Farmers Insurance v. Stockton

EDMONDS J.,

dissenting.

The majority overrules Grange Insurance Association v. Beleke, 90 Or App 416, 752 P2d 864 (1988), and holds that defendant’s derivative rights against plaintiff are not precluded, even though plaintiffs insureds could not recover under their policy. That holding is not supported by a sound rationale.

In Grange Insurance, the appellants, an automobile accident victim and his insurer, appealed from a judgment granting declaratory relief to the plaintiff insurer. The judgment determined that the plaintiffs liability insurance policy did not cover the appellants’ claims arising out of an automobile accident involving a car owned by the plaintiffs insureds. We affirmed, relying on Allegretto v. Or. Auto Ins. Co., 140 Or 538, 13 P2d 647 (1932), for the principle that the appellants’ rights were subrogated to those of the insureds, because their action was predicated on a contract of insurance. Therefore, the appellants’ right to recover depended on *128the insureds’ ability to recover under the policy. Because the insureds had no right to recover, the appellants also were unable to recover.

The majority acknowledges the holding in Allegretto but then makes an end-run around it by its interpretation of ORS 28.110. According to the majority:

“The purpose of ORS 28.110 must be to guarantee a person an opportunity to be heard before proclaiming a declaration that would adversely affect their rights. The right to be heard necessarily includes the right to present evidence. Any other conclusion would render ORS 28.110 meaningless. Any party to an action under ORS 28.110 has the right to litigate any issue that affects their interests. They cannot be required to entrust their fate to another party.” 112 Or App at 126-27.

Allegretto was an action by a plaintiff who was injured in an automobile accident with the insured against an insurer to recover on the policy. This case is factually similar, except that plaintiff initiated the case under ORS chapter 28, seeking a declaration that there is no coverage under the policy for defendant’s claim. Therefore, for the majority’s conclusion to be correct, an action under ORS chapter 28 must afford defendant a right to litigate that is superior to what she would have had if she had initiated the action.

To support that distinction, the majority relies on Hough v. Porter, 51 Or 318, 95 P 732, 98 P 1083 (1909), for the proposition that a default judgment against some defendants cannot preclude other parties from litigating their rights as to their property interests. The majority’s reliance on Hough is misplaced because the interests at stake there were not derivative of the defaulting parties, whereas as they are here. Finally, an action under ORS chapter 28 to determine coverage under an insurance policy is legal in nature, and general contract insurance law applies. See May v. Chicago Insurance Co., 260 Or 285, 490 P2d 150 (1971). Under the substantive law, the fact that plaintiff initiated the action under ORS chapter 28 does not afford defendant any greater relief than the injured party was entitled to in Allegretto.

In sum, defendant’s right to coverage is dependent on Stockton’s right to coverage. The admission by Stockton as a result of the default judgment entered against him that *129there is no coverage under plaintiff’s policy is uncontroverted. In the light of the evidentiary record, the court did not err when it granted summary judgment to plaintiff.1 The majority’s holding, which overrules our decision in Grange Insurance Association v. Belke, supra, and effectively overrules the Supreme Court’s holding in Allegretto v. Or. Auto Ins. Co., supra, is wrong.

I dissent.

The majority perceives the question to be whether the default judgment precludes plaintiff’s claim. I suggest the question is more properly cast as an evidentiary of whether plaintiff offered any evidence to contravene Stockton’s admission in the summary judgment proceeding.