Opinion ID: 4387386
Heading Depth: 3
Heading Rank: 2

Heading: Fortuity

Text: The parties hew closely to the Standard Structural Steel definition of external cause and argue at length about whether the V32 diffuser basket and the adsorbent media were “inherently defective.” The parties’ arguments largely ignore, however, the concept of “fortuity,” which operates “as a sort of partnership” with the external cause requirement.10 Standard Structural Steel, 597 F. Supp. at 191–92; see also 9 The Standard Structural Steel court also stated that all risks insurance policies implicitly require an external cause, even if the language of the policy is not so limited. Standard Structural Steel, 597 F. Supp. at 192. Thus, as the Standard Structural Steel court explained, “[t]he label ‘all risk’ is essentially a misnomer. All risk policies are not ‘all loss’ policies; all risk policies . . . contain express written exclusions and implied exceptions which have been developed by the courts over the years.” Standard Structural Steel, 597 F. Supp. at 192 (internal quotation and citation omitted). 10 Ingenco does refer to fortuity in passing in its opening brief and somewhat more extensively in its reply but, at least in part, does so in reference to flow-induced vibrations rather than the stream of incoming landfill gas. Ace does not refer to fortuity at all, but raises arguments that fit within the fortuity framework. 22 INGENCO HOLDINGS V. ACE AMER. INS. CO. Koppers Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440, 1446 (3d Cir. 1996) (citing “the generally accepted principle that every ‘all risk’ contract of insurance contains an unnamed exclusion—the loss must be fortuitous in nature.” (internal quotation omitted)); Underwriters Subscribing to Lloyd’s Ins. Cert. No. 80520 v. Magi, Inc., 790 F. Supp. 1043, 1046 (E.D. Wash. 1991) (“Regardless of its express terms, every all-risk policy contains an unnamed exclusion—the loss must be fortuitous in nature.” (internal quotation and citation omitted)). Indeed, some courts have used the word “fortuitous” as an alternative to “external cause.” See, e.g., Dow Chem. Co. v. Royal Indem. Co., 635 F.2d 379, 386, (5th Cir. 1981) (stating, in reference to an all risks policy using the term “external cause,” that “recovery under an all-risk policy will be allowed for all fortuitous losses not resulting from misconduct or fraud, unless the policy contains a specific provision expressly excluding the loss from coverage.”).11 The Washington Supreme Court has not addressed the concept of fortuity as it relates to all risks insurance policies. It is our task, therefore, to predict how the Washington Supreme Court would decide the issue. Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir. 1986). In so doing, we may look to other courts’ decisions for guidance, as well as to treatises, restatements, and other data. Id.; Astaire v. Best Film & Video Corp., 116 F.3d 1297, 1300 (9th Cir. 1997), amended, 136 F.3d 1208 (9th Cir. 1998). 11 As discussed below, other courts have emphasized the centrality of fortuity over externality in the modern view of all risks policies, holding that because the critical factor is the role of chance, external causation cannot be read into all risks policies, and that even intrinsically caused fortuitous events may be covered under an all risks policy. See City of Burlington v. Indem. Ins. Co. of N. Am., 332 F.3d 38, 48 at n.9 (2d Cir. 2003) (collecting cases). INGENCO HOLDINGS V. ACE AMER. INS. CO. 23 Courts, often drawing upon the Restatement of Contracts, have typically defined a fortuitous event as one that is dependent upon chance, taking into account the knowledge of the parties.12 See, e.g., Compagnie des Bauxites de Guinee v. Ins. Co. of N. Am., 724 F.2d 369, 372 (3d Cir. 1983); Magi, Inc., 790 F. Supp. at 1047–48 (collecting cases). Courts have further concluded that a fortuity inquiry should look to, among other things, whether a particular loss was certain to occur, the parties’ perception of risk at the time the policy issued, and whether the loss could reasonably have been foreseen.13 Magi, Inc., 790 F. Supp. at 1048; Churchill v. Factory Mut. Ins. Co., 234 F. Supp. 2d 1182, 1188 (W.D. Wash. 2002); Frank Coluccio Const. Co. v. King Cty., 136 Wash. App. 751, 768 (2007). We conclude that the Washington Supreme Court would adopt a definition of fortuity consistent with this trend.14 With this concept of fortuity in mind, we turn to the facts of this case. Here, the fortuity analysis is complicated somewhat by Ingenco’s inconsistent references to both “flow 12 According the Restatement of Contracts, “[a] fortuitous event . . . is an event which[,] so far as the parties to the contract are aware, is dependent on chance. It may be beyond the power of any human being to bring the event to pass; it may be within the control of third persons; it may even be a past event, as the loss of a vessel, provided that the fact is unknown to the parties. The event may be positive or negative—an occurrence or a failure to occur.” Restatement (First) of Contracts § 291 (1932). 13 The Magi, Inc. court determined that the Washington Supreme Court would adopt a similar definition. Magi, Inc., 790 F.Supp. at 1048. 14 Multiple district courts within this circuit have made similar predictions. See, e.g., Magi, Inc., 790 F.Supp. at 104; Kilroy Indus. v. United Pac. Ins. Co., 608 F. Supp. 847, 858 (C.D. Cal. 1985). 24 INGENCO HOLDINGS V. ACE AMER. INS. CO. induced vibrations” and “the process gas” as the cause of its losses, as discussed above. Were the inquiry focused on the fortuity of “the process gas,” Ingenco could not possibly succeed, as it is undisputed that all parties fully expected the stream of landfill gas to enter the Cedar Hills facility and, as Ingenco concedes, the incoming stream of gas never exceeded expected tolerances. The focus of our fortuity analysis, however, is not on the fortuity of the process gas or some other cause, but rather on whether Ingenco’s loss was fortuitous. There is no evidence in the record that the failure of the diffuser basket cover plate straps, or the subsequent obliteration of the adsorbent media, was inevitable. Nor is there any evidence in the record that either party had reason to believe, at the time the policy issued, that the diffuser basket cover would fail under normal gas pressures, or that the adsorbent media would ever be exposed to an unmediated stream of high pressure gas. Lastly, Ingenco’s expert opined that the resonant vibrations in the metal straps were not, and could not have been, reasonably foreseen. See Magi, Inc., 790 F. Supp. at 1047–48; see also City of Burlington v. Indem. Ins. Co. of N. Am., 332 F.3d 38, 49 (2d Cir. 2003) (recounting Third Circuit’s conclusion in Compagnie Des Bauxites that “while in hindsight [] structural defects might appear inevitable, [the court] had to credit the insured’s statements that it had no knowledge of the design defects and that the loss was therefore fortuitous,” and explaining that “an intrinsically caused loss may be just as unexpected as an extrinsically caused one.”). Thus, it appears that Ingenco’s loss was indeed fortuitous, or that there is, at the very least, a triable issue of fact regarding the issue. INGENCO HOLDINGS V. ACE AMER. INS. CO. 25