On petition to the Oregon Supreme Court, the Supreme Court reinstated the jury verdict. Because of this, the appellate court overturned the jury verdict. The appellate court concluded that the phrases “safety net” and coverage “in all instances that something goes wrong” were too vague and obscure to satisfy the “clear and express” requirements of the binder statute. On appeal, the appellate court construed Oregon’s binder statute and concluded that the terms “clear and express” meant that the oral binder terms must “definitely, explicitly, and unambiguously supersede the terms. The case was tried to an Oregon jury and a verdict was rendered in favor of coverage and against the insurer. The insured sued the insurance company for breach of the oral binder claiming unrestricted coverage. The insurer raised several policy exclusions applicable to the loss. Then, an ice storm struck and substantially damaged the home. The agent agreed to provide the coverage and did not communicate to the insured any coverage limitations. The insured told the agent that he wanted coverage that would provide a “safety net” or “catch basin” coverage “in all instances that something goes wrong during construction.” During their meeting the insured and the agent discussed at length the scope of coverage that the policy would provide, i.e., that the policy would provide coverage from the start of construction to its finish and that the coverage would be beyond what was normally available in a homeowners policy. The insured contacted an insurance agent who was experienced with course-of-construction policies. To protect that interest he wanted to purchase a course-of-construction insurance policy to cover the house while it was being built. In Stuart, the insured decided to build a new house. Absent that clarity in the transaction, the “default” continues, which means that the binder is coextensive with the actual terms and conditions of the policy being purchased.
In order to displace this default principal, whereby the binder incorporates the contemplated policy terms, conditions, restrictions and exclusions, there must occur an act during the policy purchase/binder process that specifically and clearly displaces the policy terms. The italicized language is an exclamation point upon the language of the statute that any binder will necessarily include all of the usual terms of the policy, which includes policy restrictions and exclusions. (1) Binders or other contracts for temporary insurance may be made orally or in writing, and shall be deemed to include all the usual terms of the policy as to which the binder was given together with such applicable endorsements as are designated in the binder, except as superseded by the clear and express terms of the binder.
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