In Twigg v. Admiral Ins. Co., 373 Or 475 (2025), the Oregon Supreme Court announced “property damage” caused by defective construction can be an “occurrence” if there is a basis in fact for imposing tort liability on the insured. Previously, damages awarded against an insured for breach of contract were not deemed an occurrence.
Plaintiffs were the homeowners of a house on which contractor/insured Rainier Pacific Development performed work. The work was defective and resulted in property damage. The homeowners brought an arbitration action for breach of contract against the contractor. The arbitrator awarded the homeowners damages for breach of contract. The insurer denied coverage based on the lack of “occurrence.” The insured assigned its rights to the homeowners, and the homeowners commenced a coverage action against the insurer.
Relying upon Oak Crest Const. Co. v. Austin Mutual Ins. Co., 329 Or 620, 627, 998 P2d 1254 (2000), the trial court granted summary judgment, and the court of appeals affirmed. The Oregon Supreme Court reversed.
The court analyzed the Oak Crest case and determined the outcome of this case did not turn on Oak Crest. Instead, the Court considered the opinion while applying the Hoffman framework. In working through the Hoffman framework, the court concluded that “whether property damage is the result of an ‘occurrence’ depends not on whether an insured has been sued in tort, but on whether, by causing property damage, the insured breached a duty imposed by law, and not one solely arising from contract.” The court concluded the record raises a genuine question of material fact as to that issue, and as a result, Admiral was not entitled to summary judgment.
Applying Hoffman, the court first reviewed the meaning of the word “occurrence,” which is defined in part as “accident.” “Accident” is not defined in the policy, so first the court considered whether the term has a “plain meaning.” After reviewing dictionary definitions and case law, the court determined “accident” is susceptible to more than one meaning. Next, the court turned to the “particular context” in which the term is used. The term remained debatable after considering the “particular context,” so the court next considered the “broader context of the policy as a whole.”
The court explained,
we conclude that our opinion in Oak Crest resolves one aspect of the parties’ dispute regarding the meaning of “accident” in defendant’s CGL policy: Damages arising “solely” from a breach of contract do not qualify as an accident. However, as to another relevant aspect — whether coverage under the policy is dependent upon the pleading and establishing of tort liability — we conclude that both parties’ interpretations are reasonable given the broader context of the policy as a whole and our case law. Thus, we resolve the dispute against the insurer — here, defendant — and in favor of plaintiffs.
Twigg, 373 Or at 487. The court explicitly did not overturn Oak Crest and declared that Oak Crest stands for the point that damages that arise from breach of contract do not qualify as damages caused by an accident. But the court notes, “despite Oak Crest‘s conclusion that ‘accident’ requires tortious conduct, it is not essential that there be a formal allegation of tort liability — much less adjudicated tort liability — before an insured may recover for accidental property damage.”
Ultimately, the court concluded:
to establish the property damage alleged here was caused by an “accident” within the meaning of defendant’s CGL policy, plaintiffs were not required to formally allege a tort claim or obtain an award in tort. Rather, plaintiffs were required to establish that there was a basis in fact for imposing tort liability on Rainier Pacific, even though the same facts may have established Rainier Pacific’s liability in contract.
Twigg, 373 Or at 501.
The court reversed and remanded to the trial court for further proceedings. The court determined that the evidence in the summary judgment record, when viewed in the light most favorable to plaintiffs, did not support a finding that Admiral demonstrated an absence of a genuine issue of material fact or that it was entitled to prevail as a matter of law. The court went on to conclude, “a factfinder could find, based upon that evidence, that plaintiffs’ garage floor had been negligently installed and that plaintiffs incurred damages as a result. Thus, in light of our above conclusion regarding the meaning of ‘accident’ in defendant’s CGL policy, the evidence was sufficient to preclude summary judgment on the ground that plaintiffs had failed to demonstrate that their damages were the result of an accident, i.e., that there was a basis in tort to recover those damages.”
Jackie Mitchson is a Shareholder in Bullivant’s Portland office whose practice focuses on litigation and appellate work in state and federal courts with an emphasis on complex litigation, including insurance coverage disputes. Jackie has written about Twigg in the past, after an earlier ruling by the Oregon Court of Appeals, you can read that historical context here.
