* After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is

therefore ordered submitted without oral argument. This order and judgment is

not binding precedent, except under the doctrines of law of the case, res judicata,

and collateral estoppel. It may be cited, however, for its persuasive value

consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 

FILED

United States Court of Appeals

Tenth Circuit

January 27, 2010

Elisabeth A. Shumaker

Clerk of Court

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

LOUIS S. SADLER; MARGARET A.

SADLER,

Plaintiffs-Appellants,

v.

PACIFIC INDEMNITY COMPANY,

Defendant-Appellee.

No. 09-2099

(D.C. No. 1:08-CV-00670-RLP-LFG)

(D. N.M.)

ORDER AND JUDGMENT*

Before KELLY, PORFILIO, and O’BRIEN, Circuit Judges.

Louis and Margaret Sadler were sued in state court by Chester and LeeAnn

Hine for misrepresenting the condition of a house that they sold to the Hines. The

Sadlers tendered their defense of that lawsuit to Pacific Indemnity Company

under their personal liability insurance policy (the “Policy”). Pacific refused to

defend or indemnify them, however, claiming that the underlying complaint did
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not allege facts constituting an “occurrence” as defined in the Policy. The

Sadlers then filed this action against Pacific in federal court, accusing the

company of engaging in unfair insurance practices and breaching their agreement

in bad faith. On cross-motions for summary judgment, the district court held that

the allegations in the Hines’ state court complaint did not trigger Pacific’s duty to

defend and dismissed the action. We have jurisdiction under 28 U.S.C. § 1291,

and we affirm.

I.

Shortly after the closing in October 2003, the Hines discovered a number of

concealed defects in the house sold to them by the Sadlers, including

urine-stained carpet padding and a rodent infestation. In May 2005, they sued the

Sadlers in state court, asserting claims of intentional, negligent, and innocent

misrepresentation. Generally, they alleged that the Sadlers knew about but failed

to disclose these problems and instead represented that the house was in good

condition. After a trial, in June 2007, the Hines were awarded over $375,000 in

compensatory and punitive damages, as well as their attorneys fees. 

In July 2008, the Sadlers brought this action against Pacific, claiming that

the company breached its contractual obligation to defend and indemnify them

against the claims asserted by the Hines. They argued primarily that the Hines’

claims for negligent and innocent misrepresentation, by definition unintentional

acts, brought the lawsuit within the Sadlers’ personal liability coverage, thereby
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triggering Pacific’s duty to defend. Pacific countered that it had no such duty,

arguing that the Policy protected the Sadlers only against personal injury and

property damage and not against economic loss caused by their

misrepresentations. 

In an opinion dated March 24, 2009, the district court agreed with Pacific. 

The court recognized that under New Mexico law, an insurer’s duty to defend is

triggered “if the facts as alleged in the underlying complaint tend to show an

occurrence within the coverage.” Aplt. App. at 219 (internal quotation marks

omitted); see generally Found. Reserve Ins. Co. v. Mullenix, 642 P.2d 604,

605-06 (N.M. 1982) (explaining distinction between the duty to defend and duty

to pay). After surveying multi-jurisdictional caselaw pertaining to the relevant

issues, however, the court concluded that New Mexico courts would not consider

the allegations in the Hines’ complaint to constitute an occurrence within the

meaning of the Sadlers’ Policy. 

Under the terms of the Policy, the Sadlers were protected against “personal

injury or property damage . . . caused by an occurrence.” Aplee. Supp. App. at

91. The Policy defined occurrence as “a loss or accident to which [the] insurance

applies,” id. at 75, and property damage as “physical injury to or destruction of

tangible property, including the loss of its use,” id. at 91. The district court

concluded these provisions unambiguously provided for coverage in the event of a

loss resulting from personal injury or property damage but not economic
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damages. It noted that all of the allegations in the underlying complaint pertained

to misrepresentations that caused economic harm to the Hines. And it emphasized

that “such misrepresentations [were] not the ‘cause’ of any physical damage to

the property and therefore only result[ed] in economic loss, a loss not covered

under the Policy.” Aplt. App. at 224. The court also construed “loss of use of

tangible property” to mean actual physical damage or destruction, thereby

rejecting the Sadler’s claim to loss-of-use coverage based on the Hines’ allegation

that the house was uninhabitable. Finding no plausible basis for coverage, the

court concluded that summary judgment in favor of Pacific was warranted and

dismissed the complaint with prejudice.

II.

“We review a district court’s grant of summary judgment de novo, applying

the same standard as the district court.” Union Standard Ins. Co. v. Hobbs Rental

Corp., 566 F.3d 950, 952 (10th Cir. 2009) (internal quotation marks omitted). 

Summary judgment is proper if the record reveals “no genuine issue as to any

material fact and that the movant is entitled to judgment as a matter of law.” Fed.

R. Civ. P. 56(c). Having carefully considered the parties’ briefs in light of the

relevant authority and Policy provisions at issue, we find ourselves in accord with

the well-reasoned opinion of the district court and find no error meriting 
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correction. We therefore AFFIRM its judgment for substantially the same reasons

stated in its Memorandum Opinion and Order of March 24, 2009.

Entered for the Court

Paul J. Kelly, Jr.

Circuit Judge