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NOT FOR PUBLICATION AUG 02 2011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
2
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.
4