Opinion ID: 377942
Heading Depth: 2
Heading Rank: 3

Heading: Coverage of SWF

Text: 29 Finally, Transport contends that the district judge erred in refusing to consider an alleged oral agreement between Transport and Southwest Forest Industries providing that Transport would be liable as an excess insurer of SWF only. The district judge based his ruling in part on an Oregon statute which requires that every contract of insurance shall be construed according to the terms and conditions of the policy. O.R.S. 743.045. Transport argues that the district judge should not have applied Oregon substantive law because Oregon courts would have applied the law of California or Arizona, as states with significant contacts which would uphold the validity of the oral agreement. In the alternative, Transport argues that the Oregon statute is merely a statutory embodiment of the parol evidence rule, the proper analysis of which would uphold the contract. 30 As to the choice-of-law issue, we cannot say that the district judge erred in applying Oregon law. Transport does not deny that Oregon has significant contacts with the transactions at issue here, but argues that the so-called rule of validation should be applied so as to uphold the alleged oral agreement between the parties. Although it is true that Oregon recognized the rule of validation in Lilienthal v. Kaufman, 239 Or. 1, 395 P.2d 543 (1964), it is also true that the Oregon Supreme Court applied the law of Oregon in that case because of Oregon's strong interest in applying its own law. We cannot say that the district judge, as one experienced in the law of Oregon, incorrectly concluded that the courts of Oregon would find a similar interest in the enforcement of that State's policy of having contracts of insurance interpreted according to the expectations arising from the written document. 31 Moreover, Transport failed to demonstrate that a different result would have been required under the law of Arizona or California. The full extent of its legal authority was the citation to one Arizona case holding that parol insurance contracts are valid under Arizona law. Beyond that, however, Transport simply argues that the alleged agreement should be viewed as collateral to the written policy or as an aid to its construction. We agree with Liberty, however, that the alleged oral agreement contradicts the face of the policy, which lists SWF as a named insured to receive its primary coverage. It is equally clear that the oral agreement goes far beyond aiding in construction of the policy's terms; rather than merely clarifying the identity of one of the named insureds, it varies the nature of the coverage provided. Finally, Transport's argument that the parol evidence rule does not apply where one of the parties to the proceeding is a stranger to the contract is also without merit. See 4 Williston on Contracts § 647, at 1161-67 (1961). 32 The district judge correctly applied Oregon law. We reject Transport's contention that the statutory provision in question is merely a codification of the parol evidence rule. This provision is part of the insurance code of the State. Under such statutes, the policy . . . constitutes the sole contract, to the exclusion of all anterior or contemporaneous agreements not contained or expressed in the policy . . . . Couch on Insurance 2d § 3:21, at 144 (1959). See, e. g., Spain v. Travelers Ins. Co., 332 So.2d 827 (La.1976). 33 AFFIRMED.