United States District Court, D. Arizona
G. MURRAY SNOW, District Judge.
Pending before the Court are the cross motions for partial summary judgment of Plaintiff Roselle Gallego Saba and Defendant Occidental Fire and Casualty Company of North Carolina. (Docs. 25, 27.) For the following reasons, Defendant's Motion is denied and Plaintiff's Motion is granted in part and denied in part.
In November 2006, Plaintiff Roselle Gallego Saba purchased a house in Scottsdale, Arizona. From the time that Saba moved into the house, she began to experience severe headaches, nausea, and fatigue. Eventually, doctors diagnosed her with permanent brain damage and heart damage. In January 2010, Saba discovered the presence of carbon monoxide fumes in the air conditioning vents, caused by a water heater that was placed in an unvented utility closet with the burner improperly de-rated for a gas and air mixture. The utility closet was located adjacent to an air conditioning handler that delivered air into the master bedroom. As a result, Saba experienced sustained carbon monoxide poisoning. Her impaired mental and physical condition caused her to lose her employment and eventually her house when she could no longer afford mortgage payments.
The water heater had been installed by Plumbing Specialists ("Plumbing"). Plumbing was insured by Occidental Fire & Casualty Company of North Carolina, ("Occidental"), under a Commercial Liability Policy (No. CP00015734) (the "Initial Policy") effective February 14, 2006 to February 14, 2007 and under a renewal policy (No. CP00079089) (the "Renewed Policy") effective February 14, 2007 to February 14, 2008. Both policies cover claims based upon bodily injury.
Saba brought suit in state court against Plumbing for its negligent installation of the water heater. Plumbing's attorney requested Occidental to intervene, but Occidental declined to either defend the suit or provide indemnification, citing to a pollution exclusion in the policies.
Plumbing then entered into a Damron agreement with Saba, under which Plumbing admitted fault, stipulated to entry of judgment against it, and assigned all rights against Occidental under the policy to Saba in exchange for Saba's covenant to not execute the judgment against Plumbing. See Damron v. Sledge, 105 Ariz. 151, 155, 460 P.2d 997, 1001 (1969); United Servs. Auto. Ass'n v. Morris, 154 Ariz. 113, 119, 741 P.2d 246, 252 (1987) (noting that the limitation on such agreements is that they "must be made fairly, with notice to the insurer, and without fraud or collusion on the insurer"). The Damron agreement enabled entry of judgment against Plumbing in the amount of $2, 000, 000.00-the amount of coverage in the policies for the years of 2006 and 2007.
Saba brought suit again in state court against Occidental, seeking declaratory judgment based on the policies and also recovery under a breach of contract theory. (Doc. 1, Ex. A.) Occidental removed the case to this Court and now requests summary judgment that the pollution exclusion in the policies precludes Saba's claims. (Docs. 1, 27.) In the alternative, Occidental requests summary judgment that the only applicable policy is the Initial Policy and not the Renewed Policy. (Doc. 27.) Saba requests summary judgment that the pollution exclusion did not apply and that both the Initial and Renewal Policies cover Saba's injuries. (Doc. 25.)
I. Legal Standard
Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates "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). Substantive law determines which facts are material, and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "A fact issue is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (quoting Anderson, 477 U.S. at 248). Thus, the nonmoving party must show that the genuine factual issues "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.'" Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987) (original emphasis omitted) (quoting Anderson, 477 U.S. at 250).
Interpretation of an insurance contract is a question of law. Benevides v. Arizona Prop. & Cas. Ins. Guar. Fund, 184 Ariz. 610, 613, 911 P.2d 616, 619 (Ct. App. 1995).
II. The Pollution Exclusion
Both the Initial and the Renewed Policy contain a clause entitled the "Total Pollution Exclusion Endorsement, " which states that the insured ...