Kaady v. Mid-Continent Cas. Co., No. 13-35036 (9th Cir. 2015)
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Kaady, a mason, filed suit against Mid-Continent after Mid-Continent denied Kaady's claim for indemnification under its commercial liability insurance policy. The district court granted summary judgment to Mid-Continent based on the ground that Kaady's claim was barred by the policy's known-loss provision. The court concluded that MidContinent has offered no reason to treat the insured’s work and the work of others as different property in every
provision of the policy except the known-loss provision. Thus, the known-loss provision also
distinguishes between them. The insured’s knowledge of damage to his own work doesn’t automatically constitute knowledge of damage to the components of the structure furnished by others. Further, an insured’s knowledge of one type of damage to property doesn’t automatically constitute knowledge of any and all damage to the property; the claimed damage must be related to the known damage. In this case, Kaady’s knowledge of the cracks in the masonry before he bought the policy doesn’t constitute knowledge of the claimed “property damage” to the structural components. The court concluded that the correct inquiry is whether the claimed damage to the structural components was a “continuation, change or resumption” of the cracks. If it was, Kaady’s knowledge of the cracks would bar coverage of the claimed damage; if not, his knowledge of the cracks wouldn’t bar coverage. In this case, without any record evidence connecting the cracks in the masonry that Kaady observed before he bought the policy to the damage to the wooden components for which Kaady claims coverage, summary judgment was inappropriate. Accordingly, the court reversed and remanded.
Court Description: Insurance Law. The panel reversed the district court’s summary judgment in favor of insurer Mid-Continent Casualty Company because there was a triable issue whether the insured’s claim for property damage under Mid-Continent’s commercial general liability insurance policy was barred by the policy’s known- loss provision, and remanded. The insured, as part of a subcontract, affixed manufactured stone to buildings in a multi-unit residential project, and cracks developed in the manufactured stone. In an underlying action, the insured settled a claim against him; Mid-Continent denied the claim and the insured brought this diversity action. The district court held that there was relevant property damage prior to the insured obtaining the policy, and that this damage was known to the insured. First, the panel rejected Mid-Continent’s argument that so long as the insured knew about any damage to the structure, the known-loss provision barred coverage of any other damage to the same structure. The panel held under Oregon law that the insured’s knowledge of damage to his own work did not automatically constitute knowledge of damage to the components of the structure furnished by others; but rather the correct inquiry was whether the claimed damage to the structural components was a “continuation, change or resumption” of the cracks. KAADY V. MID-CONTINENT CAS. CO. 3 Second, the panel held that Mid-Continent did not establish its contention that the damage for which the insured sought coverage was in fact a “continuation, change or resumption” of earlier cracks. The panel held that summary judgment was inappropriate where there was no record evidence connecting the cracks in the masonry that the insured observed before the policy to the damage to the wooden components for which the insured claimed coverage.
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