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NOT FOR PUBLICATION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.
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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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