Rockhill Insurance Companies v. Csaa Insurance Exchange

• Court: Court of Appeals for the Ninth Circuit
• Decided: November 20, 2020
• Docket: 19-16716
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 20 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

ROCKHILL INSURANCE COMPANIES, No. 19-16716

Plaintiff-counter-claimant- D.C. No. Appellee, 3:17-cv-00496-HDM-WGC

v. MEMORANDUM* CSAA INSURANCE EXCHANGE, DBA AAA Insurance Exchange,

Defendant-counter-claimant- Appellant,

and

PREMIER RESTORATION AND REMODEL, INC.,

Defendant-counter-claimant.

Appeal from the United States District Court for the District of Nevada Howard D. McKibben, District Judge, Presiding

Argued and Submitted October 15, 2020 San Francisco, California

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Before: WARDLAW and COLLINS, Circuit Judges, and EATON,** Judge. Concurrence by Judge COLLINS Defendant-Appellant CSAA Insurance Exchange (“CSAA”) is a

homeowner’s insurance company. Premier Restoration and Remodel, Inc.

(“Premier”) is a home-repair contractor in CSAA’s network whose misapplication

of an anti-mold chemical caused property damage to a residence insured by CSAA.

Premier was insured by Plaintiff-Appellee Rockhill Insurance Companies

(“Rockhill”), and CSAA believed that coverage for the damage was available under

Rockhill’s policy. After paying what it believed was the amount available under its

policy, Rockhill filed an action against CSAA and Premier in the Nevada District

Court, seeking a declaratory judgment that it had satisfied its obligations to Premier.

Applying Nevada law, the District Court granted Rockhill’s motion for summary

judgment, finding (1) that Rockhill had paid the full available amount of its

applicable Contractors Pollution Liability coverage (“Pollution Coverage”), and

(2) that Rockhill’s Commercial General Liability coverage (“General Coverage”)

did not apply because it contained a Mold, Fungus and Organic Pathogen Exclusion

(“Mold Exclusion”) barring the kind of property damage that Premier caused. The

District Court also dismissed CSAA’s counterclaim of bad faith.

** Richard K. Eaton, Judge of the United States Court of International Trade, sitting by designation.

2 We have jurisdiction under 28 U.S.C. § 1291, and review grants of summary

judgment de novo. See Branch Banking & Tr. Co. v. D.M.S.I., LLC, 871 F.3d 751,

759 (9th Cir. 2017). Under this standard, we affirm.

As a threshold matter, “[a] federal court sitting in diversity ordinarily must

follow the choice-of-law rules of the State in which it sits.” Atl. Marine Const. Co.

v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49, 65 (2013). A district court’s

choice-of-law analysis is reviewed de novo. See Sarver v. Chartier, 813 F.3d 891,

897 n.1 (9th Cir. 2016). We agree with the District Court that Nevada law applies

according to Nevada’s choice-of-law rules because Nevada, as Premier’s primary

place of business, bears the most significant relationship to both the contract and the

alleged breach. See, e.g., Contreras v. Am. Fam. Mut. Ins. Co., 135 F. Supp. 3d 1208,

1218–19 (D. Nev. 2015).

The General Coverage provision in Rockhill’s insurance policy precluded

coverage of CSAA’s claim. The provision is subject to the Mold Exclusion, which

excludes any “property damage . . . which would not have occurred in whole or part

but for the actual, alleged or threatened discharge, dispersal, seepage, migration,

growth, release or escape of [mold] at any time.” But for the actual, alleged, or

threatened growth of mold in CSAA’s insured’s residence, the damaging application

of the anti-mold chemical would not have occurred. Therefore, the General

Coverage provision does not provide a means of recovery for the damage, and

3 Rockhill’s obligation is limited to its Pollution Coverage provision, pursuant to

which it has paid the full remaining amount of the policy limits.

CSAA argues that Rockhill did not provide adequate notice that it intended to

reserve its right to deny coverage under the Mold Exclusion of the General Coverage

provision and thus waived that right. We reject this contention. Under Nevada law,

“an insurer does not waive its right to assert an exclusion where it has provided its

insured with adequate notice of an unambiguous exclusion,” Vitale v. Jefferson Ins.

Co., 5 P.3d 1054, 1059 (Nev. 2000), and here there is no reasonable basis in the

record for finding Rockhill’s notice was prejudicially inadequate, because Premier

conceded that it received Rockhill’s reservation of rights letter.

We further agree with the District Court’s grant of summary judgment to

Rockhill on the bad-faith claims. “Bad faith is established where the insurer acts

unreasonably and with knowledge that there is no reasonable basis for its conduct.”

Guaranty Nat’l Ins. Co. v. Potter, 912 P.2d 267, 272 (Nev. 1996). Here, Rockhill

followed the advice of its legal counsel in making multiple settlement offers, and

CSAA failed ever to make a settlement demand within the coverage limits. Viewing

the record as a whole, we conclude that no reasonable trier of fact could find that

Rockhill acted unreasonably or in bad faith.

AFFIRMED.

4 Rockhill Ins. Cos. v. CSAA Ins. Exchange, No. 19-16716 FILED NOV 20 2020 COLLINS, Circuit Judge, concurring: MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS I concur in the majority opinion. I write separately only to explain in

somewhat more detail why I agree that, under Vitale v. Jefferson Ins. Co., 5 P.3d

1054, 1059 (Nev. 2000), Rockhill Insurance Companies (“Rockhill”) did not waive

its right to assert the Mold Exclusion.

Rockhill’s August 14, 2015 reservation-of-rights letter to its insured,

Premier Restoration and Remodel, Inc. (“Premier”)—its third such letter—

specifically invoked the separate “Total Pollution Exclusion” in the Commercial

General Lability Policy, rather than the Mold Exclusion. But under Vitale, there is

no waiver of that additional exclusion absent a showing of prejudice from the

letter’s failure to specifically mention it, and here there is no such showing. See

5 P.3d at 1058–59 (citing Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d

1551, 1561 (9th Cir. 1991)).

Although the particular copy of this letter that was sent to Premier was

apparently returned to Rockhill undelivered, in my view no reasonable trier of fact

could find that Premier did not receive the letter in a timely manner. Premier’s

principal, Timothy Jeter, testified that he discussed with his Rockhill-assigned

defense counsel (who was cc’ed on the August 14 letter) any letters that came from

Rockhill. When asked at his deposition if he “recall[ed] seeing this [particular] letter on or about the date it was sent,” Jeter testified, “Yes. It does look familiar.”

Further, when asked whether he “received the three reservation of rights letters

from Rockhill,” he stated, “I acknowledge I got those letters.” The fact that, one

month later, Jeter submitted a declaration in opposition to summary judgment that

arguably contradicts these concessions does not give rise to a triable issue of fact.

Disc Golf Ass’n v. Champion Discs, Inc., 158 F.3d 1002, 1008 (9th Cir. 1998) (“A

party cannot create a triable issue of fact, and thus survive summary judgment,

merely by contradicting his or her own sworn deposition testimony with a later

declaration.”); see also Doe v. Cutter Biological, Inc., 971 F.2d 375, 376 (9th Cir.

1992) (“[A] party cannot create its own issue of fact by having a witness contradict

himself between affidavit and deposition testimony.”).

With those observations, I concur in the court’s memorandum.