Unpublished Disposition, 922 F.2d 844 (9th Cir. 1985)

MEMORANDUM^** 

This is an action for declaratory relief brought by Great American Insurance Company ("Great American") to adjudicate the respective obligations of various insurers to share in the defense and indemnification of their insured, Comstock Roofing Company, Inc. ("Comstock"). Comstock is a defendant in a suit by the Redwood Square Homeowner's Association ("Homeowner's Association") alleging damage arising from defects in the design and construction of Redwood Square, a planned condominium development in Fremont, California. One of the insurers, Industrial Indemnity Company ("Industrial Indemnity"), moved to dismiss the declaratory relief action pursuant to Fed. R. Civ. P. 12(c) and 56, claiming that there was no insurable "occurrence" during the period of its policy. The district court granted the motion and Great American appeals. The district court did not state whether it granted the motion on the basis of Rule 12(c) or on Rule 56. Nevertheless, we can affirm on any basis supported by the record. See Marino v. Vasquez, 812 F.2d 499, 508 (9th Cir. 1987). We will analyze the district court's order as a grant of summary judgment. We affirm.

STANDARD OF REVIEW

We review a grant of summary judgment de novo. See State Farm Fire and Casualty Co. v. Martin, 872 F.2d 319, 320 (9th Cir. 1989). We must determine whether, construing the evidence in the light most favorable to the nonmoving party, there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Id.

DISCUSSION

* In California, an insurer is under a duty to defend a claim against its insured whenever the allegations of the complaint would support a recovery upon a risk covered by the policy. Hogan v. Midland Nat'l Ins. Co., 3 Cal. 3d 553, 563, 91 Cal. Rptr. 153, 159, 476 P.2d 825, 831 (1970). If any of several causes of action alleged against the insured is covered by the policy, the insurer is bound to defend the action. Blackfield v. Underwriters at Lloyd's, London, 245 Cal. App. 2d 271, 275, 53 Cal. Rptr. 838, 841 (1966). Thus, we must look to the allegations in the pleadings of the Homeowners' Association's action to determine whether Industrial Indemnity has a duty under its policy to defend Comstock.

When an insured is covered by successive insurers, the date of manifestation determines which carrier must provide indemnity for a loss suffered by the insured. Home Ins. Co. v. Landmark Ins. Co., 205 Cal. App. 3d 1388, 1392, 253 Cal. Rptr. 277, 280 (1988); Snapp v. State Farm Fire & Cas. Co., 206 Cal. App. 2d 827, 24 Cal. Rptr. 44, 46 (1962). " [I]n property damage cases, 'manifestation' routinely refers to when the damage first 'becomes apparent.' " Home Ins. Co., 205 Cal. App. 3d at 1392, 253 Cal. Rptr. at 280. Industrial Indemnity contends that the pleadings allege that the date of manifestation preceded the effective date of its policy. In an argument not made below, Great American asserts that a previously unaddressed clause of the Homeowners' Association's complaint alleges that the damage may have become apparent during the period of Industrial Indemnity's coverage.

II

The first issue we must address is whether Great American can raise this argument for the first time on appeal. We normally will not consider an issue not passed upon below, but may do so under certain circumstances. Singleton v. Wulff, 428 U.S. 106, 120-21 (1976). The general rule against entertaining arguments not presented to the district court:

"is merely a rule of practice ... and can be relaxed where, for example, significant questions of general impact are raised; injustice might otherwise result; plain error has occurred; resolution of the new issue is purely a matter of law and does not rely upon the factual record developed by the parties; or a new theory has first come to light during the pendency of the appeal because of a recent change in the law.

Guam v. Okada, 694 F.2d 565, 570 n. 8 (9th Cir. 1982), cert. denied, 469 U.S. 1021 (1984).

Great American could have raised its argument before the district court. There were no extenuating circumstances justifying its failure to do so. Nevertheless, Industrial Indemnity will not be prejudiced if we allow Great American to make this argument. Great American merely suggests a previously unrecognized interpretation of the pleadings, the resolution of which does not require further development of the factual record. Moreover, Industrial Indemnity argued below that there was no "occurrence" during the period its policy was in effect. Its argument in response to Great American's new allegation is fundamentally the same. Under these circumstances, we may address Great American's argument. We consider now whether the pleadings allege an occurrence within the period covered by Industrial Indemnity's policy.¹ 

III

The Homeowners' Association's complaint alleges the following:

The defects set forth above were not apparent by reasonable inspection by Plaintiff at the time that the units were purchased. The Plaintiff and members of the Plaintiff class discovered the above-described deficiencies within three years of the filing of this Complaint. Plaintiff and members of the Plaintiff class could not, by the exercise of reasonable diligence, have become aware of the existence or cause of these defects until the building began to subside, crack, leak, and manifest the other conditions....

(emphasis added). Great American argues that this language constitutes an allegation that the damages may have been discovered while Industrial Indemnity was on risk under its policy. The complaint states that the plaintiffs discovered the damage caused by the alleged construction and design defects within three years prior to filing the complaint. Under Great American's theory, since the Homeowners' Association's complaint was filed on April 2, 1985, the discovery of the defects by the homeowners could have occurred at any time from April 2, 1982 to April 2, 1985. Industrial Indemnity's policy took effect on June 20, 1984. Great American contends, then, that there could have been an "occurrence" during the term of Industrial Indemnity's policy. The language upon which Great American relies, however, is nothing more than a jurisdictional allegation that the complaint was filed within the three-year statute of limitations. It is not an allegation of a manifestation date and, even if it were, it is not supported by enough evidence to survive summary judgment.

Bodily's cross-complaint, on the other hand, does allege a manifestation date that pre-dates the inception of the Industrial Indemnity policy. The cross-complaint alleges:

By at least May 1982, Cross-Defendant was notified by Cross-Complainant that the roofs were not watertight, and were in fact leaking all the way through to the interior structures.

This factual allegation is supported by affidavit.²  Given these pleadings and accompanying documents, the district court correctly found no material issue of fact that the occurrence happened during the period of Industrial Indemnity's coverage.

IV

The Homeowners' Association's complaint alleges "continuously-occurring new manifestations of the deficiencies and design and/or construction defects." On the basis of this allegation, Great American further urges that even if the initial manifestation of damage occurred prior to Industrial Indemnity's coverage, Industrial Indemnity is nevertheless under obligation to indemnify Comstock for claims arising from continuing and progressive damage occurring during Industrial Indemnity's policy period.³  In California, however, "as between two first-party insurers, one of which is on the risk on the date of the first manifestation of property damage, and the other on the risk after the date of the first manifestation of damage, the first insurer must pay the entire claim." Home Ins. Co., 205 Cal. App. 3d at 1393, 253 Cal. Rptr. at 281. Thus, Industrial Indemnity is not bound to share in the defense or indemnity of Comstock despite the allegation in the Homeowners' Association's complaint of progressive property damage.

The district court properly awarded summary judgment for Industrial Indemnity.

AFFIRMED.