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Pinnacle Pines Community Association v. Everest National Insurance Co.

United States District Court, D. Arizona

May 9, 2014

Pinnacle Pines Community Association, Plaintiff,
Everest National Insurance Company, Chartis Specialty Insurance Company, Defendants.


DAVID G. CAMPBELL, District Judge.

Defendants Everest National Insurance Company ("Everest") and Chartis Specialty Insurance Company ("Chartis") have each filed a motion for summary judgment. Doc. 115, 117. Plaintiff Pinnacle Pines Community Association ("Pinnacle Pines") has filed motions for summary judgment against Everest (Doc. 119) and Chartis (Doc. 120). Chartis has also filed a motion to strike Plaintiff's rebuttal expert, which Everest has joined. Doc. 124. All motions have been fully briefed. For the reasons that follow, the Court will grant summary judgment for Defendants.[1]

I. Background.

Plaintiff is a homeowner's association "comprised of members who own one or more of the duplexes located in Pinnacle Pines, a 60 unit duplex community in Flagstaff, Arizona." Doc. 119 at 3. Pinnacle Pines was constructed and sold by Empire Residential Construction, L.P. and Empire Residential Sales, L.P. ("Empire" or the "Empire entities") between 2006 and 2008. Id. Shortly after construction ceased in 2008, problems began to arise, including "drainage issues, driveway defects and significant roof, deck, and door leaks." Id. These construction defects caused mold and mildew damage in several of the duplexes, leaky sliding glass doors, "rampant" wood rot, cracking and uneven walkways, and driveways that become icy and dangerous during the winter due to improper drainage. Id. Plaintiff alleges that all units and common areas were damaged as a result of Empire's defective construction, and "elected to pursue Empire for property damage[.]" Id. at 4. The Empire entities filed for bankruptcy protection in April 2008. Id. Plaintiff obtained relief from the automatic stay and served notice of the defects on Empire in February 2010. Id. In its order lifting the automatic stay, "the bankruptcy court approved an assignment to [Plaintiff] of all coverage rights Empire may have against any insurance carriers arising out of the Pinnacle Pines construction defect claims." Id.

Plaintiff and Empire then arbitrated the construction defect claims, resulting in an award of $1, 371, 220.33 in favor of Plaintiff and against Empire. Id. at 5. The award consisted of $920, 521 in compensatory damages, $276, 156.30 in attorneys' fees, $165, 000 in expert witness fees, and $9, 543.03 for arbitration costs. Id. The Coconino County Superior Court entered judgment on September 11, 2013, confirming the arbitration award. Id. Plaintiff filed this action to collect on the judgment against Defendants, Empire's excess insurers. Id. Both Everest and Chartis contend that they are not required to pay any portion of the arbitration award.

A. The Everest Policy.

The Everest Policy is a "commercial excess liability policy" that covers "the ultimate net loss in excess of the underlying limits of insurance' to which [the Everest Policy] applies." Doc. 115 at 5. The underlying insurance policy was a "wrap policy" issued by Lexington Insurance Company. Id. at 4. The Lexington wrap policy ("LWP") was effective from May 31, 2007 to June 30, 2008. Id. The Everest Policy "follows the terms, definitions, conditions, and exclusions that are contained" in the LWP, and Everest alleges that the coverage under its policy "will not be broader than the coverage provided by the [LWP]." Id. at 5. The terms of the LWP state that it "applies to bodily injury' and property damage' which is not included in the products-completed operations hazard' only if: (1) the bodily injury' or property damage' is caused by an occurrence' that takes place in the coverage territory'; and (2) the bodily injury' or property damage' occurs during the policy period." Doc. 116-1 at 43. The LWP is subject to a $250, 000 self-insured retention. Doc. 115 at 5. Its $5, 000, 000 coverage limits have been exhausted. Id.; Doc. 119 at 7.

B. The Chartis Policy.

The Chartis Policy is a commercial umbrella policy which was effective from June 1, 2004 through June 1, 2007. Doc. 117 at 3. Chartis alleges that its policy provides for a "Retained Limit of $1 Million per Occurrence." Id. at 3. The Chartis Policy defines "occurrence" with respect to bodily injury or property damage as "an accident, including continuous or repeated exposure to conditions, " resulting in bodily injury or property damage as defined by the policy that is "neither expected nor intended from the standpoint of the Insured." Id., Doc. 118-3 at 7. "Property Damage" is defined as: (1) "physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or" (2) "Loss of use of tangible property that is not physically injured. All such loss shall be deemed to occur at the time of the Occurrence that caused it." Doc. 117 at 3, Doc. 118-3 at 8.

The Chartis Policy excludes "Property Damage" arising out of "[a] defect, deficiency, inadequacy, or dangerous condition in" the insured's product or work as defined by the policy. Doc. 117 at 4, Doc. 118-3 at 9. The Chartis Policy defines "Products-Completed Operations Hazard" as all "Bodily Injury" and "Property Damage" "occurring away from premises" owned or rented by the insured and "arising out of" the insured's product or work, excluding products that are still in the physical possession of the insured, and "work that has not yet been completed or abandoned." Doc. 118-3 at 8, Doc. 120 at 6. Work is completed under the policy "when all work called for in [the insured's] contract has been completed, " "when all of the work to be done at the site has been completed if [the] contract calls for work at more than one site, " and "when that part of the work done at a job site has been put to its intended use by any person or organization other than another contactor or subcontractor working on the same project." Doc. 118-3 at 8, Doc. 120 at 6.

II. Legal Standard.

A party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows "that 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). Only disputes over facts that might affect the outcome of the suit will preclude the entry of summary judgment, and the disputed evidence must be "such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

"Generally, the insured bears the burden to establish coverage under an insuring clause, and the insurer bears the burden to establish the applicability of any exclusion." Keggi v. Northbrook Prop. and Cas. Ins. Co., 13 P.3d 785, 788 (Ariz.Ct.App. 2000) (citation omitted). In interpreting an insurance contract, courts "give words their ordinary, common sense meaning, " and view language used "from the standpoint of the average layman who is untrained in the law or insurance." Aztar Corp. v. U.S. Fire Ins. Co., 224 P.3d 960, 966 (Ariz.Ct.App. 2010) (citations omitted). An insurance policy must also "be construed according to the entirety of its terms and conditions as set forth in the policy." A.R.S. ยง 20-1119. If a clause appears ambiguous, ...

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