Court Opinion

ID: 9900381
Source: CourtListenerOpinion
Date Created: 2023-11-18 22:11:56.609287+00
Date Added: 2024-06-11T09:21:08.580958
License: Public Domain

No. 418                 August 16, 2023                  499

           IN THE COURT OF APPEALS OF THE
                   STATE OF OREGON

                    BA VENTURES, LLC,
          an Oregon foreign limited liability company;
             and Pacific Clearvision Institute, PC,
              an Oregon professional corporation,
               dba Pacific Clearvision Institute,
                     Plaintiffs-Appellants,
                                v.
            FARMERS INSURANCE EXCHANGE,
                   a California corporation,
                    Defendant-Respondent.
                  Lane County Circuit Court
                     20CV19356; A176901

   Karrie K. McIntyre, Judge.
   Argued and submitted February 14, 2023.
   Frederick A. Batson argued the cause for appellants.
Also on the briefs was Gleaves Swearingen LLP.
   Christopher J. Cox argued the cause for respondent. Also
on the brief were Jacqueline Tokiko Mitchson, R. Daniel
Lindahl, Vanessa O. Wells, Joseph T. Spoerl, Ronald J. Clark,
Bullivant Houser Bailey PC and Hogan Lovells US LLP.
  Before Shorr, Presiding Judge, and Mooney, Judge, and
Pagán, Judge.
   PAGÁN, J.
500                BA Ventures, LLC v. Farmers Ins. Exchange

         PAGÁN, J.
         BA Ventures, LLC and Pacific Clearvision
Institute, PC (PCVI) (collectively, plaintiffs) appeal from a
general judgment of dismissal that was entered after the
trial court denied plaintiffs’ motion for summary judg-
ment and granted the cross-motion for summary judgment
filed by defendant Farmers Insurance Company. Plaintiffs
assign error to the court’s rulings denying their motion and
granting defendant’s cross-motion. Plaintiffs filed a claim
with defendant for loss of revenue from its ophthalmologi-
cal facilities during the early weeks of the COVID-19 pan-
demic. Plaintiffs argued that they were required to deliver
surplus personal protective equipment (PPE) to the state
and the loss of that property caused their loss of revenue.
In its order on the motions for summary judgment, the trial
court ruled, among other things, that the insurance policy’s
Governmental Action Exclusion applied, and that the cause
of plaintiff’s loss of revenue was an executive order issued
by the Governor of Oregon.1 We conclude that the trial court
did not err when it denied plaintiffs’ motion for summary
judgment and granted defendant’s cross-motion. We there-
fore affirm.
                            FACTS
         The relevant facts are largely undisputed. Plaintiffs
operate three eye care clinics in the Eugene area, and their
business consists mainly of nonemergency and elective pro-
cedures.2 In March 2020, when the COVID-19 pandemic
began, Oregon’s Governor declared a state of emergency. On
March 19, 2020, as a result of a shortage of PPE for health-
care providers, the Governor issued Executive Order 20-10
(EO 20-10).3 It suspended all elective and nonurgent med-
ical procedures that utilized PPE effective March 23, and
it directed medical offices to arrange for delivery of their
surplus PPE to the state’s PPE Coordinator. In compliance
    1
      At all relevant times, Kate Brown was the Governor of Oregon.
    2
      Dr. Balamurali Ambati is the manager and sole member of BA Ventures,
LLC, and he is the president of PCVI. BA Ventures owns at least two of the build-
ings that house the clinics. The insurance policy names both BA Ventures and
PCVI as the insureds.
    3
      A copy of E0-10 is available at https://www.oregon.gov/gov/eo/eo_20-10.pdf
(accessed July 27, 2023).
Cite as 327 Or App 499 (2023)                                 501

with EO 20-10, plaintiffs canceled scheduled appointments
and procedures and laid off most staff beginning March
23. Dr. Ambati delivered about 100 masks and 200 pairs of
gloves to a private hospital on or around April 9, 2020. The
clinics continued to see some patients on a limited basis over
the following weeks. After purchasing replacement PPE in
late April, the clinics resumed services in May 2020 when
EO 20-10 was rescinded.
         Plaintiffs were insured by an insurance policy pur-
chased from defendant. The pertinent clauses of the insur-
ance policy are contained in the Businessowners Special
Property Coverage Form (Coverage Form). Section A of
the Coverage Form provides, “We will pay for direct phys-
ical loss of or damage to Covered Property at the premises
described in the Declarations caused by or resulting from
any Covered Cause of Loss.” The form describes covered
property, property not covered, covered causes of loss, lim-
itations, additional coverages, coverage extensions, and
exclusions. Covered property includes “the buildings and
structures at the premises,” and business personal property,
which includes property that “you own that is used in your
business.” Covered causes of loss consist of “[r]isks of Direct
Physical Loss.”
        Under Additional Coverages, the policy includes
coverage for loss of Business Income and Extra Expense:
      “f. Business Income
      “(1) Business Income
      “We will pay for the actual loss of Business Income you
   sustain due to the necessary suspension of your ‘operations’
   during the ‘period of restoration’. The suspension must be
   caused by direct physical loss of or damage to property at
   the described premises. The loss or damage must be caused
   by or result from a Covered Cause of Loss. * * *
      “* * * * *
      “g. Extra Expense
      “(1) We will pay necessary Extra Expense you incur
   during the ‘period of restoration’ that you would not have
   incurred if there had been no direct physical loss or damage
502                 BA Ventures, LLC v. Farmers Ins. Exchange

   to property at the described premises. The loss or damage
   must be caused by or result from a Covered Cause of Loss.”
“Suspension” of operations includes “[t]he partial slowdown
or complete cessation of your business activities.”4
        The Civil Authority clause is included in the
Additional Coverages section:
       “i. Civil Authority
       “We will pay for the actual loss of Business Income you
   sustain and necessary Extra Expense caused by action of
   civil authority that prohibits access to the described prem-
   ises due to direct physical loss of or damage to property,
   other than at the described premises, caused by or result-
   ing from any Covered Cause of Loss.”
       After detailing the coverage parameters, section B
   of the Coverage Form sets forth a number of exclusions,
   including the Governmental Action Exclusion:
       “B. Exclusions
       “1. We will not pay for loss or damage caused directly
   or indirectly by any of the following. Such loss or damage
   is excluded regardless of any other cause or event that con-
   tributes concurrently or in any sequence to the loss.
       “* * * * *
       “c. Governmental Action
     “Seizure or destruction of property by order of govern-
   mental authority.”
The policy also excludes coverage for “loss or damage caused
by or resulting from any virus, bacterium or other microor-
ganism that induces or is capable of inducing physical dis-
tress, illness or disease.”5
        On March 24, 2020, shortly after the Governor
issued EO 20-10, Ambati contacted defendant by telephone
seeking to file a claim for “business interruption insurance.”
On March 28 and March 29, defendant sent Ambati two let-
ters denying coverage. Defendant explained that the policy
   4
     The definition of “suspension” in the Coverage Form was amended in an
Endorsement.
   5
     The virus exclusion was included in an Endorsement.
Cite as 327 Or App 499 (2023)                                                503

did not cover the loss of income because plaintiffs had not
experienced a direct physical loss of or damage to property
at the insured premises, and the policy excluded coverage
caused by or resulting from a virus.
         On April 9, 2020, around the same time that Ambati
delivered the surplus PPE to a hospital, plaintiffs requested
reconsideration of the denial of insurance coverage, assert-
ing that the loss of surplus PPE in response to EO 20-10 was
a direct physical loss of property, and that the loss of that
property caused the business income losses, due to plain-
tiffs being unable to safely conduct procedures. Plaintiffs
further argued that their loss of business income and extra
expenses were covered under the Civil Authority clause, and
they argued that the virus exclusion did not apply.
         Defendant again denied coverage continuing to
invoke the virus exclusion. Defendant argued that the exec-
utive order was “not a mandatory seizure order,” and that
the loss of PPE was a “voluntary donation.” In the alter-
native, defendant argued that “[i]f Oregon is instituting a
mandatory confiscation of PPE, seizure of property due to
Government Action is excluded under the policy.”
         In May 2020, plaintiffs filed a complaint against
defendant asserting a claim for breach of contract and seek-
ing declaratory relief that the losses were covered under
the insurance policy. Plaintiffs alleged business income
losses and extra expenses of approximately $235,418.08.
Defendant answered and counter-claimed, seeking declar-
atory relief that the policy did not cover the claimed losses.
         Plaintiffs moved for summary judgment. Defendant
opposed the motion and filed a cross-motion for summary
judgment. After a hearing on the motions, the trial court
concluded that the executive order canceling nonessential
procedures was the efficient proximate cause of plaintiffs’
business losses, and that coverage was precluded by the
Governmental Action Exclusion, which was unambiguous.6
As a result, the trial court denied plaintiffs’ motion, granted
defendant’s motion, and entered a general judgment of dis-
missal. Plaintiffs appeal.
   6
       The trial court also determined that the virus exclusion did not apply.
504               BA Ventures, LLC v. Farmers Ins. Exchange

                             ANALYSIS
         “Each party moving for summary judgment has the
burden of demonstrating that there are no material issues
of fact and that it is entitled to judgment as a matter of law.
ORCP 47 C. On review of a trial court’s grant of summary
judgment, we view the evidence and all reasonable infer-
ences that may be drawn from the evidence in the light most
favorable to the nonmoving party.” TriMet v. Amalgamated
Transit Union Local 757, 362 Or 484, 491, 412 P3d 162
(2018). “Under Oregon law, the initial burden of proving cov-
erage is on the insured.” Employers Insurance of Wausau v.
Tektronix, Inc., 211 Or App 485, 509, 156 P3d 105, rev den,
343 Or 363 (2007). “Conversely, the insurer has the burden
of proving that the policy excludes coverage.” Id.
         Plaintiffs argue that their lost business income and
extra expenses were covered because the loss of their sur-
plus PPE caused those losses and expenses. The policy pro-
vides that defendant “will pay for the actual loss of Business
Income [plaintiffs] sustain due to the necessary suspension
of [plaintiffs’] ‘operations’ during the ‘period of restoration.’
The suspension must be caused by direct physical loss of or
damage to the property at the described premises.” It also
covers extra expenses that would not have been incurred if
there had been no direct loss or damage to property. In its
order denying plaintiffs’ motion for summary judgment and
granting defendant’s cross-motion, relying on Naumes, Inc.
v. Landmark Ins. Co., 119 Or App 79, 82, 849 P2d 554 (1993),
the trial court determined that the loss of plaintiffs’ surplus
PPE was not the cause of plaintiffs’ lost business income;
instead, the trial court determined that the Governor’s
order caused that loss.
         We agree with the trial court’s rulings denying plain-
tiffs’ motion for summary judgment and granting summary
judgment in favor of defendant. Even assuming that there is
a material issue of fact as to whether the loss of surplus PPE
caused some business losses and expenses, the trial court
was not required to submit that coverage question to a jury
because the Governmental Action Exclusion applies.7 Under
    7
      Based on our determination that the Governmental Action Exclusion
applies, we do not address in detail plaintiffs’ other arguments regarding
Cite as 327 Or App 499 (2023)                                                505

that exclusion, the policy excludes coverage for losses that
were caused directly or indirectly by “seizure or destruction
of property by order of governmental authority.”
         Plaintiffs argue that a “seizure” occurs only when
there is wrongdoing on the part of the person or entity dis-
possessed, or when there is a use of force in the act of taking
possession. Plaintiffs reason that because the government
did not take the PPE pursuant to a governmental action
indicating some wrongdoing on plaintiffs’ part or a use of
force, the exclusion should not apply. We are not persuaded
that the parties intended for the Governmental Action
Exclusion to apply only under those circumstances.
         Interpretation of an insurance policy is a question
of law, and our task is to ascertain the intention of the par-
ties to the insurance policy. Holloway v. Republic Indemnity
Co. of America, 341 Or 642, 649, 147 P3d 329 (2006). The
parties’ intentions are determined from the terms of the pol-
icy. Groshong v. Mutual of Enumclaw Ins. Co., 329 Or 303,
307, 985 P2d 1284 (1999). We interpret those terms “accord-
ing to what we perceive to be the understanding of the ordi-
nary purchaser of insurance.” Coelsch v. State Farm Fire
and Casualty Co., 298 Or App 207, 214, 445 P3d 899 (2019).
         To assist in determining that understanding, we
look to dictionary definitions. A “seizure” is “the act of tak-
ing possession of person or property by virtue of a warrant
or by legal authority.” Webster’s Third New Int’l Dictionary
2057 (unabridged ed 2002). Definitions of “seize” include “to
take possession of,” to confiscate, and “to take possession of
(something) after or by a court order, legislative enactment,
or other legal process.” Id. A “seizure” includes the “confisca-
tion or forcible taking possession (of land or goods).” Oxford
English Dictionary 898 (2nd ed 1989). “Seizure” has also
been defined as “[t]he act or an instance of taking possession

coverage. We briefly note, however, that we are not persuaded by plaintiffs’ argu-
ment for coverage under the Civil Authority clause. It covers losses “caused by
action of civil authority that prohibits access to the described premises due to
direct physical loss of or damage to property, other than at the described prem-
ises.” Here, there is no dispute that plaintiffs were not prohibited from accessing
their premises. Plaintiffs argue that the clause applies to partial slowdowns, but
the partial slowdown coverage endorsement amended the definition of suspen-
sion of operations, not access to the premises.
506            BA Ventures, LLC v. Farmers Ins. Exchange

of a person or property by legal right or process.” Black’s
Law Dictionary 1564 (10th ed 2014).
         Based on those definitions, we conclude that plain-
tiffs construe the word “seizure” too narrowly, and that an
ordinary purchaser of insurance would not view the word
as limited to instances that involve wrongdoing or the use
of force. Although a seizure may often involve those ele-
ments, they are not necessary components. Instead, an
ordinary purchaser of insurance would understand the
word more broadly as including any taking of property by
legal or governmental authority. See Horne v. Department
of Agriculture, 576 US 350, 358-59, 135 S Ct 2419, 192 L Ed
2d 388 (2015) (“Virginia allowed the seizure of surplus ‘live
stock, or beef, pork, or bacon’ for the military, but only upon
‘paying or tendering to the owner the price so estimated by
the appraisers.’ And South Carolina authorized the seizure
of ‘necessaries’ for public use[.]” (Citation omitted.)).
         In arguing otherwise, plaintiffs discuss Torres
Hillsdale Country Cheese, L.L.C. v. Auto-Owners Ins. Co., No.
308824, 2013 Mich App LEXIS 1547 (Ct App Oct 1, 2013), an
unpublished opinion in which the Michigan Court of Appeals
determined that losses resulting from the confiscation and
recall of contaminated cheese products were excluded from
coverage. While the court did conclude that the seizures in
question satisfied the exclusion clause, the opinion did not
go so far as to suggest that the relevant exclusions would
not have applied if it had been determined that the cheese-
maker was not responsible for the contamination.
         Plaintiffs also claim that the inclusion of Civil
Authority coverage implies that the Governmental Action
Exclusion should be limited to criminal activity or wrongdo-
ing. However, as noted above, the Civil Authority provision
covers losses caused by action of civil authority that prohib-
its access to the described premises. We discern no incom-
patibility between that coverage provision and the exclusion
for losses caused by governmental seizures. See Schutt v.
Farmers Ins. Group, 129 Or App 401, 405, 879 P2d 1303,
rev den, 320 Or 272 (1994) (“[A]n ambiguity does not auto-
matically arise when, as here, one clause provides coverage
Cite as 327 Or App 499 (2023)                                                 507

and another clause excludes that coverage under certain cir-
cumstances.” (Internal quotation marks omitted.)).
          Other jurisdictions addressing insurance claims
filed in response to executive orders relating to the COVID-
19 pandemic have not limited application of the same
Governmental Action Exclusion to instances in which the
insured was engaged in wrongdoing or in which the gov-
ernment used force. See, e.g., MIKMAR, Inc. v. Westfield
Ins. Co., 520 F Supp 3d 933, 945 (ND Ohio 2021) (“[E]ven
assuming the government orders alone caused Plaintiffs’
loss, the policies exclude coverage resulting from the
‘[s]eizure or destruction of property by order of governmen-
tal authority[.]’ ”); King’s Palace, Inc. v. Certain Underwriters
at Lloyd’s, London, 558 F Supp 3d 636, 647 n 11 (WD Tenn
2021) (“To the extent the Governmental Action Exclusion
* * * contemplate[s] coverage of dispossession or loss of use
by excluding governmental seizure, nationalization, or con-
fiscation of property, they contemplate permanent disposses-
sion or loss of use, which has not occurred here.”). Similarly,
here, an ordinary purchaser of insurance would have under-
stood that the exclusion applied to any loss caused by the
taking or confiscation of property by order of governmental
authority.8
       With that understanding of the word “seizure”
in mind, we turn to the application of the exclusion. The
Governor’s order provided:
       “No later than March 27, 2020, hospitals, ambulatory
    surgery centers, outpatient clinics (including community
    health clinics and student health centers), dental clinics,
    and veterinary clinics with surplus PPE supplies shall
    notify the state’s PPE coordinator * * * and arrange for
    delivery of those surplus supplies to the PPE Coordinator.”

    8
       Plaintiffs argue that the word “seizure” is ambiguous and should be con-
strued against the insurer. We disagree. For the reasons discussed above, it is
not plausible to construe the term in a way that limits it to actions involving
wrongdoing or the use of force. See Hoffman Construction Co. v. Fred S. James &
Co., 313 Or 464, 470, 836 P2d 703 (1992) (“[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.” (Emphasis in original.)).
508           BA Ventures, LLC v. Farmers Ins. Exchange

In compliance with that governmental order, a representa-
tive of plaintiffs contacted the PPE Coordinator, and, after
receiving instructions, Ambati delivered surplus PPE to a
hospital in early April 2020. No juror could reasonably con-
clude that the loss of the surplus PPE did not qualify as
a taking of property by order of governmental authority.
Because the surplus PPE was seized, we conclude, as a mat-
ter of law, that the Governmental Action Exclusion applies.
Based on that conclusion, it is not necessary to address
defendant’s arguments that other exclusions in the policy
also apply.
        Affirmed.