Mr. Cepeda and Ms. Wright said that they received a call from Performance Properties on May 17, 2012 advising them that Ms. Dalzell no longer wanted to rent the Unit to them. According to Mr. Cepeda and Ms. Wright, Ms. Dalzell accused Mr. Cepeda of reversing a deadbolt lock on the Unit that caused Mr. Cepeda to have access to the attic. They said that Performance Properties advised them that Ms. Dalzell had moved all of their belongings into the garage, had changed the locks on the Unit, and “had tried to file a police report” regarding the allegedly reversed deadbolt.

Ultimately Mr. Cepeda and Ms. Wright had to find another place to live.

On April 3, 2015, Mr. Cepeda and Ms. Wright filed a lawsuit against Ms. Dalzell in which they alleged that Ms. Dalzell had refused to rent the Unit to them because of their national origin in violation of Oregon Revised Statute § 659A.421; that Ms. Dalzell had refused to rent the Unit to them because they had two sons, ages 8 and 11, in violation of Oregon Revised Statute § 659A.421; and that Ms. Dalzell was negligent when she failed in her “duty to use reasonable or ordinary care to avoid violating” Oregon Revised Statute § 659A.421 and/or when she failed to “hire, supervise and train her agents and employees who were charged with ensuring compliance with” Oregon Revised Statute § 659A.421.

Ms. Dalzell tendered defense of the action to Allstate Insurance Company, which had issued her a homeowners' insurance policy.

Allstate went to court for a declaration that it did not have a duty to defend or to indemnify Ms. Dalzell. It asserted that the actions Ms. Dalzell alleged in the state court complaint were excluded from coverage by the policy's Intentional Acts exclusion, and it moved for summary judgment.

For her part, Ms. Dalzell asserted that Mr. Cepeda and Ms. Wright had not alleged any “intent to harm” in their state court complaint.

The Allstate Policy

The Allstate policy provided:

Section II – Family Liability and Guest Medical Protection

Coverage X

Family Liability Protection

Losses We Cover Under Coverage X:

Subject to the terms, conditions and limitations of this policy, Allstate will pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an occurrence to which this policy applies, and is covered by this part of the policy.

(Emphasis in original.)

The policy also provided:

Losses We Do Not Cover under Coverage X:

1. We do not cover any bodily injury or property damage intended by, or which may reasonably be expected to result from the intentional or criminal acts or omissions of, any insured person. This exclusion applies even if:

a) such insured person lacks the mental capacity to govern his or her conduct;

b) such bodily injury or property damage is of a different kind or degree than intended or reasonably expected; or

c) such bodily injury or property damage is sustained by a different person than intended or reasonably expected.

This exclusion applies regardless of whether or not such insured person is actually charged with, or convicted of a crime.

(Emphasis in original.)

In addition, the policy provided:

4. “Bodily injury” – means physical harm to the body, including sickness or disease, and resulting death, except that bodily injury does not include:

a) any venereal disease;

b) Herpes;

c) Acquired Immune Deficiency Syndrome (AIDS);

d) AIDS Related Complex (ARC);

e) Human Immunodeficiency Virus (HIV); or any resulting symptom, effect, condition, disease or illness related to (a) through (e) listed above.

* * *

9. “Occurrence” – means an accident, including continuous or repeated exposure to substantially the same general harmful conditions during the policy period, resulting in bodily injury or property damage.

10. “Property damage” – means physical injury to or destruction of tangible property, including loss of its use resulting from such physical injury or destruction.

(Emphasis in original.)

The Court's Decision

The court granted Allstate's motion.

In its decision, the court first found that there was no coverage for the housing discrimination claims brought by Mr. Cepeda and Ms. Wright under Oregon law.

The court conceded that Mr. Cepeda and Ms. Wright had not specifically alleged in their claims for violation of Section 659A.421 that Ms. Dalzell had intended to cause them harm when she allegedly refused to rent the premises to them because of either their national origin or their familial status. It found, however, that they alleged conduct from which an intention to cause harm “must be inferred” because the “natural and intended consequence” of such discrimination was “to cause some type of harm to the putative renter.”

Therefore, the court concluded that public policy precluded a duty to defend those claims.

The court then ruled that Allstate also had no duty to defend Ms. Dalzell against the negligence claim. It reasoned that even though Mr. Cepeda and Ms. Wright couched that claim in the “rubric of negligence,” they were, in fact, asserting a claim for discrimination in housing under Section 659A.421, given that Mr. Cepeda and Ms. Wright alleged that Ms. Dalzell had a duty to “abide by § 649A.421” and to avoid violating that statute and that she had created the risk of harm by refusing to rent to them due to their national origin and/or familial status.

The court concluded that it had to infer an intent to discriminate and that, accordingly, public policy also precluded a duty to defend as to the third claim asserted by Mr. Cepeda and Ms. Wright.

The case is Allstate Ins. Co. v. Cepeda, No. 3:15-CV-01766-BR (D. Ore. May 6, 2016). Attorneys involved include: DOUGLAS F. FOLEY, VERNON S. FINLEY, Douglas Foley & Associates, PLLC, 13115 N.E. 4th Street, Suite 260, Vancouver, WA 98684, (360) 883-0636, Attorneys for Plaintiff Moloy K. Good, Good Law Clinic, PLLC, 211 E. 11th Street, Suite 104, Vancouver, WA 98660, 360-608-5346, Attorneys for Defendants.