1 – OPINION AND ORDER

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

ARGONAUT GREAT CENTRAL

INSURANCE COMPANY,

Plaintiff, Case No. 6:15-cv-01466-MC

v. OPINION AND ORDER

C&K MARKET, INC.; PAUL R. 

DANOFF; KIM L. DANOFF; 

AND THE DANOFF FAMILY 

TRUST 2000,

Defendant.

_____________________________

MCSHANE, Judge:

Plaintiff Argonaut Great Central Insurance Company (“Argonaut”) and Defendants Paul 

Danoff, Kim Danoff, and the Danoff Family Trust 2000 (collectively “Danoff”) filed cross 

motions for summary judgment to determine the availability of insurance coverage for a claim by 

Danoff for damages to a grocery store located at 330 Dakota Street in Sutherlin, Oregon (the 

Storefront). Because C&K Market, Inc. (“C&K), the named insured, did not suffer a covered loss 

under the policy, Danoff, the loss payee, may not recover under that policy. Danoff’s motion for 

summary judgment, ECF No. 17, is DENIED, and Argonaut’s motion for summary judgment, 

ECF No. 12, is GRANTED.

Case 6:15-cv-01466-MC Document 24 Filed 05/12/16 Page 1 of 8
2 – OPINION AND ORDER

BACKGROUND

This action arises out of a claim that Danoff filed as a loss payee under a Grocers 

Advantage Plus insurance policy purchased by C&K. C&K built the Storefront in 2001. In early 

2003, C&K sold the Storefront to Crest Net Lease, Inc. (“Crest Net”) and entered into a lease 

agreement with Crest Net. Danoff purchased the Storefront from Crest Net in October 2003 and 

assumed the existing lease agreement between C&K and Crest Net. Danoff did not inspect the 

Storefront before purchasing it. Nor did Danoff receive from Crest Net any inventory regarding 

what property, if any, came with the purchase. Lehner Decl. Ex. 5, 8, 10.

Under the lease, C&K was obligated to purchase an insurance policy naming Danoff as 

loss payee and C&K as the named insured. C&K purchased a Grocers Advantage Plus insurance 

policy (the Agreement) from Argonaut, which specified a policy period from Sept. 1, 2013 to 

Sept. 1, 2014. 

During the policy period, C&K filed for Chapter 11 Bankruptcy and liquidated all assets 

in the store including portions of the building’s HVAC system, plumbing, piping, condensers, 

water heating equipment, and materials. The parties dispute ownership of some of the liquidated 

assets. Argonaut submitted declarations demonstrating C&K owned everything sold during the 

liquidation of the Storefront. Danoff argues that while C&K may have believed it owned the 

liquidated items, many items were actually owned by Danoff as of October 2003 when Danoff 

purchased the Storefront from Crest Net. Additionally, some tiles, drywall, and flooring of the 

Storefront were damaged during the policy period. Argonaut submitted evidence demonstrating 

the above damage was ordinary wear and tear.

Danoff, as the loss payee, made a claim under the Agreement in December 2013. C&K, 

the insured, denied it sustained any covered loss and made no claim under the Agreement. 

Case 6:15-cv-01466-MC Document 24 Filed 05/12/16 Page 2 of 8
3 – OPINION AND ORDER

Argonaut adjusted Danoff’s claim, including taking examinations under oath of Paul Danoff and 

two C&K representatives. Argonaut ultimately denied Danoff’s claim.

During the bankruptcy proceedings, Danoff settled its claims with C&K. The sole 

remaining claims are Argonaut’s claim for declaratory relief and Danoff’s claim alleging

Argonaut breached the Agreement by denying Danoff’s claim.

INSURANCE POLICY TERMS AND CONDITIONS

Argonaut issued commercial property coverage to C&K providing insurance for 79 

different store locations. The Storefront is listed as property No. 60 and is identified as a 

warehouse. Lehner Decl. Ex. 6, 7. Under the Agreement, a loss payee is only entitled payment in 

“the event of loss or damaged covered” in the Agreement. The relevant portions of the policy 

state:

Throughout this policy the words "you" and "your" refer to the Named Insured shown in the declarations.

***

A. Coverage.

We will pay for direct physical loss of or damage to covered

property at the premises described in the declarations caused by or

resulting from any covered cause of loss.

***

A. Covered Causes of Loss

When Special is shown in the Declarations, Covered Causes of Loss 

means direct physical loss unless the loss is excluded or limited in this 

policy.

B. Exclusions

***

Case 6:15-cv-01466-MC Document 24 Filed 05/12/16 Page 3 of 8
4 – OPINION AND ORDER

1. We will not pay for loss or damage caused by or resulting from 

any of the following: 

***

d.(1) Wear and tear;

***

h. Dishonest or criminal act (including theft) by you, any of 

your partners, members officers, managers, employees 

(including temporary employees and leased workers), 

directors, trustees or authorized representatives, whether 

acting alone or in collusion with each other with any other 

party; or theft by any person to whom you entrust the 

property for any purpose, whether acting alone or in 

collusion with any other party.

***

C. Limitations

The following limitations apply to all policy forms and endorsements 

unless otherwise stated:

1. We will not pay for loss of or damage to property, as described and 

limited in this section. In addition, we will not pay for any loss that 

is a consequence of loss or damage as described and limited in this 

section.

***

d. Building materials and supplies not attached 

as part of the building or structure, caused

by or resulting from theft.

e. Property that is missing, where the only 

evidence of the loss or damage is a shortage 

disclosed on taking inventory, or other 

instances where there is no physical 

evidence to show what happened to the 

property.

Case 6:15-cv-01466-MC Document 24 Filed 05/12/16 Page 4 of 8
5 – OPINION AND ORDER

f. Property that has been transferred to a 

person or to a place outside the described 

premises on the basis of unauthorized 

instructions.

STANDARDS

The court must grant summary judgment if there is no genuine issue of material fact and 

the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). An issue is 

“genuine” if a reasonable jury could return a verdict in favor of the non-moving party. Rivera v. 

Phillip Morris, Inc., 395 F.3d 1142, 1146 (9th Cir. 2005) (citing Anderson v. Liberty Lobby, Inc., 

477 U.S. 242, 248 (1986)). A fact is “material” if it could affect the outcome of the case. Id. The 

court reviews evidence and draws inferences in the light most favorable to the non-moving party. 

Miller v. Glenn Miller Prods., Inc., 454 F.3d 975, 988 (9th Cir. 2006) (quoting Hunt v. 

Cromartie, 526 U.S. 541, 552 (1999)). When the moving party has met its burden, the nonmoving party must present “specific facts showing that there is a genuine issue for trial.” 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87 (quoting Fed. R. Civ. 

P. 56(e)).

DISCUSSION

Under “an ‘all-risks’ insurance policy, the insured's burden is limited. The insured need 

only show that a physical loss occurred to covered property.” Columbiaknit, Inc. v. Affiliated FM 

Ins. Co., No. CIV. 98-434-HU, 1999 WL 619100, at *3–4 (D. Or. Aug. 4, 1999). The insurer

then has the burden of proof to show that any loss is excluded. Stanford v. Am. Guar. Life Ins. 

Co., 280 Or. 525, 527 (1977). Any and all “ambiguity in an exclusionary clause is strictly 

construed against the insurer.” Id.

Case 6:15-cv-01466-MC Document 24 Filed 05/12/16 Page 5 of 8
6 – OPINION AND ORDER

If “an insurance policy contains a loss-payable clause, the ‘loss payee’ does not claim as 

an assignee of the policy, but merely as an appointee to collect the insurance; consequently, he

must claim in the right of the insured, and not in his own right. Armbrust v. Travelers Ins. Co., 

232 Or. 617, 621 (1962). Because it is not a party to the insurance contract, a loss payee may not 

recover absent any loss by the named insured. Transp. Equip. Rentals Inc. v. Oregon Auto. Ins. 

Co., 257 Or. 294 (1970). As a result, Danoff’s right to payment under the Agreement is derived 

from the rights of C&K under the Agreement. Contrary to Danoff’s argument, demonstrating 

C&K suffered a covered loss is an “essential element” of its claim. Id. at 293. Transportation 

Equipment is both instructive and controlling on this issue.

In Transportation Equipment, A log loader was destroyed while in transport between the 

owner and the lessee. The policy named the owner as the loss payee and the lessee as the named 

insured. Although the lessee had an insurable interest in the loader, it suffered no loss in its 

destruction. Consequently, even though the owner of the loader suffered a loss, it could not 

recover as the loss payee under the policy because the insurer owed nothing to the insured lessee. 

Id. at 295. 

The facts here are analogous to those in Transportation Equipment. Danoff owned the 

Storefront and no doubt suffered a loss when it was damaged. But “it is the damage sustained by 

the party insured and not by the party appointed to receive payment that is recoverable from the 

insurer.” Id. at 294 (quoting Charles R. Allen, Inc. v. Rhode Island Ins. Co., 217 S.C. 296 (1950) 

(emphasis in original)). Like the lessee in Transportation Equipment, C&K suffered no damages. 

Danoff, as C&K’s appointee, is entitled to nothing under the Agreement.

Danoff’s argument supporting recovery under the policy fall into three broad categories: 

claims resulting from the liquidation of assets in the Storefront; claims related to unintentional 

Case 6:15-cv-01466-MC Document 24 Filed 05/12/16 Page 6 of 8
7 – OPINION AND ORDER

damage to the Storefront; and claims for lost business income. All these claims fail because 

Danoff cannot establish that C&K could have claimed these same losses under the Agreement.

Danoff cannot recover for property damaged when C&K intentionally liquidated the 

Storefront. First, if C&K liquidated the property knowing it belonged to Danoff, such an act 

would constitute theft under ORS §164.015, and would fall outside of coverage due to being a 

“dishonest or criminal act” by C&K. Second, even if C&K liquidated the property with an honest 

but mistaken belief that it owned the property, Danoff’s claim fails because C&K did not suffer 

any loss. Danoff’s proper remedy in that case is through a contract or tort claim against C&K, 

not a commercial property coverage claim against Argonaut.1 Third, C&K may have owned all 

the liquidated property, in which case neither it nor Danoff suffered any damages.

2

Danoff also seeks to recover physical damage to the Storefront including damage to the 

flooring, tiling, drywall, and a sliding glass door. Argonaut presented evidence demonstrating

that these damages were ordinary wear and tear. Lehner Decl., Ex. 2, 16–17. 3 Danoff failed to 

rebut that evidence. The Agreement specifically excludes coverage for ordinary wear and tear. 

Lehner Decl. Ex. 6, 36. Danoff is not entitled to recover for these alleged damages. 

Finally, Danoff seeks to recover rental income it lost due to damage to the Storefront. 

The Agreement’s Business Income Coverage Form provides that Argonaut “will pay for the loss 

 1 As noted, Danoff settled all claims against C&K during C&K’s bankruptcy proceedings.

2 C&K submitted evidence demonstrating it owned all of the liquidated property. Lehner Decl. Ex. 2, 9-13, 15. 

Danoff failed to rebut that evidence. Danoff’s submission of the June 2001 architectural and mechanical plans for 

the Storefront fails to create a genuine issue of material fact as to whether Danoff owned any of the liquidated 

property. The Storefront changed hands between C&K building it in 2001 and Danoff purchasing it from Crest Net 

in 2003. And there is no evidence the property on the plans was ever actually in the Storefront, either in 2003 or 

2001. Danoff admitted to never setting foot inside the Storefront, and never having an inventory prepared of 

equipment or fixtures included in the sale before purchasing it in 2003 from Crest Net. Lehner Decl. Ex. 5, 8, 10. 

Unlike C&K, Danoff did not keep careful inventory records of the Storefront for depreciation on taxes. Finally, C&K 

used its inventory records to keep track of property sold at the liquidation auction. 3 Although Danoff argues that admission of statements by C&K employees related to wear and tear is hearsay, FRE 

801(d)(2) provides that opposing party statements are not hearsay.

Case 6:15-cv-01466-MC Document 24 Filed 05/12/16 Page 7 of 8
8 – OPINION AND ORDER

of Business Income you sustain . . . .” Lehner Decl. Ex. 6, 25. That form also provides, 

“Throughout this policy, the words ‘you’ and ‘your’ refer to the Named Insured shown in the 

Declarations.” Id. As Danoff is not a named insured, the Agreement does not cover Danoff’s lost 

rental income. 

CONCLUSION

The Agreement names Danoff as a loss payee in the event of a covered loss. Here, C&K 

suffered no covered loss. Accordingly, Danoff’s motion for summary judgment, ECF No. 17, is 

DENIED, and Argonaut’s motion for summary judgment, ECF No. 12 is GRANTED.

4

IT IS SO ORDERED.

DATED this 12th day of May, 2016.

_______/s/ Michael McShane______ 

Michael McShane

United States District Judge

 4 Because Danoff cannot recover for the damages claimed in this case, Danoff’s bad faith and interference claims 

fail as a matter of law.

Case 6:15-cv-01466-MC Document 24 Filed 05/12/16 Page 8 of 8