assigning his cause of action need not

detain us. It is well settled that such a provision does

not preclude the assignment of a cause of action for

damages for breach of a contract.

Id. The court supported its statement by citing only California

state law cases. 

In Hoffman, the Oregon Supreme Court set forth an analytical approach to the construction of insurance contracts. 836

P.2d at 706-07. Noting that interpretation of insurance contracts is a question of law, the court stated that the “ ‘primary

and governing rule of the construction of insurance contracts

is to ascertain the intention of the parties.’ ” Id. at 706 (quoting Totten v. N.Y. Life Ins. Co., 696 P.2d 1082, 1086 (Or.

1985)). The court held that “[w]e determine the intention of

the parties based on the terms and conditions of the insurance

policy.” Id.

At issue in Hoffman was how to interpret the phrase

“amount recoverable.” Id. at 705. The plaintiff and the defendant offered competing, “plain meaning” interpretations. Id.

The plaintiff argued that, because the term reasonably could

be interpreted in two ways, it was ambiguous and should be

construed against the insurer, who drafted the policy. Id. The

Oregon Supreme Court disagreed, holding that, before resort3848 ALEXANDER MANUFACTURING v. ILLINOIS UNION
ing to the rule of construction against the insurer, a court must

engage in a series of analytical steps: 

In other words, a term is ambiguous in a sense that

justifies application of the rule of construction

against the insurer only if two or more plausible

interpretations of that term withstand scrutiny, i.e.,

continues to be reasonable, after the interpretations

are examined in the light of, among other things, the

particular context in which that term is used in the

policy and the broader context of the policy as a

whole.

Id. Thus, if one possible meaning of a term is not reasonable

in light of the other provisions of the policy, leaving only the

other reasonable interpretation of the term, there is no remaining ambiguity. In such a case, “resort to the rule that ambiguities are construed against the insurer is inappropriate.” Id. at

709. 

In 2006, the Oregon Supreme Court reaffirmed the analytical approach in Hoffman when it construed an anti-assignment

clause in an insurance policy. Holloway, 147 P.3d at 333-35.

In Holloway, the plaintiff sued the insured, claiming that she

had been sexually harassed while employed by the insured.

Id. at 331-32. The insurer refused to defend and indemnify the

insured. Id. at 332. The plaintiff and the insured settled the

case and, under the settlement, the insured assigned to the

plaintiff the insured’s right to defense and indemnity under

the insurance policy. Id. Once she received the assignment,

the plaintiff filed an action for breach of contract against the

insurer. Id. The insurance policy contained an anti-assignment

clause that provided: “Your rights or duties under this policy

may not be transferred without our written consent.” Id. at

331. 

The Oregon Court of Appeals held that the provision was

ambiguous because it did not define which particular rights or

ALEXANDER MANUFACTURING v. ILLINOIS UNION 3849
duties could not be assigned and, therefore, construed the

clause in favor of the insured. Id. at 332-33. The Oregon

Supreme Court reversed after reaffirming and elaborating on

the analytical approach introduced in Hoffman. Id. The court

held that, if the insurance policy explicitly defines the phrase

in question, the court applies that definition. Id. If the policy

does not define the phrase in question, the court must consider

whether the phrase has a plain meaning. Id. If the phrase in

question has a plain meaning, the court must apply that meaning and no further analysis is needed. Id. If the phrase in question has more than one plausible interpretation, the court must

then examine the context in which the phrase is used and the

broader context of the policy as a whole. Id. at 333-34. It is

only after this full contextual examination that any remaining

ambiguity should be construed against the drafter. Id. at 334.

Following this framework, the Oregon Supreme Court held

that the anti-assignment clause in Holloway was not ambiguous and that the provision was broadly worded to include both

pre-loss and post-loss rights. Id. at 335. Specifically, the court

held that “the clause applies to whatever rights or duties the

insured may have under the policy” and that “[n]othing in the

clause suggests a limitation to pre-loss rights or duties or provides an exception for post-loss rights or duties.” Id. at 334.

The court further held that “[r]eading such an exception into

the policy would not be reasonable.” Id. In holding the assignment invalid, the court distinguished contrary authority from

other jurisdictions on the ground that those courts did not follow Oregon’s analytical approach to the construction of insurance contracts. Id. at 335. 

B. Interpretation of the Anti-Assignment Clause

The parties dispute what Oregon law requires us to do as

we interpret the anti-assignment clause before us. Plaintiff

argues that Groce remains good law and stands for the proposition that an anti-assignment clause worded like this one

applies only to pre-loss assignments. Defendant argues that

3850 ALEXANDER MANUFACTURING v. ILLINOIS UNION
Holloway holds that any anti-assignment clause that fails to

limit its scope expressly must be interpreted to apply to preloss and post-loss rights, thus implicitly overruling Groce and

controlling our decision. 

[2] We agree with Plaintiff. Groce declared a substantive

rule of law concerning the interpretation of a specific clause

in insurance contracts. The clause at issue in that case—

“Assignment of interest under this policy shall not bind the

company until its consent is endorsed hereon,” Groce, 252 Or.

at 306 (alterations omitted), was materially identical to the

clause here—“Assignment of interest under this Policy shall

not bind Insurer unless their consent is endorsed hereon.”

Hoffman provided a method for analyzing insurance contracts

in the future but did not overrule any previous substantive

case, including Groce. In fact, the Oregon Supreme Court did

not even mention Groce in either Hoffman or Holloway. The

court did not suggest that every pre-Hoffman case, which, by

definition, had not applied Hoffman’s analytical steps, was

overruled. 

[3] Furthermore, the rule set forth in Groce, that this antiassignment clause applies only to pre-loss assignments, is not

undercut by the Hoffman methodology. Even if Groce were

not binding, this anti-assignment clause is ambiguous.1 There

are two plausible interpretations of the term “interest”: one in

which “interest” does not encompass post-loss assignments,

and one in which “interest” does apply to post-loss as well as

pre-loss assignments. See Hoffman, 836 P.2d at 706. 

Regarding the first interpretation, “interest” plausibly could

refer to a financial stake in the policy, as distinct from a financial stake in a post-loss cause of action. In that sense, no “interest” in the policy may be assigned, for the sensible reason

that the insurer accepts only the known risk of a particular

1Holloway is not instructive in applying Hoffman here, because the antiassignment clauses are worded very differently. 

ALEXANDER MANUFACTURING v. ILLINOIS UNION 3851
insured. See 16 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 49.51, at 420 (4th ed. 2000).

That purpose is irrelevant after a known loss already has

occurred. A definition of the term “interest” in Black’s Law

Dictionary supports this reading: “A legal share in something;

all or part of a legal or equitable claim to or right in property.”

Black’s Law Dictionary 828 (8th ed. 2004). The words that

follow “interest” in the anti-assignment clause also support

this reading: The clause precludes assignment of an “interest

under this policy” (emphasis added), not an interest in later

causes of action. 

On the other hand, “interest” could be understood to

include both pre- and post-loss assignments. An alternate definition of “interest” contained in Black’s Law Dictionary is

the following: “Collectively, the word includes any aggregation of rights, privileges, powers, and immunities; distributively, it refers to any one right, privilege, power, or

immunity.” Id. Under that definition, one plausibly could

interpret “interest” in the anti assignment clause to encompass

all rights, including post-loss assignments. 

[4] Reviewing the greater context of “interest” and other

provisions of the policy, we find no clues to determine which

of the two plausible interpretations was intended by the parties. When both interpretations are reasonable in light of the

other provisions of the policy, the court must resort to the rule

of construction against the insurer. Hoffman, 836 P.2d at 706.

Defendant drafted the anti-assignment clause, so we construe

the term against it. The usual presumption against the drafter

applies with particular force here in view of the clear rule of

Groce; Defendant chose a nearly identical anti-assignment

clause with constructive knowledge of its meaning. Because

Plaintiff’s interpretation of the anti-assignment clause is reasonable in context, because Defendant drafted it, and because

Defendant chose a clause with a known meaning under Oregon law, we hold that the anti-assignment clause at issue in

this case excludes post-loss assignments. 

3852 ALEXANDER MANUFACTURING v. ILLINOIS UNION
REVERSED. 

ALEXANDER MANUFACTURING v. ILLINOIS UNION 3853