NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CITY OF PHOENIX,

Plaintiff

- Appellant,

v. FIRST STATE INSURANCE COMPANY, a foreign insurer; et al.,

Defendants

- Appellees. No. 16

- 16767
D.C. No. 2:15

- cv - 00511

- NVW

MEMORANDUM *

Appeal from the United States District Court for the District of Arizona Neil V. Wake, District Judge, Presiding Submitted February 14, 2018 ** San Francisco, California Before: KLEINFELD and TALLMAN, Circuit Judges, and JACK, *** District Judge.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36

- 3.

** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2).

*** The Honorable Janis Graham Jack, United States District Judge for the Southern District of Texas, sitting by designation. 

# FILED

APR 4 2018 MOLLY C. DWYER, CLER K U.S. COURT OF APPEAL S2

The City of Phoenix (“ the City” ) appeals an adverse summary judgment in favor of First State Insurance Company, Twin City Fire Insurance Company, New England Reinsurance Corporation, and Nutmeg Insurance Company (colle ctively, “Hartford”) 1 on the City’s declaratory judgment , breach of contract, and bad faith
claim s , and from the denial of the City’s motion for partial summary judgment

. We have jurisdiction pursuant to 28 U.S.C. § 1291 and we affirm. The City’s insuranc e coverage action against Hartford arose from an underlying personal injury and wrongful death lawsuit brought by Carlos Tarazon
and his wife. Mr. Tarazon was exposed to asbestos through his work as an underground pipe layer in the City from 1968 to 1993 and died of mesothelioma in
2014

. T he City settled the Tarazon family’s c laims against it for $500,000. The City’s legal defense expenses amounted to over $1,400,000.
From July 1, 1981 to July 1, 1985 , the City was covered by four successive excessive liability policies (“Excess Policies”) issued by Hartford, each of which provided $500,000 in liability coverage in excess of a $500,000 self

- insured retention (“SIR”). The City also purchased three succ essive umbrella policies (“Umbrella Policies”) from Hartford, covering periods from July 1, 1981 to July 1,
1984.

1 The named A ppellees are all affiliates of The Hartford Financial Services Group.3

1

. The Excess Policies’ basic insuring agreement states that Hartford “will indemnify the [ City] for ultimate net loss in excess of the reta ined limit [of $500,000

. ]” “Ultimate net loss” is defined in the Excess Policies to “exclude[] all loss adjustment expenses . . . .” The parties agree that defense costs are “loss adjustment expenses.” The plain language of this provision is unambiguous

. S ee S parks v. Republic Nat’l Life Ins. Co. , 647 P.2d 11 27, 1132 (Ariz. 1982) (en banc) (a n insurance policy’s provisions “are to be construed in a manner according to their plain and ordinary meaning” ). Hartford only has to indemnify the City if the
C ity’s ultimate net loss ( i.e. , not including defense costs) exceeds $500,000. See Pac. Emp’rs Ins. Co. v. Domino’s Pizza, Inc. , 144 F.3d 1270, 1276

– 77 (9th Cir. 1998). The City settled its claim for $500,000 and is not entitled to indemnity.
The Excess Policies also contain a “No Costs” provision , which states: Should any claim arising from such occurrence be adjusted prior to trial court judgment for a total amount not more than the retained limit, then no loss expenses or legal expenses sha ll be payable by the Company(s). Again, because the City settled its claim within the retained limit , the plain language of the policy precludes it from receiving defense costs from Hartford

. The City attempts to inject ambiguity into the No Costs prov ision by arguing that use of the term “adjusted” includes both liability and defense costs, and
defense costs therefore erode the SIR. However, this reading would contradict the language from the basic insuring agreement , which clearly provides that Hartf ord’s4

duty to indemnify applies when the retained limit is exhausted by liability costs. We are also persuaded by City of Oxnard v. Twin City Fire Insurance Co. , which examined an insurance policy with similar policy language, and likewise
concluded that the insured “was responsible for defense costs for claims it settled within its SIR amount.” 44 Cal. Rptr. 2d 177, 180 (Cal. Ct. App. 1995). 2
2

. The City argues in the alternative that if Hartford is not obligated to pay the City under the Excess Policies , Hartford must pay under the Umbrella
Policies

. The Umbrella Policies provide that Hartford will indemnify the City “for ultimate net loss in excess of the underlying limit or the [SIR] , whichever is the greater . . . .” The Umbrella Policies define “un derlying limit” as the “ limits of liability of the underlying insurance

. . . . ” Each Umbrella Policy’s Schedule of Underlying Policies lists an Excess P olicy and states that the Excess Policy ’s limit of liability is $500,000 in excess of the $500,000 SIR . W here no underlying insurance applies, the Umbrella Policies have a separate SIR of $10,000 or $25,000, depending on the policy year. Because the City’s asbestos liability fell with in the scope of the Excess
Policies , the City is only entitled to “ult imate net loss in excess of the underlying
limit . . . .” As the City did not exhaust the underlying limit of the Excess Policies ,

2 Because we agree with the district court’s interpretation of the Excess Policies , we need not reach the issu e of pro rata allocation.5

it is not entitled t o indemnity under the Umbrella P olicies. See Garmany v.
Mission Ins. Co. , 785 F.2d 941, 948 (11th Cir. 1986) (explaining the dual nature of

a typical umbrella policy). Moreover, t he City’s argument that it is entitled to
defense costs under the Umbrella Policies fails for the same reason it is not entitled
to defense costs under the Excess Policies

. 3

. B ecause we find that Hartford was justified in refusing to indemnify the City, we decline to review the City’s bad faith claim. The City conceded below that it could not show bad faith if Hartford’s refusal to pay out on the policies was justified. See Un ited States v. Patrin , 57 5 F.2d 708, 712 (9th Cir. 1978)

. 4

. The district court excluded “much of” the City’s expert testimony because it “assert[ed] legal principles, reache [ d] legal conclusions, or assert[ed] facts contrary to or unsupported by the record on these motions.” This was not an abuse of discretion

. See Nationwide Transp. Fin. v. Cass Info. Sys., Inc. , 523 F.3d 1051, 1058

– 59 (9th Cir. 2008). Costs for this appeal are awarded to Appellees. See Fed. R. App. P. 39(a)(2).
AFFIRMED.