Court Opinion

ID: 222389
Source: CourtListenerOpinion
Date Created: 2011-08-02 21:11:06+00
Date Added: 2024-06-11T17:28:54.338685
License: Public Domain

FILED
                           NOT FOR PUBLICATION                              AUG 02 2011

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

CANAL INDEMNITY COMPANY, a                       No. 10-35761
foreign corporation,
                                                 D.C. No. 3:09-cv-05561-BHS
              Plaintiff - Appellee,

  v.                                             MEMORANDUM *

ADAIR HOMES INC., a Washington
Corporation,

              Defendant - Appellant.

                    Appeal from the United States District Court
                      for the Western District of Washington
                    Benjamin H. Settle, District Judge, Presiding

                        Argued and Submitted June 6, 2011
                               Seattle, Washington

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

       In this insurance coverage dispute, Appellant Adair Homes, Inc. (Adair

Homes), a construction company, was sued by Tammy and Daniel Pearson (the

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
              The Honorable Irma E. Gonzalez, Chief District Judge for the United
States District Court, Southern District of California, sitting by designation.
Pearsons) for the alleged defective construction of their residence. The Pearsons

averred that water intrusion into their residence resulted in property damage and

bodily injury stemming from mold exposure. Adair Homes tendered the lawsuit to

its insurer, Appellee Canal Indemnity Co. (Canal), which filed a declaratory action

regarding its duty to defend while providing a defense under a reservation of

rights. Adair Homes challenges the district court’s grant of summary judgment in

Canal’s favor based on the insurance policies’ exclusions.

      In this declaratory judgment action, the district court properly granted

summary judgment because Adair Homes failed to raise a material factual dispute

regarding Canal’s duty to defend. See American Best Food, Inc. v. Alea London,

Ltd., 229 P.3d 693, 696 (Wash. 2010) (en banc), as corrected (“When the facts or

the law affecting coverage is disputed, the insurer may defend under a reservation

of rights until coverage is settled in a declaratory action.”) (citation omitted).

Canal presented undisputed evidence that the Pearsons’ property damage and

bodily injury claims occurred after Adair Homes completed the construction of the

residence. Summary judgment was warranted because the insurance policies’

products-completed operations hazard (PCOH) exclusion unambiguously barred

coverage for any post-construction claims. See Moeller v. Farmers Ins. Co. of

Wash., 229 P.3d 857, 861 (Wash. App. 2010) (“When faced with clear and

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unambiguous language, we enforce the policy as written.”) (citation omitted); see

also Goodwin v. Wright, 6 P.3d 1, 8 (Wash. App. 2000) (holding that a similar

PCOH exclusion unambiguously barred coverage for completed work).

      In any event, Canal did not have a duty to defend against property damage

claims that occurred during construction pursuant to the insurance policies’ J(5)

and J(6) business risk exclusions. Coverage was barred because these exclusions

applied to all of Adair Homes’ ongoing operations during the construction of the

residence, as well as to direct damages stemming from the alleged defective

construction. See Vandivort Constr. Co. v. Seattle Tennis Club, 522 P.2d 198, 201

(Wash. App. 1974) (holding that a similar business risk exclusion barred coverage

for work performed by the insured on any part of the property); see also Harrison

Plumbing & Heating, Inc. v. New Hamphsire Ins. Grp., 681 P.2d 875, 879 (Wash.

App. 1984) (holding that the business risk exclusion barred coverage for all direct

damages stemming from defective construction).

      Summary judgment was also warranted because the insurance policies’ mold

exclusion unambiguously barred coverage for the Pearsons’ bodily injury claims

premised on mold exposure. See Nw. Bedding Co. v. Nat’l Fire Ins. Co. of

Hartford, 225 P.3d 484, 488 (Wash. App. 2010) (“And, while we strictly construe

exclusions, strict construction should not overcome plain, clear language . . .”)

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(citation and internal quotation marks omitted). Because the post-construction

water intrusion was not a covered peril, the efficient proximate cause doctrine does

not nullify the mold exclusion. See id. at 488-89.

      The district court, therefore, properly held that Canal did not have a duty to

defend the Pearsons’ bodily injury and property damage claims.1

      AFFIRMED.

      1
       We deny Adair Homes’ Motion To Certify Questions To The Supreme
Court Of Washington filed on June 9, 2011.

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