Court Opinion

ID: 4178475
Source: CourtListenerOpinion
Date Created: 2017-06-16 20:04:05.455717+00
Date Added: 2024-06-11T07:47:14.119429
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                           JUN 16 2017
                    UNITED STATES COURT OF APPEALS                      MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

PROBUILDERS SPECIALTY                            No. 14-17544
INSURANCE COMPANY, RRG,
                                                 D.C. No. 5:10-cv-05533-EJD
              Plaintiff - Appellee,

 v.                                              MEMORANDUM*

VALLEY CORP. B.; TY LEVINE;
KAREN LEVINE; RONALD J. HAAS; R.
J. HAAS CONSTRUCTION CORP.,

              Defendant - Appellants.

                    Appeal from the United States District Court
                      for the Northern District of California
                    Edward J. Davila, District Judge, Presiding

                     Argued and Submitted February 13, 2017
                            San Francisco, California

Before: W. FLETCHER, RAWLINSON, Circuit Judges, and PRATT**, District
Judge.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
        **
             The Honorable Robert W. Pratt, District Judge for the U.S. District
Court for the Southern District of Iowa, sitting by designation.
      Valley Corp B., Ronald J. Haas (Haas), Karen Levine, and Ty Levine (the

Levines) appeal the district court’s partial judgment in favor of plaintiff

ProBuilders Specialty Insurance Company, RRG (ProBuilders). Appellants assert

that the district court erred in refusing to give their proposed jury instructions on

certain policy exclusions and indemnity coverage.

      We review “a district court's formulation of civil jury instructions for an

abuse of discretion, but we consider de novo whether the challenged instruction

correctly states the law.” Wilkerson v. Wheeler, 772 F.3d 834, 838 (9th Cir. 2014).

      The district court properly instructed the jury on exclusion (M). “California

cases consistently hold that coverage does not exist where the only property

damage is the defective construction, and damage to other property has not

occurred.” Reg’l Steel Corp. v. Liberty Surplus Ins. Corp., 226 Cal. App. 4th 1377,

1393 (2014) (internal quotation marks omitted) (emphasis in the original).

Appellants’ proposed instruction would extend coverage beyond the language of

the exclusion as interpreted by California courts. See id. at 1394. Any error in

failing to provide the jurors a definition of “impaired property” was harmless in

view of the ample evidence supporting the jury’s verdict. See Wilkerson, 772 F.3d

at 838.

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      The district court also properly instructed the jury on exclusions J(5) and

J(6). Appellants contend that exclusions J(5) and J(6) “exclude coverage only for

work that is merely defective.” However, Appellants’ reading of these exclusions

is too narrow. Exclusions J(5) and J(6) preclude coverage for “damage to. . . [a]ny

real property. . . aris[ing] out of” work being performed by Haas or his

subcontractors and “damage to. . . [a]ny property that must be restored, repaired, or

replaced” because Haas or his subcontractors incorrectly performed work on it,

respectively. “California courts have consistently given a broad interpretation to

the terms ‘arising out of’ or ‘arising from’ in various kinds of insurance

provisions.” Acceptance Ins. Co. v. Syufy Enterprises, 69 Cal. App. 4th 321, 328

(1999); see also Nguyen v. W. Digital Corp., 229 Cal. App. 4th 1522, 1545 (2014)

(“[A]ny means without limit and no matter what kind.”) (citation and internal

quotation marks omitted).

      Although the language of exclusions J(5) and J(6) in the ProBuilders policy

differs from the language interpreted in published California cases, Appellants’

argument that those differences, which appear to broaden both exclusions, should

instead be interpreted to narrow them is unconvincing. See Hollingsworth v.

ProBuilders Specialty Ins. Co., No. B239118, 2013 WL 5798695, at *3-5 (Cal. Ct.

                                          3
App. Oct. 28, 2013) (interpreting exclusion J(5) in a ProBuilders policy to preclude

coverage more broadly than the standard J(5) exclusion).

       The district court did not err in declining to provide Appellants’ requested

bad-faith instruction to the jury. Under California law, the bad-faith doctrine

described in the proposed instruction has not applied to general liability insurers

acting under a legal duty to defend. See Manzarek v. St. Paul Fire & Marine Ins.

Co., 519 F.3d 1025, 1034 (9th Cir. 2008) (“California law is clear, that without a

breach of the insurance contract, there can be no breach of the implied covenant of

good faith and fair dealing. . . .”) (citation omitted).

       Finally, the district court did not err in declining to instruct the jury that the

“Contractors Special Conditions” clause applied only if ProBuilders was

substantially prejudiced by Appellants’ failure to perform the conditions.

California law does not support such an instruction. See Scottsdale Ins. Co. v.

Essex Ins. Co., 98 Cal. App. 4th 86, 97 (2002) (explaining that no cases require “a

showing of prejudice outside the notice-cooperation clause context”).

       AFFIRMED.

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