NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ENGINEERED STRUCTURES, INC., a 

corporation of Idaho, an Idaho corporation, 

Plaintiff-Appellee, 

 v. 

TRAVELERS PROPERTY CASUALTY 

COMPANY OF AMERICA, a Connecticut 

corporation, 

Defendant-Appellant.

No. 18-35588 

D.C. No. 1:16-cv-00516-CWD 

MEMORANDUM*

ENGINEERED STRUCTURES, INC., a 

corporation of Idaho, an Idaho corporation, 

Plaintiff-Appellant, 

 v. 

TRAVELERS PROPERTY CASUALTY 

COMPANY OF AMERICA, a Connecticut 

corporation, 

Defendant-Appellee.

No. 18-35589 

D.C. No. 1:16-cv-00516-CWD 

Appeal from the United States District Court

for the District of Idaho

Candy W. Dale, Magistrate Judge, Presiding

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

FILED

AUG 17 2020

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
2

Argued and Submitted July 9, 2020

Portland, Oregon

Before: BENNETT and MILLER, Circuit Judges, and NAVARRO,** District 

Judge.

This cross-appeal centers on the scope of insurance coverage from a

builders’ risk policy (“the Policy”) between Travelers Property Casualty Company 

of America (“Travelers Insurance”) and Engineered Structures, Inc. (“ESI”). The 

Policy covered risks of loss while ESI built a fueling station for Fred Meyer Stores, 

Inc., in Portland, Oregon. Damages occurred when an underground fuel storage 

tank “floated” in a “wet” excavation hole before the tank’s complete installation. 

Travelers Insurance investigated and determined that the damages resulted from 

ESI or its subcontractor, 3 Kings Environmental, Inc. (“3 Kings”), not placing 

enough ballast water into the tank to prevent floatation during a period of rainy 

weather. Travelers Insurance thus denied coverage for ESI’s damages, citing an 

exclusion in the Policy barring coverage for “faulty, inadequate or defective . . . 

workmanship [or] construction” (“the Exclusion”). ESI then sued Travelers 

Insurance for breach of contract, negligence, breach of the implied covenant of 

good faith and fair dealing (bad faith), and declaratory judgment.

** The Honorable Gloria M. Navarro, United States District Judge for 

the District of Nevada, sitting by designation.
3

The district court, relying mainly on Allstate Ins. Co. v. Smith, 929 F.2d 447 

(9th Cir. 1991), found the Exclusion to be ambiguous based on faulty 

“workmanship” being susceptible to two reasonable interpretations: (1) excluding 

only losses caused by a flawed product; or (2) excluding losses caused by a flawed 

process. The district court accordingly construed the Exclusion in favor of 

coverage, meaning the “product” interpretation governed and the Exclusion did not 

apply because ESI’s damages did not occur from a flaw in the underground storage 

tank. Because the Exclusion did not apply, the district court granted summary 

judgment to ESI on its breach of contract claim. However, the district court 

granted summary judgment to Travelers Insurance with ESI’s bad faith claim.1

Travelers Insurance appeals the district court’s grant of summary judgment 

on the breach of contract claim, and ESI appeals the district court’s grant of 

summary judgment on its bad faith claim. We have jurisdiction pursuant to 28 

U.S.C. § 1291. Our review of the district court’s grant of summary judgment is de 

novo. Trishan Air, Inc. v. Fed. Ins. Co., 635 F.3d 422, 426 (9th Cir. 2011).

1

 The district court granted summary judgment to Travelers Insurance with ESI’s 

third cause of action for negligence, and ESI listed that decision as one of the 

issues in its Notice of Appeal. However, ESI presented no argument in its 

appellate briefing about the negligence cause of action. We accordingly decline to 

address it. See Brownfield v. City of Yakima, 612 F.3d 1140, 1149 n.4 (9th Cir. 

2010) (“We review only issues which are argued specifically and distinctly in a 

party’s opening brief.” (quoting Greenwood v. FAA, 28 F.3d 971, 977 (9th Cir.

1994))).
4

Similarly, “[c]onstruction of a contractual insurance policy provision is a question 

of law and therefore subject to de novo review.” Id. (quoting Assurance Co. of Am. 

v. Wall & Assocs. LLC of Olympia, 379 F.3d 557, 560 (9th Cir. 2004)); Universal 

Cable Prods., LLC v. Atl. Specialty Ins. Co., 929 F.3d 1143, 1151 (9th Cir. 2019). 

Both parties agree that Idaho law governs this diversity action. Applying these 

standards here, we reverse in part, affirm in part, and remand for further 

proceedings.

We reverse the district court’s grant of summary judgment on ESI’s breach 

of contract claim. The Exclusion at issue here states Travelers Insurance “will not 

pay for loss or damage caused by or resulting from faulty, inadequate or defective . 

. . [d]esign, specifications, workmanship, repair, construction, renovation, 

remodeling, grading or compaction.” (emphasis added). The district court focused 

on “workmanship” to find the Exclusion ambiguous and inapplicable. But that 

focus disregarded the Exclusion’s unambiguous, process-oriented use of 

“construction.” Indeed, the term “construction” appears several times throughout 

the Policy as referring to the process of completing the project rather than a defect 

in the final product being built. The Policy’s section on “covered property,” for 

example, defines “completion of the project” as including “construction activities” 

like “site preparation . . . fabrication, assembly, installation, erection, alteration, 

[and] renovation. Similarly, in another section on coverage, the Policy instructs 
5

the insured to “see that the following are done in the event of a loss . . . Resuming, 

as soon as possible, all or any part of the construction or repair; . . . .” We find no 

reason to interpret “construction” in the Exclusion different than the Policy’s 

provisions on coverage—as a term referring to the “process” in completing the 

covered project. See McFarland v. Liberty Ins. Corp., 434 P.3d 215, 222 (Idaho 

2019) (“This Court ‘must construe the policy as a whole, not by an isolated 

phrase.’” (quoting Cascade Auto Glass, Inc. v. Idaho Farm Bureau Ins. Co., 115 

P.3d 751, 754 (Idaho 2005))).

Because we find that “construction” carries an unambiguous, processoriented meaning in the Exclusion, remand is appropriate. The district court 

merely “assume[d] insufficient ballast was in the [storage tank] at the time of the 

loss,” because that assumption did not affect this case’s outcome if the Exclusion 

were ambiguous. Further proceedings before the district court are necessary to 

resolve whether ESI’s losses were, in fact, “caused by or result[ed] from faulty, 

inadequate or defective . . . construction,” thus making the Exclusion applicable.

Since we remand for further proceedings on the Exclusion’s application, we 

must also address the district court’s references to the Policy’s provision on 

“resulting loss or damage.” This provision clarifies that if an “excluded cause of 

loss [e.g. faulty construction] . . . results in a Covered Cause of Loss, [Travelers 

Insurance] will pay for the resulting loss or damage caused by that Covered Cause 
6

of Loss.” ESI claims this provision means that the Exclusion bars coverage for 

only the defect itself (i.e. the cost of putting more ballast water into the tank), 

while the “resulting loss or damage” provision reinstates coverage for all other 

damages. Travelers Insurance counters that the “resulting loss or damage” 

provision does not apply here, because all damages stemmed from faulty 

construction allowing the tank to float when rain accumulated in the “wet” 

excavation hole.

We find both parties’ positions on the “resulting loss or damage” provision 

untenable. The “resulting loss or damage” provision does not contain an anticoncurrent causation clause, so the Exclusion would not bar coverage for all of 

ESI’s damages if faulty construction was one factor among others causing the 

storage tank’s floatation. Cf. ABK, LLC v. Mid-Century Ins. Co., 454 P.3d 1175, 

1183 n.3 (Idaho 2019) (“An anti-concurrent causation clause . . . in an insurance 

policy states that where a property loss is caused by a combination of excluded and 

covered perils, the entire loss is excluded from coverage.” (quotation and citation 

omitted)). Yet ESI is incorrect in its position that the “resulting loss or damage” 

provision would reinstate coverage for all damages other than the cost of additional 

ballast water needed to prevent floatation. That position ignores the Policy’s 

language stating how in no circumstance will Travelers Insurance pay for “any cost 

incurred to tear down, tear out, repair or replace any part of any property to correct 
7

the fault, inadequacy or defect.” Ultimately, however, we leave it to the district 

court for further proceedings on whether an “excluded cause of loss” did, in fact, 

“result[] in a Covered Cause of Loss”; and, if so, the scope of the “resulting loss or 

damage” provision in light of our guidance here.

Aside from ESI’s breach of contract claim, we affirm the district’s grant of 

summary judgment on ESI’s bad faith claim. Travelers Insurance submitted 

evidence to support a reasonable dispute about insurance coverage. The burden 

thus shifted to ESI to show a genuine dispute of material fact about its claim for 

coverage not being “fairly debatable.” See, e.g., Lakeland True Value Hardware, 

LLC v. Hartford Fire Ins. Co., 291 P.3d 399, 404 (Idaho 2012) (“[A]n insurer does 

not act in bad faith if it declines to pay sums that are reasonably in dispute.”). 

While ESI presented evidence showing that Travelers Insurance knew there might 

be some question as to whether 3 Kings properly ballasted the tank, its evidence

was not enough to show more than the existence of “a legitimate question or 

difference of opinion over the eligibility, amount or value of the claim.” Robinson 

v. State Farm Mut. Auto. Ins. Co., 45 P.3d 829, 834 (Idaho 2002). ESI needed to 

present some evidence of a clear entitlement to coverage, which it did not do. 

Moreover, even if the district court on remand finds that coverage exists for ESI’s 

losses, that does not mean Travelers Insurance acted in bad faith by denying ESI’s 

claim and litigating the Policy’s scope in these circumstances. See, e.g., Vaught v. 
8

Dairyland Ins. Co., 956 P.2d 674, 679 (Idaho 1998) (explaining that if a claim 

involves an unsettled legal issue, insurers do not act in bad faith by litigating the 

claim in good faith “even if the insurer does not prevail”).

The parties shall bear their own costs on appeal. 

AFFIRMED IN PART, REVERSED IN PART, and REMANDED.