Court Opinion

ID: 9367424
Source: CourtListenerOpinion
Date Created: 2023-01-31 19:00:41.821878+00
Date Added: 2024-06-11T17:16:00.173039
License: Public Domain

NOT FOR PUBLICATION                        FILED
                       UNITED STATES COURT OF APPEALS                     JAN 31 2023
                                                                     MOLLY C. DWYER, CLERK
                              FOR THE NINTH CIRCUIT                    U.S. COURT OF APPEALS

AECOM, a Delaware corporation,                   No. 22-55092

                   Plaintiff-Appellant,          D.C. No. 2:21-cv-00237-JAK-MRW
     v.

ZURICH AMERICAN INSURANCE                        MEMORANDUM*
COMPANY, a New York corporation,

                   Defendant-Appellee.

                      Appeal from the United States District Court
                         for the Central District of California
                      John A. Kronstadt, District Judge, Presiding

                             Submitted December 5, 2022**
                                 Pasadena, California

Before: M. SMITH, COLLINS, and LEE, Circuit Judges.

          Plaintiff-Appellant AECOM seeks coverage from its property insurer,

Zurich American Insurance Co. (“Zurich”), for losses sustained as a result of the

Covid-19 pandemic. The district court dismissed AECOM’s complaint for failure

to state a claim, and we affirm.

          1. All of the coverage provisions invoked by AECOM in its operative

*
 This disposition is not appropriate for publication and is not precedent except as
provided by Ninth Circuit Rule 36-3.
**
  The panel unanimously concludes that this case is suitable for decision without
oral argument. See FED. R. APP. P. 34(a)(2)(C).
complaint apply only if there is “direct physical loss of or damage . . . to” covered

property or, in specified circumstances, to third-party property. AECOM alleges

that this coverage requirement is met because the presence of Covid virus particles

at a given premises “alters the air and airspace in which it is found and the property

on which it lands.” Assuming arguendo that the presence of Covid virus particles

at an insured’s property constitutes “direct physical loss of or damage to” such

property, we agree with the district court’s conclusion that the “Contamination”

exclusion in AECOM’s policy precludes coverage here.1

        a. The Contamination exclusion excludes from coverage “Contamination,

and any cost due to Contamination including the inability to use or occupy

property or any cost of making property safe or suitable for use or occupancy,

except as provided by the Radioactive Contamination Coverage of this Policy.”2

The policy defines “Contamination” to mean: “[a]ny condition of property due to

the actual presence of any foreign substance, impurity, pollutant, hazardous

material, poison, toxin, pathogen or pathogenic organism, bacteria, virus, disease

1
  We therefore deny AECOM’s motion to stay this matter pending resolution of
proceedings concerning the certified question in Another Planet Ent., LLC v.
Vigilant Ins. Co., 56 F.4th 730, 734 (9th Cir. 2022) (certifying to the California
Supreme Court the question of whether “the actual or potential presence of the
COVID-19 virus on an insured’s premises constitute[s] ‘direct physical loss or
damage to property’ for purposes of coverage under a commercial property
insurance policy”).
2
    Unless otherwise noted, our quotations omit any boldface type used in the policy.

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causing or illness causing agent, Fungus, mold or mildew” (emphasis added). As

noted earlier, AECOM’s theory of coverage rests dispositively on the presence of

Covid virus particles at its various insured properties and the contention that such

presence constitutes direct physical loss of or damage to property. Accordingly,

the very thing that AECOM claims triggers coverage—the “presence” of a “virus”

and the resulting “condition of property” due to that presence—constitutes

“Contamination” under the plain language of the Contamination exclusion. Thus,

under the theory of AECOM’s own complaint, the Contamination exclusion bars

the coverage that AECOM alleges.

      b. We reject AECOM’s contention that the Contamination exclusion is

insufficiently conspicuous, plain, and clear to be enforceable. The exclusion is

located directly under a heading that states—in all caps, and in font notably larger

than the surrounding text—“EXCLUSIONS,” and as we have explained, the

import of the language of that exclusion is clear and unambiguous. AECOM

points out that the word “virus” does not occur in the exclusion, but only in a

definition that is recited more than 40 pages later. But the policy conspicuously

uses boldface type throughout to signify terms that are defined elsewhere in the

policy, and here the operative language of the Contamination exclusion clearly

uses boldface type for the term “Contamination.” Moreover, the definition of that

term occurs 40 pages later only because the policy adopts the conspicuous, plain,

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and clear practice of gathering such defined terms into a single alphabetically

organized section prominently labeled “DEFINITIONS.” And, as noted, the

definition of “Contamination” contained in that section plainly includes a “virus.”

In view of all of these features, the exclusion is enforceable. See Nat’l Ins.

Underwriters v. Carter, 551 P.2d 362, 365–66 (Cal. 1976) (holding that an

exclusion is sufficient where it is stated in “plain” language under a “bold face

heading designated ‘EXCLUSIONS’” rather than “concealed in a mass of fine

print”); Cal-Farm Ins. Co. v. TAC Exterminators, Inc., 218 Cal. Rptr. 407, 413–14

(Ct. App. 1985) (recognizing Carter’s holding that “an exclusion clause [is]

conspicuous as a matter of law when it [i]s found in a section under the bold face

heading ‘EXCLUSIONS,’ in printing [whose] size and intensity [is] identical to

the rest of the policy”).

      c. AECOM argues that the Contamination exclusion only applies to “costs”

and not to “financial losses.” We disagree. The exclusion applies both to

“Contamination”—meaning the underlying condition of the property due to the

presence of virus—and to “any cost due to Contamination.” Moreover, such

excluded “costs” specifically include an “inability to use or occupy property.” All

of AECOM’s theories of coverage are based on the condition of the property due

to the presence of virus particles. They are therefore all based on

“Contamination,” the resulting “inability to use or occupy” the property, and the

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costs of remediation, and they all fall within the exclusion.

      2. The policy’s “Louisiana Endorsement” applies only in Louisiana.

AECOM’s contrary argument is foreclosed by American International Specialty

Lines Insurance Co. v. Continental Casualty Insurance Co., 49 Cal. Rptr. 3d 1, 14–

15 (Ct. App. 2006). AECOM argues that American International is

distinguishable, because here the policy contains a provision (§ 6.21) stating that

“[t]he titles of the various paragraphs and endorsements are solely for reference

and shall not in any way affect the provisions to which they relate.” Because the

“Louisiana Endorsement” only mentions Louisiana in the title, AECOM argues,

the reference to “Louisiana” has no effect on the provisions set forth in that

endorsement, which must be understood as applying across the board. AECOM’s

argument is not a reasonable reading of these provisions or of the policy as a

whole.

      No reasonable reader of the policy could fail to recognize that the 31 state-

specific endorsements are intended to modify the policy’s terms solely with respect

to the particular state at issue. Indeed, the policy cannot reasonably be read

otherwise, because several of the state-specific endorsements (including the

Louisiana Endorsement) make mutually inconsistent replacements of the same

underlying sections of the policy, such as the section concerning “suits against the

company.” See People ex rel. Dep’t of Parks & Recreation v. West-A-Rama, Inc.,

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111 Cal. Rptr. 197, 201 (Ct. App. 1973) (“It is a cardinal rule of construction that a

contract is to be construed as a whole, effecting harmony among and giving

meaning to all the parts thereof.”). And by recognizing that the Louisiana

Endorsement is limited to Louisiana, we do not thereby use the title to alter the

substantive meaning of the operative provisions set forth in that section, which is

what § 6.21 addresses. Finally, the fact that Zurich subsequently amended its

Louisiana Endorsement to make its state-specific application explicit is irrelevant.

See Tzung v. State Farm Fire & Cas. Co., 873 F.2d 1338, 1341 (9th Cir. 1989)

(“We reject the Tzungs’ reliance on the revised policy for its negative

inferences.”); McKee v. State Farm Fire & Cas. Co., 193 Cal. Rptr. 745, 748 (Ct.

App. 1983) (“We agree that evidence of subsequent revisions of an exclusionary

clause in an insurance policy should be inadmissible because it lacks relevance,

i.e., has no tendency to prove a material fact—is not probative on the issue of

liability.”).

       3. AECOM’s argument that the COVID-19 virus was not the “efficient

proximate cause” of its financial losses for purposes of the Contamination

exclusion fails for the same reasons that we explained in rejecting a comparable

argument in Mudpie, Inc. v. Travelers Casualty Insurance Co. of America, 15 F.4th

885, 893–94 (9th Cir. 2021).

       AFFIRMED.

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