Lockner v. Farmers Ins. Co. of Oregon

“Under Oregon law, the purpose of an exclusion in an insurance policy is to eliminate coverage that, were it not for the exclusion, would otherwise exist.” ZRZ Realty v. Beneficial Fire & Cas. Ins. Co., 222 Ore. App. 473

Plaintiffs appealed the Stipulated General Judgment, contending that the trial court incorrectly granted Farmers’ motion for summary judgment while denying their cross-motion for partial summary judgment. They argued that the tenant's personal use of methamphetamine constituted "vandalism," which should be covered by the insurance policy. “Under Oregon law, the purpose of an exclusion in an insurance policy is to eliminate coverage that, were it not for the exclusion, would otherwise exist.” ZRZ Realty v. Beneficial Fire & Cas. Ins. Co., 222 Ore. App. 473. The Court found that the trial court did not err by granting the defendant's motion and denying Plaintiffs' cross-motion because the policy's contaminants exclusion barred coverage for the loss. The Court reasoned that this exclusion applied to losses caused directly or indirectly by the release of contaminants—in this case, methamphetamine residue from the tenant's drug use. The Court held that the residue qualified as a contaminant, thereby justifying the exclusion of coverage based on the clear language of the policy and affirmed the trial court's judgment.