Atain Specialty Insurance Co. v. Jkt Associates, Inc. ( 2022 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 11 2022
FOR THE NINTH CIRCUIT MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
ATAIN SPECIALTY INSURANCE No. 20-16366
COMPANY, a Michigan corporation,
D.C. No. 3:19-cv-07588-SK
Plaintiff-Appellee,
v. MEMORANDUM*
JKT ASSOCIATES, INC., a California
domestic stock corporation,
Defendant-Appellant,
and
ELIZABETH CHRISTENSEN, an
individual; RICHARD MEESE, an
individual; LORA EICHNER BLANUSA,
M.D., an individual; KRISTI SYNEK, an
individual; HIDDEN HILLS OWNERS’
ASSOCIATION, a California business
entity, form unknown,
Defendants.
Appeal from the United States District Court
for the Northern District of California
Sallie Kim, Magistrate Judge, Presiding
Argued and Submitted May 12, 2021
San Francisco, California
Before: NGUYEN and COLLINS, Circuit Judges, and RAKOFF,** District Judge.
*
This disposition is not appropriate for publication and is not precedent except as
provided by Ninth Circuit Rule 36-3.
**
The Honorable Jed S. Rakoff, United States District Judge for the Southern
District of New York, sitting by designation.
JKT Associates, Inc. (“JKT”) appeals the district court’s summary judgment
in favor of Atain Specialty Insurance Company (“Atain”) in this insurance
coverage dispute. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
I
JKT was hired by Lora Eichner Blanusa in 2011 to perform landscape and
hardscape work on her home in the Hidden Hills subdivision of Napa, California.
In 2019, after the property had been purchased by Richard Meese and Elizabeth
Christensen, a catastrophic landslide occurred that caused portions of the rear of
the property to slide downhill by 15 feet. Meese and Christensen filed suit in state
court seeking damages from JKT, Blanusa, the developers of the subdivision, and
the Hidden Hills Owners’ Association (“HOA”). The owner of an adjacent
property, Kristi Synek, filed a separate state-court action, naming as defendants the
primary developer and the HOA. Although not expressly named, JKT fell within
the Synek complaint’s description of the “Design Professional Defendants” who
were sued as unnamed “Doe” defendants. Moreover, the developer had previously
informed JKT that it expected JKT to accept responsibility for repairs at both
properties. JKT tendered both suits to its insurer, Atain, which provided a defense
to JKT subject to a reservation of rights.
Three months later, invoking the district court’s diversity jurisdiction, Atain
filed this coverage action against JKT, Chistensen, Meese, Blanusa, Synek, and the
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HOA. By stipulation, the remaining parties agreed to be bound by the outcome of
the coverage litigation between JKT and Atain. The district court subsequently
granted summary judgment to Atain, concluding that JKT’s liability under the
Messe/Christensen and Synek suits was not covered by Atain’s policies and that
Atain had no duty to defend JKT in those actions. By separate order, the court
directed JKT to reimburse Atain for $105,608.59 in defense costs that Atain had
incurred in defending JKT under the reservation of rights. JKT’s premature notice
of appeal from the summary judgment ruling became effective after the district
court entered final judgment. See FED. R. APP. P. 4(a)(2).
II
We agree with the district court’s conclusion that the Atain policies’
“Subsidence Exclusion” unambiguously precludes any possibility of coverage for
the claims asserted against JKT in the Meese/Christensen and Synek suits. Atain
therefore had no duty to defend JKT in those suits and no duty to indemnify JKT
for any liability arising from those suits. See Montrose Chem. Corp. v. Superior
Ct., 861 P.2d 1153, 1160 (Cal. 1993) (holding that duty to defend goes beyond
duty to indemnify and arises “if the underlying complaint alleges the insured’s
liability for damages potentially covered under the policy, or if the complaint
might be amended to give rise to a liability that would be covered under the
policy”).
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The Subsidence Exclusion provides, in relevant part:
This insurance does not apply and there shall be no duty to
defend or indemnify any insured for any “occurrence”, “suit”,
liability, claim, demand or cause of action arising, in whole or
part, out of any “earth movement.” This exclusion applies
whether or not the “earth movement” arises out of any
operations by or on behalf of any insured.
“Earth movement” includes, but is not limited to, any earth
sinking, rising, settling, tilting, shifting, slipping, falling away,
caving, erosion, subsidence, mud flow or any other
movements of land or earth.
Because a landslide is an “earth movement,” the plain terms of this exclusion bar
any coverage for any claim “arising, in whole or part,” from the landslide at the
Hidden Hills properties or from any “settling” or “slipping” that preceded that
landslide, and it does so regardless of the cause of the landslide. See, e.g., City of
Carlsbad v. Ins. Co. of the State of Pa., 102 Cal. Rptr. 3d 535, 536, 539 (Ct. App.
2009) (holding that an earth movement exclusion barring coverage for “‘any
property damage arising out of land subsidence for any reason whatsoever’”
applied to earth movement caused by the insured). Accordingly, there can be a
possibility of coverage, and a duty to defend, only if either the Meese/Christensen
suit or the Synek suit seeks redress for non-landslide damages. Atain carried its
burden to show, as a matter of law, that no such damages are at issue in either suit.
Montrose Chem., 861 P.2d at 1161.
The Meese/Christensen complaint does not allege any facts or claims
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concerning injuries that occurred independent of the occurrence of the landslide
and the earth movement that preceded it. The opening paragraph of the complaint
emphasizes that the various alleged breaches of duty combined to “destabilize[] the
hillside and resulted in its catastrophic failure.” Likewise, in the concluding
paragraph of the factual allegations that precedes the recitation of the various
causes of action, the complaint summarizes its theory of causation-of-injury by
stating that “defendants are jointly and severally liable for the catastrophic failure
of the Property and, by this action, seek a determination of their comparative
fault.” Moreover, the only specified damages alleged in the complaint all flow
from the landslide—namely, the “cost of interim and permanent repairs to the
Property, a diminution in the value of the Property, the value of lost use of the
Property, and other costs, fees, expenses and damages.” To be sure, the
Meese/Christensen complaint seeks all consequential damages flowing from the
asserted breaches of duty and does not limit the relief requested to these
enumerated items. But there is nothing in the complaint, or in any reasonably
conceivable plausible amendment of the complaint, that suggests that Meese and
Christensen suffered any relevant injuries that are independent of the landslide.
JKT nonetheless points to the allegation that, prior to the landslide, JKT’s
negligence “result[ed] in changes in drainage patterns on the Property and the
unwanted accumulation of water in the backyard.” Nothing in the complaint,
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however, supports an inference that the accumulation of water itself produced a
compensable injury that was suffered in advance of the land movement, such as,
for example, water damage to wooden backyard furniture, injury to costly
backyard plants, or expenses in removing water. On the contrary, the complaint
alleges only that JKT’s actions in “allowing excess water to accumulate on the
Property . . . thereby ma[de] it susceptible to failure” (emphasis added).1 Because
all injuries connected to the Meese/Christensen complaint “aris[e], in whole or
part, out of . . . ‘earth movement,’” there is no possibility of coverage under the
Atain policies.
We reach the same conclusion as to the Synek complaint. In alleging how
the various alleged breaches injured Synek, the complaint states that, “[a]s a direct,
proximate and legal result of the foregoing negligent acts and/or omissions, the
Landslide did occur, and Plaintiff has sustained damages.” JKT points to the
Synek complaint’s allegation that the improvements made by JKT to Blanusa’s
property “interfered with and encroached [upon] an easement for storm water and
irrigation drainage in the backyard” of Blanusa’s property (subsequently purchased
1
To the extent that the Meese/Christensen complaint alleges, or could be amended
to allege, a compensable injury arising from the allegation that JKT “broke or
damaged drains, subdrains and drainpipes on and under the Property” at the time of
the improvements in 2011, there is no plausible basis for inferring that any such
compensable injury occurred during the 2018–2020 policy periods of the Atain
policies, rather than at an earlier time.
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by Meese and Christensen). But JKT does not point to any allegation in the Synek
complaint that seeks compensable damage flowing from that alleged encroachment
apart from its subsequent contribution to the landslide. Nor does it appear that the
Synek complaint could plausibly be amended to assert such a claim. See Kazi v.
State Farm Fire & Cas. Co., 15 P.3d 223, 226, 229–30 (Cal. 2001) (holding that,
because an easement “is not tangible property,” there is “no potential coverage,
and therefore no duty to defend,” under comparably worded coverage language,
with respect to a claim concerning “interference” with an easement).
Because there is no potential for coverage, Atain had no duty to defend and
no duty to indemnify. The district court therefore correctly granted summary
judgment.
AFFIRMED.
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