United States District Court, D. Nevada
ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT (ECF NOS.
P. GORDON UNITED STATES DISTRICT JUDGE.
a declaratory relief action in a dispute between a primary
insurer, defendant Liberty Mutual Fire Insurance Company, and
an excess insurer, plaintiff AIG Specialty Insurance Company.
Liberty and AIG both covered a construction project at the
Palazzo Hotel in Las Vegas. Approximately three years after
the project was completed, maintenance personnel noticed
corrosion of the steel support framing underneath the
Palazzo's pools and spas located on the third and fifth
floors of the hotel. An investigation determined that water
leaked into the unventilated crawl space beneath the pools
creating a moist and humid environment that corroded the
steel framing. That framing was also inconsistent with the
project's specifications, which called for cold-formed
metal stud framing with G90 galvanization. Instead, the
contractors used light-gauge steel finished with a primer
that was not properly finished to prevent rusting. The
corrosion was so significant that it reduced the load
carrying capacity of the framing system, which required
replacing the system.
Palazzo's owner sued the contractors in Nevada state
court for the cost of replacement. A substantial barrier to
settlement of that action was a dispute between Liberty and
AIG about how much each should contribute to the resolution
of the claims. Liberty's policy covered $2 million per
occurrence, with a $4 million general aggregate limit.
Liberty tendered $2 million, contending that the property
damage was the result of a single occurrence. AIG, on the
other hand, contended that there were multiple occurrences,
thus triggering Liberty's $4 million limit. AIG also
asserted that a contractor's rework endorsement that
covered the loss at issue was not subject to the $2 million
per occurrence limit in Liberty's policy and instead was
subject to the $4 million limit. Because AIG's duty to
indemnify is not triggered until Liberty's primary policy
is exhausted, AIG contended it had no obligation to
contribute funds to settle the lawsuit because the overall
damages were greater than $2 million but less than $4
underlying lawsuit ultimately settled. However, this
declaratory relief action between AIG and Liberty remained.
The parties each moved for summary judgment. I granted
AIG's motion on the issue of whether Liberty's $2
million per occurrence limit applies to the contractor's
rework endorsement because I concluded Liberty's policy
is ambiguous, and construing the ambiguity against the
drafter, the $2 million per occurrence limit does not apply.
ECF No. 103.
believed that ended the parties' dispute, but I requested
a status report to ensure that was the case. AIG contends the
case is over because all of the underlying settlement falls
within the contractor's rework endorsement. ECF No. 14.
In contrast, Liberty contends that although I ruled the
contractor's rework endorsement was subject to the $4
million policy limit, I did not make any factual findings
allocating what portion of the damages to the Palazzo's
pool fell within any particular coverage.
with Liberty. It is theoretically possible that some of the
damages to the Palazzo pool areas do not fall within the
contractor's rework endorsement but would constitute
property damage exceeding the $2 million per occurrence limit
in Liberty's policy. I therefore will address the
parties' dispute in their competing summary judgment
motions over whether there was a single occurrence or
judgment is appropriate if the movant shows “there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a), (c). A fact is material if it “might affect the
outcome of the suit under the governing law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). An issue is genuine if “the evidence is such
that a reasonable jury could return a verdict for the
nonmoving party.” Id.
party seeking summary judgment bears the initial burden of
informing the court of the basis for its motion and
identifying those portions of the record that demonstrate the
absence of a genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden
then shifts to the non-moving party to set forth specific
facts demonstrating there is a genuine issue of material fact
for trial. Fairbank v. Wunderman Cato Johnson, 212
F.3d 528, 531 (9th Cir. 2000). I view the evidence and
reasonable inferences in the light most favorable to the
non-moving party. James River Ins. Co. v. Hebert Schenk,
P.C., 523 F.3d 915, 920 (9th Cir. 2008).
there are no disputed material facts, ” the
construction of an insurance policy is “purely a
question of law.” Allstate Ins. Co. v.
Fackett, 206 P.3d 572, 575 (Nev. 2009) (en banc). I read
the insurance policy “as a whole, ” and analyze
its language “from the perspective of one untrained in
law or in the insurance business.” Fourth St. Place
v. Travelers Indem. Co., 270 P.3d 1235, 1239 (Nev. 2011)
(quotations omitted), as modified on reh'g (May
23, 2012). I give policy terms “their plain, ordinary
and popular connotations.” Id. (quotation
insurance policy is ambiguous, “it will be construed
against the insurer, because the insurer was the drafter of
the policy. . . . Whether a term is ambiguous depends on
whether it creates reasonable expectations of coverage as
drafted.” Id. (quotation omitted).
Consequently, I interpret the policy “to effectuate the
reasonable expectations of the insured.” Id.
(quotation omitted). In evaluating whether a policy term is
ambiguous, I look at “the policy as a whole in order to
give a reasonable and harmonious meaning and effect to all
its provisions.” Id. (quotation omitted).
I of the Liberty policy is entitled “Coverages.”
ECF No. 17-1 at 60. Coverage A is entitled “Bodily
Injury and Property Damage Liability.” Id.
Coverage A provides coverage for “sums that the insured
becomes legally obligated to pay as damages because of
‘bodily injury' or ‘property damage' to
which this insurance applies.” Id.
“Property damage” is defined as “[p]hysical
injury to tangible property . . . .” Id. at
coverage is subject to a $2 million per occurrence limit.
Id. at 2, 60, 72. “Occurrence” is
defined as “an accident, including continuous or
repeated exposure to substantially the same general harmful
conditions.” Id. at 81; see also Id.
at 10 (stating that property damage “arising out of
continuous or repeated exposure to substantially the same
general harmful conditions will be considered as the result
of one and the same ‘occurrence'”).
follows the “causal approach” to determine the
number of occurrences. Bish v. Guar. Nat. Ins. Co.,
848 P.2d 1057, 1058 (Nev. 1993). Under this approach, the
inquiry focuses on “the cause or causes of the injury,
” not on the “number, magnitude or time of the
injuries.” Id. Thus, “[a]s long as the
injuries stem from one proximate cause there is a single
occurrence.” Id. (quotation omitted).
Proximate cause means “any cause which in natural and
continuous sequence, unbroken by any efficient intervening
cause, produces the injury ...