Atain Specialty Ins v. Homer Savard , 631 F. App'x 452 ( 2015 )


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  •                                                                             FILED
    NOT FOR PUBLICATION                            NOV 19 2015
    MOLLY C. DWYER, CLERK
    UNITED STATES COURT OF APPEALS                      U.S. COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    RTR BUILDERS INCORPORATED, an                    No. 13-16638
    Arizona corporation/ Judgment Debtor,
    D.C. No. 2:12-cv-02007-SRB
    Plaintiff-counter-defendant,
    ATAIN SPECIALTY INSURANCE                        MEMORANDUM*
    COMPANY, a Michigan corporation,
    FKA USF Insurance Company,
    Garnishee - Appellee,
    v.
    HOMER F. SAVARD, husband/ Judgment
    Creditor; et al.,
    Defendants-counter-claimants
    - Appellants.
    Appeal from the United States District Court
    for the District of Arizona
    Susan R. Bolton, District Judge, Presiding
    Argued and Submitted October 23, 2015
    San Francisco, California
    Before: HAWKINS, SILVERMAN, and CHRISTEN, Circuit Judges.
    *
    This disposition is not appropriate for publication and is not precedent
    except as provided by 9th Cir. R. 36-3.
    After rebuilding a substantial portion of the Savards’ home, their general
    contractor, RTR Builders, stopped work because of a payment dispute. RTR filed
    a complaint against the Savards seeking payment and the Savards asserted various
    counterclaims. RTR repeatedly asked its insurer, Atain Specialty Insurance
    Company, to defend and indemnify it under RTR’s Commercial General Liability
    Policy (“the Policy”). Atain declined. RTR eventually confessed judgment and
    assigned its claims against Atain to the Savards in a Damron agreement. See
    Damron v. Sledge, 
    460 P.2d 997
    (Ariz. 1969). In the Savards’ subsequent
    collection action, the district court granted summary judgment in favor of Atain.
    The Savards argue on appeal that Atain breached its duty to defend and indemnify
    RTR. We have jurisdiction over this diversity action under 28 U.S.C. § 1291 and
    we affirm.1
    The Savards argue that Atain had a duty to defend RTR because the Savards
    alleged that RTR caused “property damage” resulting from an “occurrence” within
    the meaning of the Policy. An insurer has a duty to defend when a complaint
    alleges “facts that, if true, would give rise to coverage,” Lennar Corp. v. Auto-
    Owners Ins. Co., 
    151 P.3d 538
    , 544 (Ariz. Ct. App. 2007), so long as “other facts
    1
    Because the parties are familiar with the facts we do not recount them
    here.
    2
    which are not reflected in the complaint [do not] plainly take the case outside the
    policy coverage,” Kepner v. Western Fire Ins. Co., 
    509 P.2d 222
    , 224 (Ariz. 1972)
    (en banc). An “occurrence” is defined in the Policy as “an accident, including
    continuous or repeated exposure to substantially the same general harmful
    conditions.” RTR’s affirmative decision to stop work was not an “occurrence.”
    The Savards did not establish a triable issue of fact as to whether Atain had a duty
    to defend RTR.
    The Savards also contend that Atain had a duty to indemnify RTR.2 To
    determine a duty to indemnify we look to whether the facts “proven, stipulated or
    otherwise established” fall within policy coverage. Colorado Cas. Ins. Co. v.
    Safety Control Co., Inc., 
    288 P.3d 764
    , 772 (Ariz. Ct. App. 2012). The Savards did
    not establish a disputed issue of fact as to whether they suffered “property damage”
    caused by an “occurrence.” They allege that their home sustained water damage,
    but nothing in the record shows that any water damage actually occurred. The
    2
    The Savards argue that Atain had a duty to indemnify RTR for the full
    stipulated Damron judgment because Atain breached its duty to defend RTR.
    Because we find Atain did not have a duty to defend RTR this argument is moot.
    But even if Atain had a duty to defend RTR and breached that duty, the Savards
    would still have to show Atain had a duty to indemnify RTR; a Damron agreement
    establishes the amount of liability, but it does not establish coverage. Quihuis v.
    State Farm Mut. Auto. Ins. Co., 
    334 P.3d 719
    , 727 (Ariz. 2014) (recognizing that
    an insurer in breach of its duty to defend is not bound by a Damron agreement
    unless the insured can separately establish a duty to indemnify).
    3
    record does show evidence of incomplete construction, but this alone cannot
    constitute property damage under the Policy. U.S. Fidelity & Guar. Corp. v.
    Advance Roofing & Supply Co., Inc., 
    788 P.2d 1227
    , 1230 (Ariz. Ct. App. 1989).
    As noted, the Savards did not raise a disputed issue of fact about whether there was
    an occurrence under the Policy, because incomplete construction cannot constitute
    an “occurrence.”3
    Last, the Savards argue that failing all else, RTR had a reasonable
    expectation of coverage because Atain knew what kind of work RTR performed, it
    could infer RTR expected coverage for this work, and it subsequently created an
    impression of coverage by not informing RTR that its work was not covered. We
    can find no authority for the proposition that an insurer has an affirmative duty to
    alert its insured that the insured is operating outside of coverage, lest the insurer
    create a reasonable expectation of coverage. Even if an insurer had such a duty,
    the record does not reflect that RTR represented to Atain that it was operating
    3
    The Savards rely on Arizona case law suggesting that damage
    resulting from faulty construction (as opposed to incomplete construction) can
    itself constitute an occurrence. See Lennar 
    Corp., 151 P.3d at 546
    . But the
    negligent construction in Lennar is unlike the intentional incomplete construction
    here; damage caused by the former can be considered an “accident,” but damage
    caused by the latter cannot. Further, as noted, the Savards did not establish a
    triable issue of fact as to whether the incomplete construction actually resulted in
    any property damage.
    4
    outside of coverage. The Savards have not raised a triable issue of fact as to
    whether Atain had a duty to indemnify RTR.
    AFFIRMED.
    5
    

Document Info

Docket Number: 13-16638

Citation Numbers: 631 F. App'x 452

Filed Date: 11/19/2015

Precedential Status: Non-Precedential

Modified Date: 1/13/2023