IN THE COURT OF APPEALS OF THE STATE OF OREGON

TRUCK INSURANCE EXCHANGE, CA A144902 Plaintiff-Appellant,

Washington County v. Circuit Court C 091034 CV

JOSEPH RALPH FRIEND, JR.,Defendant-Respondent.

RESPONDENT’S BRIEF

Appeal from judgment of the Circuit Court of Washington County,Honorable Donald Letourneau, Judge.

Listing of Counsel Next Page November, 2010

November 19, 2010 02:59 PM

W. Eugene Hallman, OSB #741237Hallman & DretkePO Box 308Pendleton OR 97801(541) 276-3857

Representing Defendant-Respondent Joseph Ralph Friend, Jr.

Stephen V. Piucci, OSB #821056Attorney at Law900 SW 13 , Suite 200th

Portland OR 97205(503) 228-7385

Representing Defendant-Respondent Joseph Ralph Friend, Jr.

Thomas M. Christ, OSB #834064Julie A. Smith, OSB #983450Cosgrave Vergeer Kester805 SW Broadway, 8 Floorth

Portland OR 97205(503) 323-9000

Representing Plaintiff-Appellant Truck Insurance Exchange

i

INDEX OF CONTENTSPage

STATEMENT OF THE CASE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A. Summary of Argument... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1B. Statement of Facts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1. Introduction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22. Permission... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

RESPONSE - ASSIGNMENT OF ERROR.. . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

A. Introduction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4B. The Policy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5C. ORS 742.502... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

RESPONDENT’S ALTERNATIVE GROUND FOR UPHOLDING THE COURT’S RULING .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

A. Preservation of Error.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13B. Standard of Review.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

RESPONDENT’S CROSS ASSIGNMENT OF ERROR.. . . . . . . . . . . . . . . . 17

A. Preservation of Error.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18B. Standard of Review.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

A. Friend’s Second Counterclaim.. . . . . . . . . . . . . . . . . . . . . . . . . 19B. Promissory Estoppel.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20C. Certificates of Insurance Generally. . . . . . . . . . . . . . . . . . . . . . 23D. Friend Stated a Claim for Promissory Estoppel

Based on the Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26E. Interpretation of the Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . 28F. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

ii

TABLE OF AUTHORITIES

Cases 1

Page

Bixler v. First National Bank, 49 Or App 195, 619 P2d 895 (1980). . . . . . . . 21

Blackburn, Nickels & Smith, Inc. v. National Farmers Union , 482 NW2d 600 (ND, 1992). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Blizzard v. State Farm Auto. Ins. Co., 86 Or App 56, 738 P2d 983 (1987), rev den, 304 Or 149.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Brennen v. City of Eugene, 285 Or 401, 591 P2d 719 (1979). . . . . . . . . . . . 19

Burlington Ins. Co. v. Asturias USA Motorsports Co., 370 F Supp 2d 1272 (SD Fla, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9

Columbia Mut. Ins. Co. v. Estate of Baker, 65 Ark App 22, 984 SW2d 829 (1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-8

Country Companies v. Universal Underwriters Ins. Co., 343 Ill App3d 224, 796 NE2d 639 (2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Criterion Leasing Group v. Gulf Coast Plastering & Drywall, 582 So2d 799 (Fla App, 1991). . . . . . . . . . . . . . . . . . . . . . . . . 21, 22-23, 24, 27

Farmers Ins. Exch. v. Crutchfield, 200 Or App 146, 113 P3d 972 (2005). . . 17

General Security Indem. Co. of Arizona v. Tipton, 158 P3d 1121 (Utah App, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Hayes Truck Lines, Inc. v. Investors Ins. Corp., 269 Or 565, 525 P2d 1289 (1974). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21-22, 23, 26

Hoey v. Shelter General Ins. Co.,715 So 2d 512 (La App, 1998).. . . . . . . . . . 9

Macchi v. Connecticut General Ins. Co., 804 A2d 596 (NJ App, 2002), cert den, 175 NJ 79, 812 A2d 1111 (NJ, 2002). . . . . . . . . . . . . . . . 11-12

Cases are reprinted from Westlaw with the express permission of1

Thompson Reuters. To check the currency of any case go to www.Westlaw.com.

iii

Marlin v. Wetzel County Bd. of Educ., 212 WVa 215, 569 SE2d 462 (2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23, 26

Matheny v. Unumprovident Corporation, 594 F Supp2d 1212 (WD Wash, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Neiss v. Ehlers, 135 Or App 218, 899 P2d 700 (1995). . . . . . . . . . . 20, 26, 27

Outdoor Media Dimensions, Inc. v. State, 331 Or 634, 20 P3d 180 (2001). . 13

Prudential Ins. Co. of America v. Clark, 456 F2d 932 (5th Cir, 1972). . . . . . 23

Rick Franklin Corp. v. State ex rel. Dept. of Transp., 207 Or App 183, 140 P3d 1136 (2006), rev den, 342 Or 116, 149 P3d 138 (2006). . . . 20-21

Safeco Ins. Co. of America v. American Hardware Mut. Ins. Co., 169 Or App 405, 9 P3d 749 (2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Santana Row Hotel Partners, L.P. v. Zurich American Ins. Co., 446 F Supp2d 1108 (ND Cal, 2006). . . . . . . . . . . . . . . . . . . . . . . . 23-24, 26

Smith v. Multnomah County Board of Commissioners, 318 Or 302, 865 P2d 356 (1994).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Staley v. Taylor, 165 Or App 256, 994 P2d 1220 (2000). . . . . . . . . . . . . . . . 21

Westfield Insurance Company v. Paugh, 390 F Supp2d 511 (ND W Va, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Zuber v. Safeco Ins. Co. of America, 96 Or App 596, 773 P2d 800 (1989). . 12

Zurich Ins. Co. v. White, 633 NYS2d 415 (App Div, 1995), leave to appeal denied, 88 NY2d 804, 668 NE2d 417 (NY, 1996). . . . . . 24-25, 27

StatutesPage

ORAP 5.40(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ORAP 5.50(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ORAP 5.50 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

iv

ORAP 5.57. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

ORS 650.120. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ORS 742.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ORS 742.502. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5, 6, 13

ORS 742.504. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 9, 10

ORS 742.450. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ORS 803.010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ORS 806.070. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ORS 822.020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 16

ORS 822.033. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5, 19, 24, 27, 28

ORS 822.040. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 13, 14, 15, 16, 17

ORS 822.060. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ORS 822.065. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Other AuthoritiesPage

2007 Or Laws Ch 782, §2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Black's Law Dictionary (5th Ed, 1983). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Holmes, Restatement of Promissory Estoppel, 32 Willamette Law Review 263 (1996). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

1

STATEMENT OF THE CASE

With the exception of the plaintiff’s Summary of Argument and2

Summary of Material Facts defendant accepts plaintiff’s statement of the

case.

A. Summary of Argument.

1. Truck’s garage policy provided liability coverage for “any auto.”

It provided uninsured motorist coverage for “owned autos only.” By its

terms the policy violates ORS 742.502(2)(a) which requires “the same

limits for uninsured motorist coverage as for bodily injury liability coverage.”

2. If Truck is correct and uninsured motorist coverage is available

only for “owned autos” ORS 822.040(1)(d) provides that the dealer shall be

considered the owner of any vehicle in the dealer’s possession and

operated by the dealer or the dealer’s employees. For insurance purposes

the insured, TWW, owned the vehicle in question.

3. Truck issued a certificate of insurance as required by ORS

822.033. The doctrine of promissory estoppel precludes Truck from

claiming that the policy did not conform to the certificate required by law.

The court should not have dismissed Friend’s Second Counterclaim.

Defendant Friend will follow plaintiff’s practice and refer to plaintiff2

as “Truck” and defendant as “Friend.”

2

B. Statement of Facts.

1. Introduction.

Friend agrees that the court views all facts in the light most favorable

to Truck and draws all reasonable inferences in its favor. That does not

mean, however, that Truck can ignore the factual basis of the court’s ruling

or the undisputed facts supporting it. Even if the facts do not support its

position, the appellant is required to present “a concise summary, without

argument, of all the facts of the case material to the determination of the

appeal.” ORAP 5.40(9).

The problem is compounded by Truck’s failure to prepare an Excerpt

of Record in conformity with ORAP 5.50(2) and Appendix 5.50.

2. Permission.

Without citation to the record, Truck argues that “there is a question

of fact whether Friend was using the Mustang with TWW’s permission.”

Appellant’s Brief at 16. There is no question of fact.

TWW did business as Cornelius Auto Sales. ER 1. Cornelius Auto

Sales ("CAS") was a business owned by Tamer Kekhia. Supplemental

Excerpt of Record (“SER”) 12. It was in the business of selling used cars.

SER 19. In August of 2007 it generally had 50 to 60 cars in inventory.

SER 16-18.

3

Friend was the secretary of the corporation from September 1, 2005

until after the accident. SER 26, 29. He was not paid by CAS directly but

was compensated through Ground Zero Autos where he was a 50 percent

partner with Mr. Kekhia. SER 15. Friend worked about 10 to 12 hours a

week at CAS doing mechanical work. He would also just help out. SER

14. He had an auction card which allowed him to purchase cars on behalf

of CAS. SER 27-28.

When the Mustang was purchased it was delivered directly to the3

CAS lot. SER 20.

The Mustang was the most expensive car on CAS's lot. The car was

shown at car shows. SER 22. It was driven only a couple of hundred

miles a year. The day of the accident was the second or third time Friend

had driven the car. SER 24 Mechanical work on the car was done at CAS

by a CAS employee. SER 6.

Mr. Friend was driving the car back to the CAS lot from a car show

As Truck points out, Friend conceded that there was a question of3

fact as to the ownership of the Mustang.The Mustang was previously owned by John He sold it to

CAS. Although he no longer has his check he remembers receiving acheck from CAS. SER 7-8.

Mr. Kekhia is not sure who had title to the car when it was firstacquired. SER 21. It was paid for by CAS. SER 19.

There was a “Dealer Notice of Vehicle Purchase” from Kekhia toCAS, SER 38, but the Certificate of Title remained in Kekhia. SER 37.

4

when the accident occurred. There were dealer plates in the car, probably

displayed in the window. He was driving the car with the permission of Mr.

Kekhia. SER 6, 23.

There is no evidence in the record that Friend was not driving the

vehicle with permission of CAS.

RESPONSE - ASSIGNMENT OF ERROR

The trial court did not err is granting Friend’s Motion for Summary

Judgment based on ORS 742.504.

Friend agrees with Truck’s statement concerning preservation of

error and standard of review.

ARGUMENT

A. Introduction.

The policy in this case is known as a “garage policy.” A garage

policy is “a type of auto policy specially designed for auto dealers and

repair shops.” Appellant’s Brief at 5. As pointed out in 8A Couch on

Insurance, §120:38:

“A very important distinction between an automobile garageliability policy and a standard automobile liability insurance isthat a garage policy does not insure a particular automobile,but instead provides coverage for the ownership, maintenance,or use of any automobile for the purpose of garageoperations.”

5

B. The Policy.

In Oregon a dealer must have a garage policy in order to do

business. In order to obtain or renew a vehicle dealer certificate the

applicant must provide a certificate of insurance as described in ORS

822.033 which includes a requirement that the insurance covers all

vehicles “under the control of the dealer” and that covers all persons who

use vehicles under control of the dealer. ORS 822.033(1)(d) and (e).

The garage insurance policy issued by Truck provided liability limits

of $500,000. The liability limits were applicable to "any auto." The policy

also provided uninsured motorist coverage limits of $500,000. However,

the UIM limits were applicable to "owned autos only." 4 ER 7-8. The policy

does not define "owned." There is an obvious difference in coverage

between liability coverage and UIM coverage.

C. ORS 742.502.

Under Oregon law an insurance company cannot provide liability

coverage without also providing UIM coverage in an equal amount. The

only exception is if the insured elects lower limits in writing. The insured

did not elect lower UIM limits in writing.

One determines the coverage by referring to the "Garage4

Declarations," ER 7, which lists the symbols for "Covered Autos" anddetermining the symbol for each coverage. That symbol is then defined inthe "Garage Coverage Form," ER 8.

6

ORS 742.502 provides in relevant part:5

“(1) Every motor vehicle liability policy insuringagainst loss suffered by any natural personresulting from liability imposed by law for bodilyinjury or death arising out of the ownership,maintenance or use of a motor vehicle shallprovide in the policy or by indorsement on thepolicy uninsured motorist coverage when the policyis either:

(a) Issued for delivery in this state; or

(b) Issued or delivered by an insurer doingbusiness in this state with respect to any motorvehicle then principally used or principally garagedin this state.

(2)(a) A motor vehicle bodily injury liability policyshall have the same limits for uninsured motoristcoverage as for bodily injury liability coverageunless a named insured in writing elects lowerlimits. The insured may not elect limits lower thanthe amounts prescribed to meet the requirementsof ORS 806.070 for bodily injury or death.Uninsured motorist coverage shall includeunderinsurance coverage for bodily injury or deathcaused by accident and arising out of theownership, maintenance or use of a motor vehiclewith motor vehicle liability insurance that providesrecovery in an amount that is less than theinsured's uninsured motorist coverage.Underinsurance coverage shall be equal touninsured motorist coverage less the amountrecovered from other motor vehicle liabilityinsurance policies.” [Emphasis added.]

5 ORS 742.502 was amended by 2007 Or Laws Ch 782, §2 in areasnot relevant to this case. The quoted material remains the same.

7

A garage liability policy is subject to the mandatory financial

responsibility laws of the state to the same extent as other policies.

Safeco Ins. Co. of America v. American Hardware Mut. Ins. Co., 169 Or

App 405, 9 P3d 749 (2000). In Safeco the company excluded liability

coverage if the permissive user was insured by his or her own policy. That

exclusion violated the financial responsibility law. 169 Or App at 415-416.

Although Safeco dealt with the financial responsibility law rather than

UIM, there is no indication that a garage policy would not be equally

subject to the mandatory requirements of Oregon's UIM statutes. 6

The case of Columbia Mut. Ins. Co. v. Estate of Baker, 65 Ark App

22, 984 SW2d 829 (1999) is on point. Arkansas had a statute similar to

Oregon's which required an automobile liability policy to also provide UM

coverage unless specifically rejected. The insurance company offered

liability coverage for permissive users of non-owned autos. The court, at

27-28, held that the insurance company was required to provide UM

coverage:

/////

It is interesting to note that the provisions in the garage policy held,6

in 2000, to violate ORS 742.450 and the financial responsibility law remainin the policy as of 2007. Compare Safeco, 169 Or App at 410 with the2007 policy in the instant case. ER 10.

8

“The appellant states that the purpose of aGarage Owner's Liability Policy is to allow thegarage owner to protect himself from liability fromany harm caused to the vehicles owned by thecustomers while he is in possession of thosevehicles. The appellant also states that to broadenthe scope of a garage owner's liability policy toinclude uninsured motorist coverage wouldcontravene the General Assembly's intention.

We disagree, and we hold that the court didnot err in finding that Madlock's policy includedautomobile liability insurance coverage and thatBaker was a person protected by such coverage atthe time of the accident that resulted in his death.Therefore, uninsured motorist coverage shouldhave been offered to Madlock and properlyrejected by him.

* * *

Because the policy itself offered automobile liabilityinsurance, the insurance company was obligatedunder Arkansas law, pursuant to Ark.Code Ann. §23-89-403(a), to offer uninsured motoristcoverage.” [Emphasis added.]

The insurer issuing a garage policy is required to follow the same

requirements concerning the election of lower uninsured limits as other

insurers. General Security Indem. Co. of Arizona v. Tipton, 158 P3d 1121

(Utah App, 2007), cert den, 168 P3d 819 (Utah, 2007) (failure to obtain

written waiver on issuance of garage policy).

The case of Burlington Ins. Co. v. Asturias USA Motorsports Co., 370

F Supp 2d 1272, 1276 (SD Fla, 2005) is similar to the case at bar. The

9

insurer issued a garage policy providing liability coverage for "any auto."

There the insurer argued that the mandatory requirements for UIM

coverage were inapplicable because the garage policy did not cover a

specifically insured or identifiable vehicle. The court rejected that

argument and stated:

“Similarly, in the instant case, the policy wasa garage insurance policy that covered aspecifically identified class of automobiles, namelynon-owned automobiles used in connection withthe garage business. Because it is undisputed thatMr. Con was in an accident while using anon-owned vehicle in connection with his business,it is clear that he was using a ‘specifically insuredor identified motor vehicle’ subject to [Florida'smandatory uninsured motorist statute].”

See also Hoey v. Shelter General Ins. Co.,715 So 2d 512 (La App, 1998),

rev den, 727 So2d 1160 (garage policy is subject to statutory requirement

of UIM coverage and employee entitled to UIM benefits when injured test

driving customer's auto).

Truck seems to say that, in spite of ORS 742.504 (2) (a), some

people can be insured for liability coverage but not for UIM.

ORS 742.504 (2)(c)(C) defines "insured" to include:

"(C) Any other person while occupying aninsured vehicle, provided the actual use thereof iswith the permission of the named insured."

10

The same statute, ORS 742.504 (2)(d)(A), defines "insured vehicle" to

include:

"(A) The vehicle described in the policy or anewly acquired or substitute vehicle, as each ofthose terms is defined in the public liabilitycoverage of the policy, insured under the publicliability provisions of the policy."

In the instant case the vehicle described in the policy for liability

purposes is "any auto." This is consistent with the purposes of the garage

liability policy and with the statutes requiring such insurance for automobile

dealers. If there is liability coverage then, by operation of the UIM statutes,

there must also be UIM coverage.

Plaintiff takes the extreme position that the descriptive term "any

covered auto" provides coverage only for "you" and "you" means TWW,

not TWW's officers, employees or agents:

"As noted above, “you” and “your” refer tothe named insured - TWW. ER 7 - 8. Thus, TWWis insured under the liability coverage for anyvehicle. “Anyone else” is insured under thatcoverage only while using with TWW’s permissiona vehicle that TWW owns, hires or borrows. Itfollows that the Mustang was insured while Friendwas using it only if TWW owned, hired, orborrowed it and if Friend was using it with TWW’spermission. Otherwise there was no liabilitycoverage on the vehicle then. At that time andplace, it was not an insured vehicle under thatcoverage.” Appellant’s Brief at 14.

11

In other words Truck argues the “any auto” coverage only applies when

TWW drives the car - not when its officers or employees drive the car.

This argument, though novel, is defective for two reasons.

First, it contradicts the express terms of the policy. For “garage

operations” the policy, at ER 10, provides:

“We will pay all sums an “insured” legally must payas damages because of “bodily injury” or “propertydamage” to which this insurance applies, causedby an “accident” and resulting from “garageoperations” involving the ownership, maintenanceor use of covered “autos.”

Second, corporations lack the ability to drive motor vehicles. Taken

to its logical conclusion, Truck argues that Friend, the corporate secretary

and agent operating within the course and scope of his agency, would not

even be entitled to liability coverage "unless TWW owned that car".

Appellant’s Brief at 14. Apparently, Truck would also deny coverage for a

mechanic taking a customer's car out for a test drive because TWW did

not own that car. Such an interpretation is contrary to the purpose of a

garage policy and flies in the face of the mandatory dealer insurance

requirements.

Truck’s argument that only the corporation is entitled to UIM

coverage because it is the "you" in the declarations page was rejected in

Macchi v. Connecticut General Ins. Co., 804 A2d 596, 603 (NJ App, 2002),

12

cert den, 175 NJ 79, 812 A2d 1111 (NJ, 2002) (wife of the owner of the

corporation was a named insured):

"Our interpretation of the terms of theInnovative policy begins with the understandingthat plaintiff is for all intents and purposes anindividual named insured under that policy. If itwere otherwise, i.e., if the only individual namedinsured were deemed to be Innovative PackagingCorp., then no claim of the full extent of thepersonal injury benefit provided by the policy'sUM/UIM provisions would ever be possible,because an entity cannot suffer the predicatepersonal injury. That construction would renderillusory the term of the policy establishing a$1,000,000 UM/UIM limit."

When an insurance company fails to follow its statutory obligation

and offer uninsured motorist coverage in an amount equal to liability

coverage that coverage is automatically provided. In Blizzard v. State

Farm Auto. Ins. Co., 86 Or App 56, 61, 738 P2d 983 (1987), rev den, 304

Or 149 the court stated:

“[T]he appropriate remedy for defendant'sfailure to comply with its statutory duty is to readinto the insurance contract the coverage whichdefendant should have offered. That is what thetrial court did, and we affirm its decision.”

See also Zuber v. Safeco Ins. Co. of America, 96 Or App 596, 773 P2d

800 (1989).

13

Where Truck has failed to meet the requirements of ORS 742.502

the policy limits for uninsured motorist coverage are the same as for

liability coverage. In this case that is $500,000.

RESPONDENT’S ALTERNATIVE GROUND FOR UPHOLDING THE

COURT’S RULING

The court granted the defendant’s Motion for Summary Judgment.

However, it rejected defendant’s argument for coverage based on ORS

822.040. The court ruled:

“Very well. I am prepared to rule. I’m going togrant the motion under Chapter 742. I didn’t - - Ididn’t agree with the 822 argument. I did agreewith the 742 argument. So I’ll grant the motion.” Tr 7.

A. Preservation of Error.

Friend’s Motion for Summary Judgment was also based on the

alternative ground that, if Truck’s ownership argument was correct, ORS

822.040 provides that, under a garage policy, the dealer is considered the

owner of the vehicle.

The alternative argument may be considered under the “right for the

wrong reason” principle. Outdoor Media Dimensions, Inc. v. State, 331 Or

634, 659–660, 20 P3d 180 (2001).

14

B. Standard of Review.

As noted above, Friend agrees with Truck’s statement of the

standard of review. The application of ORS 822.040 presents a question7

of law.

ARGUMENT

Truck argues that for liability purposes the “any auto” coverage is

only applicable when TWW is operating the auto. For others, including

officers and employees of TWW, the auto must be “owned, hired or

borrowed” by TWW.8

Oregon law has special provisions to determine ownership of

vehicles in possession of a dealer. ORS 822.040(1)(d) provides:

"(1) The holder of a current, valid vehicledealer certificate issued under ORS 822.020 mayexercise the following privileges under thecertificate:

(d) The dealer shall be considered the ownerof vehicles manufactured or dealt in by the dealer,before delivery and sale of the vehicles, and of allvehicles in the dealer's possession and operatedor driven by the dealer or the dealer's employees."

7 ORS 822.040 is set out at App 3-5.

This argument is to get around the illegal difference between the8

liability coverage, which is listed as “any auto” and the UIM coverage,which is listed as “owned autos only.”

15

In the instant case, the evidence is uncontradicted that the Mustang

was one "dealt in by the dealer" and was "in the dealer's possession and

operated or driven by the dealer or the dealer's employees." ORS

822.040.

ORS 822.040 is a specific statute dealing with dealers. It is perfectly

consistent with ORS 803.010, dealing with certificates of title. However,

even if ORS 822.040 were deemed to conflict with ORS 803.010 the more

specific statute would prevail. A specific statute takes precedence over an

inconsistent general statute that is on the same subject, with the specific

statute deemed to be an exception to the general. Smith v. Multnomah

County Board of Commissioners, 318 Or 302, 309, 865 P2d 356 (1994).

ORS 822.040 is designed for a special class who deal in volumes

of automobiles and who are in lawful possession of those vehicles. Often

the dealer will never have title to a vehicle. This is called a consignment

sale. See ORS 650.120, 822.060 and 822.065. The dealer has control of

the vehicle and, for this purpose, has insurance.

Truck argues that the court may not consider “some non-insurance

statute” in determining the meaning of terms. Appellant’s Brief at 10.

Whatever merit that argument may have generally, it has none here. The

statutes in question here are mandatory insurance statutes.

16

As noted above, a dealer is considered the owner of a vehicle in the

dealer’s possession and operated by the dealer or the dealer’s employees.

ORS 822.040(1)(d). That provision is in the statute for insurance

purposes.

ORS 822.033(1) provides in relevant part:9

"A certificate of insurance required to qualifyfor a vehicle dealer certificate under ORS 822.020or to qualify for renewal of a certificate under ORS822.040 must comply with all of the following:

(1) The certificate shall:

(a) - (c) * * * *,

(d) Show that the dealer is insured by apolicy covering all vehicles manufactured, owned,operated, used or maintained by or under thecontrol of the dealer;

(e) Show that the dealer is insured by apolicy that also covers all other persons who, withthe consent of the dealer, use or operate vehiclesmanufactured, owned or maintained by or underthe control of the dealer;

(f) - (h) * * * *." [Emphasis added.]

It is difficult to understand how a statute which specifically sets out

mandatory provisions of an insurance policy can be described as “some

9 ORS 822.033 is set out at App 1-2.

17

non-insurance statute.”10

Under the specific terms of ORS 822.040 the dealer is “considered

the owner of vehicles * * *dealt in by the dealer * * * and of all vehicles in

the dealer's possession and operated or driven by the dealer or the

dealer's employees." The vehcile in question was owned by TWW.

RESPONDENT’S CROSS ASSIGNMENT OF ERROR

The court erred in allowing the following motion:

“Plaintiff moves the court to dismissdefendant’s second and third counterclaims on theground they fail to allege ultimate facts sufficient toconstitute a claim for relief.” SER 2-4.

The court allowed the motion as to the second counterclaim. The

court ruled:

“Thank you. The court’s conclusion is that,on the right side of facts, promissory estoppel canlie. Then turning to the - - the actual claims, thecertificate doesn’t establish facts that would giverise to promissory estoppel, so I would grant themotion with respect to the second claim.” Tr (6-8-09) at 13.

/////

10 Farmers Ins. Exch. v. Crutchfield, 200 Or App 146, 113 P3d 972(2005) did not interpret statutes governing mandatory insurancerequirements and is not on point.

18

The court issued its order as follows:

“The court concludes:

1. that coverage can be created bypromissory estoppel, as opposed to equitableestoppel;

2. that the certificate of insurance whichis incorporated in the second counterclaim doesnot represent that there is underinsured motorist(UIM) coverage under plaintiff's policy with TWW,Inc., for vehicles not owned by TWW, Inc.; and

3. [Paragraph 3 deals with the thirdcounterclaim].

Therefore, the court grants plaintiff's motionto dismiss the second counterclaim, but denies themotion to dismiss the third counterclaim.” SER 4.

A. Preservation of Error.

The alleged error is properly preserved. The plaintiff moved to

dismiss the second counterclaim on the grounds that there was no

“coverage by estoppel” recognized in Oregon. The court disagreed but

ruled that the certificate of insurance did not establish estoppel.

This is properly before the court as a cross-assignment of error in

that the respondent does not seek to reverse the judgment but if the relief

sought by the appellant is granted the respondent seeks reversal of this

intermediate ruling of the trial court. ORAP 5.57.

19

B. Standard of Review.

The ruling is reviewed for errors of law. All well pleaded allegations

are assumed to be true. Brennen v. City of Eugene, 285 Or 401, 405, 591

P2d 719 (1979).

ARGUMENT

A. Friend’s Second Counterclaim.

In his second counterclaim Friend claims that Truck is estopped to

claim that the policy provides different coverage than that represented in

the mandatory certificate of insurance issued by Truck and required by

ORS 822.033. The counterclaim is at ER 5. Friend alleged;

Prior to the collision described in the complaint Truck had issued a

Certificate of Insurance. This Certificate of Insurance is required by ORS

822.033. This Certificate of Insurance was signed by an authorized

representative of plaintiff and was represented, under criminal penalties,

to be true. The Certificate of Insurance, Exhibit 1 to Counterclaim, is

attached as SER 1.

This Certificate of Insurance certified that Truck’s policy of insurance

covers all motor vehicles maintained by, or under the control of the named

insured, Cornelius Auto Sales and further certified that it covered all

persons who, with the consent of the named insured, use or operate motor

20

vehicles maintained by, or under the control of, the named insured.

The vehicle involved in the collision was maintained by, or under the

control of Cornelius Auto Sales and defendant was using the vehicle with

the consent of Cornelius Auto Sales.

To the extent the policy of insurance varies from that promised by the

Certificate of Insurance, the Certificate of Insurance amends the policy of

insurance and broadens the coverage to that represented by the Certificate

of Insurance.

Plaintiff is estopped to claim that coverage under the policy issued

to TWW, Inc. is different than that represented in its Certificate of

Insurance.

B. Promissory Estoppel.

The trial court rejected Truck’s argument that promissory estoppel is

unavailable.

Promissory estoppel is a theory of recovery in breach of contract

actions. It may act as a consideration substitute or to enforce contracts

that are too indefinite to be enforce under traditional contract rules. Neiss

v. Ehlers, 135 Or App 218, 227-228, 899 P2d 700 (1995). The elements

of promissory estoppel are described in Rick Franklin Corp. v. State ex rel.

Dept. of Transp., 207 Or App 183, 190, 140 P3d 1136 (2006), rev den, 342

Or 116, 149 P3d 138 (2006):

21

"Promissory estoppel requires: (1) a promise,(2) which the promisor, as a reasonable person,could foresee would induce conduct of the kindwhich occurred, (3) actual reliance on the promise,(4) resulting in a substantial change in position.Bixler v. First National Bank, 49 Or App 195,199-200, 619 P2d 895 (1980). FN5

FN5. ‘Promissory estoppel' is not a ‘cause ofaction' in itself; rather, it is a subset of a theory ofrecovery based on a breach of a contract andserves as a substitute for consideration. Staley v.Taylor, 165 Or App 256, 261 n. 5, 994 P2d 1220(2000)."

See also Holmes, Restatement of Promissory Estoppel, 32 Willamette Law

Review 263 (1996).

Other states, while adhering to the strict "no coverage by estoppel"

rule make a distinction for promissory estoppel. See Criterion Leasing

Group v. Gulf Coast Plastering & Drywall, 582 So2d 799, 800 (Fla App,

1991); Matheny v. Unumprovident Corporation, 594 F Supp2d 1212, 1221

(ED Wash, 2009).

The Oregon Supreme Court has held that an insurance company is

estopped to argue that its policy was narrower than the certificate of

insurance. In Hayes Truck Lines, Inc. v. Investors Ins. Corp., 269 Or 565,

525 P2d 1289 (1974), as in the instant case, the insurance company

issued a certificate of insurance. That certificate stated that a credit life

policy had been issued on the life of a creditor-beneficiary. In fact, the

22

group policy did not cover that individual. As in the instant case, the

insurance company argued that the certificate of insurance was not a

contract of insurance. Id at 568-569. The court, at 572-573, held:

"In this case the court tried the case on thefacts and the law. The record before us supportsthe trial court's finding that defendant should beestopped to deny coverage and that the policy ofinsurance was issued to NAC and Hayes. We findthe court did not err in this respect. The certificateof insurance in defendant's home office and assent to NAC and, presumably, to Hayes,represented that the defendant had issuedinsurance to Northwest Acceptance Corporation ascreditor and Sidney Hayes as insured debtor. BothNAC and Hayes relied on this representation andthereby failed to seek credit life insurance fromanother insurer. Defendant cannot justly bepermitted to assert, after Hayes' death, that noinsurance policy was issued by defendant to NACand Hayes." [Emphasis added.]

The application of promissory estoppel is illustrated in Criterion

Leasing Group, 582 So2d at 800. As in the instant case, the insurance

company in that case argued that the certificate of insurance that it issued

could not be used to enlarge the coverage of the policy. Florida, like

Oregon, follows the "no coverage by estoppel rule." However, that rule

does not preclude the application of promissory estoppel.

"Initially, we determine that the JCC [Judgeof Compensation Claims] erred in finding that ‘allof the elements of equitable estoppel have beensatisfied.' (emphasis added). Equitable estoppelmay not be used to affirmatively create or extend

23

insurance coverage. However, ‘[a]n exception tothe general rule is the doctrine of promissoryestoppel, a qualified form of equitable estoppelwhich applies to representations relating to afuture act of the promisor rather than to an existingfact.' * * *.

A party will be estopped from denying liabilityunder the principle of promissory estoppel whenthe party makes ‘[a] promise which the promisorshould reasonably expect to induce action orforbearance of a definite and substantial characteron the part of the promisee and which does inducesuch action or forbearance ... [and] injustice canbe avoided only by enforcement of the promise.'"[Citations omitted, emphasis in original.]

Promissory estoppel does not seek to change the terms of the

insurance contract. Rather, it enforces the insurance company's separate

promise. Prudential Ins. Co. of America v. Clark, 456 F2d 932, 937 (5th

Cir, 1972).

C. Certificates of Insurance Generally.

A certificate of insurance is a representation by the insurance

company that an insurance policy as described in the certificate has been

issued. Hayes, 269 Or at 573. It is not a part of the insurance contract but

is evidence of insurance. Marlin v. Wetzel County Bd. of Educ., 212

WVa 215, 569 SE2d 462 (2002). As discussed below, the certificate of

insurance may form the basis of a claim for promissory estoppel. Santana

Row Hotel Partners, L.P. v. Zurich American Ins. Co., 446 F Supp2d 1108

24

(ND Cal, 2006).

One of the Oregon occupations requiring a certificate of insurance

is that of vehicle dealer. In order to obtain or renew a vehicle dealer

certificate the applicant must provide a certificate of insurance as

described in ORS 822.033.

In the instant case, Truck issued a certificate of insurance as

required by statute. It purported to be issued to satisfy ORS 822.033 and

to be in a form required by statute. It was signed by Truck's agent under

threat of criminal penalties.

In Criterion Leasing Group, 582 So2d at 800, the insurance company

issued a certificate of insurance in compliance with Florida statutes

mandating workers compensation insurance. The company disavowed

coverage based on the policy. The court, after stating Florida's "no

coverage by estoppel" rule, held that promissory estoppel applied and that

the company was bound by its certificate of insurance.

In Zurich Ins. Co. v. White, 633 NYS2d 415, 417 (App Div, 1995),

leave to appeal denied, 88 NY2d 804, 668 NE2d 417 (NY, 1996), as in the

instant case, the insurance company used a certificate devised by the

governmental agency awarding the contract. The insurance company

asserted that the policy controlled over the certificate. The court

disagreed:

25

"Here, however, the certificates of insurancewere on a form devised by DOT which notablyincorporated by reference the detailed insurancespecifications of the Skyway Bridge contract. Itfurther recited that the issuing company certifies,under penalty of perjury, that no deductible wouldapply. The record further reflects that both DOTand Smalis relied upon these representations totheir detriment. In addition, Zurich waited until afteradjusting and paying hundreds of claims and afterthe painting was essentially complete beforedisclaiming coverage retroactively. By furtheracting in a manner which indicated itsacknowledgment of a no deductible clause, we findthat it prevented both Smalis and DOT fromknowing that they should take further steps toprotect themselves from liability. Hence, Zurichwas properly found to be estopped from nowasserting a claim for reimbursement." [Emphasisadded.]

An analogous case to the instant case is Country Companies v.

Universal Underwriters Ins. Co., 343 IllApp3d 224, 796 NE2d 639, 642

(2003). As in the instant case, the policy under consideration was a

garage policy. As in the instant case, the insurance company filed a

certificate of insurance with the appropriate governmental agency (in that

case the Secretary of State). The court held that the insurance company

waived the more restrictive policy over the representations made in the

certificate of insurance filed with the Secretary of State.

Certificates of insurance, necessary to protect the public, are not

unique to vehicle dealers. They are required as proof of financial

26

responsibility, liquor liability insurance and the practice of law, to name a

few. It would be strange indeed if a company could assert coverage

through a certificate of insurance and then, when a claim arises, rely on

contradictory language in a policy.

D. Friend Stated a Claim for Promissory Estoppel Based on theCertificate.

Hayes Truck Lines, 269 Or 565 should end the discussion. An

insurance company may be estopped to disavow a certificate of insurance

on the basis that it conflicts with the terms of the policy. The elements of

promissory estoppel are set out in Neiss, 135 Or App at 223.

1. "A Promise." 135 Or App at 223.

In the case of Blackburn, Nickels & Smith, Inc. v. National Farmers

Union , 482 NW2d 600, 603 (ND, 1992) the court described a certificate of

insurance:

"A Certificate of Insurance is a documentevidencing the fact that an insurance policy hasbeen written and includes a statement of thecoverage of the policy in general terms. Black'sLaw Dictionary (5th Ed, 1983). A Certificate ofInsurance is an insurance company's writtenstatement to its customer that he has insurancecoverage, and the insurance company is estoppedfrom denying coverage that the Certificate ofInsurance states is in effect."

The certificate of insurance can constitute a "promise" under promissory

estoppel. Marlin, 569 So2d at 472; Santana Row Hotel Partners, 446 F

27

Supp2d at 1113.

2. "Which the Promissor, as a Reasonable Person, Could

Foresee Would Induce Conduct of the Kind Which Occurred." 135 Or App

at 223.

Reasonable reliance is particularly applicable in cases where the

certificate of insurance is a statutory requirement. CAS could not act as

an auto dealer if it did not have insurance of the type described in ORS

822.033. Both the applicant and the governmental agency rely on the

premise that the certificate is truthful. See Zurich, 633 NYS2d at 417. If

the applicant knows the certificate of insurance is untruthful, the applicant

has the ability to obtain complying insurance from another source.

Criterion, 582 So2d at 800; Westfield Insurance Company v. Paugh, 390

F Supp2d 511, 529-530 (ND W Va, 2005) (misrepresentations prevented

the insured from procuring the insurance she desired.)

3. "Actual Reliance On the Promise." 135 Or App at 223.

CAS purchased insurance from Truck. It did so as a vehicle dealer

and to comply with ORS 822.033.

4. "Resulting in a Substantial Change in Position." 135 Or App

at 223.

CAS did not buy other insurance which did comply with ORS

822.033. Criterion, 582 So2d at 800.

28

E. Interpretation of the Certificate.

Truck argued, and the court agreed, that the certificate only relates

to liability coverage and not to underinsured motorist coverage. There are

three problems with this argument.

First, as noted in the certificate, it is given to comply with ORS

822.033. In accordance with ORS 822.033 the certificate certifies liability

coverage pursuant to ORS 822.033(1)(b) and (c). The certificate then

provides, in addition to those liability provisions, "ADDITIONAL

STIPULATIONS" made to comply with ORS 822.033( 1)(d) and (e). Those

provisions dictate the general coverage of the policy and are not limited to

the liability coverage.

Second, after the motion to dismiss was disposed of, Truck argued

at trial and now on appeal that the policy does not even provide liability

insurance in accordance with the certificate.

Finally, as discussed above, a promise that a policy provides a

certain amount of liability coverage includes, by operation of law, a

concomitant promise that there is an equal amount of uninsured motorist

coverage. In this case there wasn’t.

F. Conclusion.

The court correctly held that promissory estoppel is available and

29

applicable to enforce promises of insurance companies.

The court erred in holding that the certificate in this case did not

make such a promise.

CONCLUSION

The judgment of the trial court should be affirmed, either on the basis

adopted by the trial court or on the alternative basis argued by Friend.

If Truck prevails on its appeal the court should reverse the trial

court’s order dismissing Friend’s Second Counterclaim.

RESPECTFULLY SUBMITTED this 19 day of November, 2010.th

s/ W. Eugene Hallman W. Eugene Hallman, OSB #741237Hallman & DretkeAttorney for Defendant-RespondentJoseph Ralph Friend, Jr.

CERTIFICATE OF COMPLIANCEWITH ORAP 5.05(2)(d)

Brief Length

I certify that (1) this brief complies with the word-count limitations in ORAP5.05(2)(b) and (2) the word-count of this brief (as described in ORAP5.05(2)(a)) is 7,213 words.

Type Size

I certify that the size of the type in this brief is not smaller than 14 point forboth the text of the brief and footnotes as required by ORAP 5.05(4)(f).

s/ W. Eugene Hallman W. Eugene Hallman, OSB No. 741237

Certificate of Filing and Service

I certify that on the 19 day of November, 2010, I filed the originalth

Respondent’s Brief with the State Court Administrator by ElectronicFiling.

I further certify that on the same date Electronic Service of theforegoing document was made, pursuant to ORAP 16.45, upon:

Thomas M. Christ Representing Plaintiff-Appellant Cosgrave Vergeer Kester Truck Insurance Exchange 805 SW Broadway, 8 Floorth

Portland OR 97205

I further certify that on the same date I served two true and correctcopies of the foregoing document, certified by me as such, by US Mail,upon:

Stephen V. Piucci Representing Defendant-Respondent Attorney at Law Joseph Ralph Friend, Jr. 900 SW 13 , Suite 200th

Portland OR 97205

s/ W. Eugene Hallman W. Eugene Hallman, OSB #741237Hallman & DretkeOf Attorneys for Defendant-RespondentJoseph Ralph Friend, Jr.