Court Opinion

ID: 2903281
Source: CourtListenerOpinion
Date Created: 2015-09-09 20:01:02.026543+00
Date Added: 2024-06-11T15:20:42.321643
License: Public Domain

FILED
                             NOT FOR PUBLICATION
                                                                            SEP 09 2015
                      UNITED STATES COURT OF APPEALS                    MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS

                             FOR THE NINTH CIRCUIT

AMERON INTERNATIONAL                             No. 13-55838
CORPORATION; et al.,
                                                 D.C. No. 2:12-cv-08582-R-VBK
                Plaintiffs-counter-defendants,

  And                                            MEMORANDUM*

AMERICAN HOME ASSURANCE
COMPANY,

                Defendant-counter-claimant -
Appellee,

             v.

GREENWICH INSURANCE
COMPANY,

                Plaintiff-counter-defendant -
Appellant.

AMERON INTERNATIONAL                             No. 13-55850
CORPORATION and AMERON B.V.,
                                                 D.C. No. 2:12-cv-08582-R-VBK
                Plaintiffs-counter-defendants
- Appellants,

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
 And

GREENWICH INSURANCE
COMPANY,

                Plaintiff-counter-defendant,

v.

AMERICAN HOME ASSURANCE
COMPANY,

                Defendant-counter-claimant -
Appellee.

AMERON INTERNATIONAL                            No. 13-56105
CORPORATION and AMERON B.V.,
                                                D.C. No. 2:12-cv-08582-R-VBK
                Plaintiffs-counter-defendants
- Appellants,

 And

GREENWICH INSURANCE
COMPANY,

                Plaintiff-counter-defendant,

v.

AMERICAN HOME ASSURANCE
COMPANY,

                Defendant-counter-claimant -
Appellee.
AMERON INTERNATIONAL                          No. 13-56106
CORPORATION; et al.,
                                              D.C. No. 2:12-cv-08582-R-VBK
             Plaintiffs-counter-defendants,

  And

GREENWICH INSURANCE
COMPANY,

             Plaintiff-counter-defendant -
Appellant,

 v.

AMERICAN HOME ASSURANCE
COMPANY,

             Defendant-counter-claimant -
Appellee.

                  Appeal from the United States District Court
                     for the Central District of California
                   Manuel L. Real, District Judge, Presiding

                       Argued and Submitted May 4, 2015
                             Pasadena, California

Before: NOONAN, WARDLAW, and MURGUIA, Circuit Judges.

      Ameron International Corporation and its subsidiary Ameron B.V.

(collectively, “the Ameron parties”), along with Greenwich Insurance Company,

appeal the district court’s grant of summary judgment in favor of American Home

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Assurance. We have jurisdiction under 28 U.S.C. § 1291. Reviewing the district

court’s summary judgment de novo, Anthem Elecs., Inc. v. Pac. Emp’rs Ins. Co.,

302 F.3d 1049, 1054 (9th Cir. 2002), we reverse and remand.

      The Ameron parties supplied paint that was affixed to various onshore and

offshore facilities in a large natural gas production project in Nova Scotia, Canada.

The organization behind the project is now suing the Ameron parties for paint

failure, which allegedly caused corrosion of the underlying steel structure and

pipelines. The Ameron parties seek defense costs for this action under the terms of

a general liability policy issued by American Home Assurance.

      In California, an insurer “‘must defend a suit which potentially seeks

damages within the coverage of the policy.’” Montrose Chem. Corp. v. Superior

Court, 861 P.2d 1153, 1157 (Cal. 1993) (in bank) (quoting Gray v. Zurich Ins. Co.,

419 P.2d 168, 176 (Cal. 1966)). This duty continues “until the underlying lawsuit

is concluded or until it has been shown that there is no potential for coverage.” Id.

(internal citation omitted). To make that showing, the insurer must probe the

absence of any potential for coverage “conclusively.” Anthem Elecs., 302 F.3d at

1055. Courts resolve any doubt as to whether the facts establish the existence of

the defense duty in the insured’s favor. Id. at 1054.

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      1.     American Home Assurance argues that there is no potential for

coverage under the policy’s known damages provision, which precludes coverage

for property damage that the insured “knew . . . had occurred, in whole or in part.”

 The parties agree that the Ameron parties knew about paint failure at the project.

However, an “insured’s knowledge of damage to his own work doesn’t

automatically constitute knowledge of damage to the components of the structure

furnished by others.” See Kaady v. Mid-Continent Cas. Co., -- F.3d ----, 2015 WL
3894394, at *2 (9th Cir. June 25, 2015); Golden Eagle Ins. Co. v. Travelers Cos.,

103 F.3d 750, 757 (9th Cir. 1996) (“[A]n insured’s faulty workmanship is not

‘property damage’ under California law.”), overruled on other grounds by Gov’t

Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1223–25 (9th Cir. 1998) (en banc).

      Turning to the damage to the underlying steel, we agree with American

Home Assurance that the record conclusively shows that the Ameron parties knew

about corrosion to the underlying steel at the offshore facilities before the inception

of the policy. However, that is not the end of our inquiry.

      We must also ask: did the Ameron parties know about corrosion to the

underlying steel at the onshore facilities and the pipelines?1 We hold that there is

      1
       The onshore and offshore facilities, as well as the pipelines, are all different
“properties” for purposes of the policy. See Kaady, 2015 WL 3894394, at *3.

                                           3
an issue of fact on this question. Although American Home Assurance has

presented some evidence that the Ameron parties had pre-policy knowledge of

corrosion and damage to the underlying steel at the onshore facilities and pipelines,

none of this evidence is “conclusive[].” See Anthem Elecs., 302 F.3d at 1054.

Additionally, several key Ameron employees testified that they did not have

knowledge of corrosion or other damage to the underlying steel at the onshore

facilities until after the policy’s inception. This testimony alone creates an issue of

fact about the Ameron parties’ knowledge. See id.

      The next question is whether the corrosion damage to the onshore facilities

and pipelines was a “continuation, change, or resumption” of the known corrosion

damage at the offshore facilities. There is also an issue of fact on this question.

American Home Assurance argues that “continuation, change, or resumption”

refers to the same type or same cause of damage, regardless of how widespread or

physically separated that damage is. Under this definition, American Home

Assurance argues that the later corrosion at the onshore facilities and pipelines

qualifies as a “continuation, change, or resumption” of the offshore property

damage because the same paint continued to fail in the same ways giving rise to

the same type of damage. However, even assuming that American Home’s

                                           4
interpretation of the policy is correct,2 there are issues of fact as to whether the

corrosion at the various locations shared a common cause. See Montrose Chem.

Corp., 861 P.2d at 1158; see also Anthem Elecs., 302 F.3d at 1060. Given these

issues of fact, there remains the “possibility” that the corrosion at the onshore

facilities and pipelines is not a continuation, change, or resumption of the known

damage at the offshore facilities and thus is within the policy’s coverage. See

Montrose Chem. Corp., 861 P.2d at 1157 (“Facts extrinsic to the [underlying]

complaint also give rise to a duty to defend when they reveal a possibility that the

claim may be covered by the policy.”); see also Gray, 419 P.2d at 276 (“[An

insurer] cannot construct a formal fortress of the third party’s pleadings and retreat

behind its walls. . . . In light of . . . the plasticity of modern pleading, we should

hardly designate the third party as the arbiter of the policy’s coverage.”).

       2.     American Home Assurance also argues that there is no potential for

coverage because the underlying action does not involve an “occurrence” within

       2
        The Ameron parties and Greenwich argue that “continuation, change, or
resumption” necessarily encompasses a geographic element. That is, property
damage at the offshore facilities is separate and distinct from the property damage
at the onshore facilities, even if the damage is the same type (corrosion) and same
cause (defective paint). Under this competing definition of continuation, change,
or resumption, the corrosion at the onshore facilities and the pipelines also was not
a continuation of the corrosion seen at the offshore facilities and thus covered
under the terms of the policy. Because there is a potential for coverage under
either definition, we do not need to decide this issue.

                                            5
the terms of the policy. Specifically, American Home Assurance argues that the

corrosion at the Sable Project was not caused by an “accident” because the Ameron

parties intentionally supplied the defective paint. But, the evidence does not

conclusively show that the Ameron parties intended to supply defective or faulty

paint. In light of this evidence, American Home Assurance cannot conclusively

establish that Ameron intentionally (rather than negligently) supplied defective

paint. Therefore, there remains a possibility that the property damage was caused

by an “occurrence” and covered by the policy. See Montrose Chem. Corp., 861
P.2d at 1161; see also Anthem Elecs., 302 F.3d at 1060.

      For the above reasons, we REVERSE the grant of summary judgment for

defendant-appellee, REVERSE the denial of summary judgment to plaintiffs-

appellants, GRANT partial summary judgment to plaintiffs-appellants on the duty

to defend, and REMAND for proceedings consistent with this decision.

      REVERSED; REMANDED with instructions.

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