Oregon Appellate Court Sets Forth Burdens of Proof Regarding the Expected or Intended Damage Defense

By:  Nicholas A. Nardi

Fall 2008


In ZRZ Realty Co. v. Beneficial Fire & Cas. Ins. Co., 222 Or. App. 453 (October 1, 2008), the Oregon Court of Appeals held that an insured has the burden to prove the existence of an “occurrence” where the term “occurrence” is defined to mean an “accident. . . which results in property damage neither expected nor intended from the standpoint of the insured.”


In ZRZ, the insureds argued that they did not expect or intend environmental damage to result from their ship dismantling and scrap operations on the Willamette River in Portland, Oregon.  The court first held that the expected or intended limitation is not an exclusion. Rather, it is more properly classified as part of the grant of coverage, because it appears in the definition of a triggering event. The court noted that insureds have the burden to prove that a claim falls within the grant of coverage, and that insurers have the burden to prove the applicability of policy exclusions. Accordingly, the court placed the burden of proof of an “occurrence” on the insureds.


The court also noted in dicta that the insurer likely would not prevail on a motion for summary judgment on the issue. Under Oregon law, an insured must prove that it did not have the subjective intent to cause property damage. The court held that the activities of the insured, including dumping oil and discharging lead paint into the River, were not so egregious as to require a court to infer intent to injure as a matter of law. Rather, the issue was more appropriately a fact question for trial on remand.


Some of the policies at issue did not contain an express requirement that property damage be unexpected and unintended. The insureds did not challenge the trial court’s ruing that these policies contained an “implied fortuity” requirement for unexpected and unintended property damage. The court held that the insurer had the burden of proof in this instance, because a limitation imposed by law is more analogous to an exclusion than a grant of coverage. The court also held that the burden of proof did not shift to the insureds merely because they were plaintiffs in a declaratory judgment action.


Finally, the insurer challenged the trial court’s ruling that some of the other policies at issue contained an implied requirement for unintended, but not unexpected, losses. The Court held that there is no implied requirement for unexpected losses in Oregon law, and that parties are free to contract to cover those losses if they choose.

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