BLISS SEQUOIA INSURANCE, ET AL V. ALLIED PROPERTY & CASUALTY INS, No. 20-35890 (9th Cir. 2022)
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Bliss Sequoia Insurance and Risk Advisors held an insurance policy from Allied Property and Casualty Insurance (Allied Property) covering any liability that Bliss Sequoia might incur for “damages because of ‘bodily injury.’” One of Bliss Sequoia’s clients was a water park, and after a park guest was injured, the park sued Bliss Sequoia for professional negligence, alleging that the coverage limits on the park’s liability insurance were too low. This appeal presents the question whether that negligence claim arose “because of” the guest’s “bodily injury” and is therefore covered by Bliss Sequoia’s policy. We agree with the district court that the answer is no.
The panel affirmed the district court’s summary judgment in favor of Allied Property. Allied’s policy provided that it covered any sums Bliss Sequoia was “legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage.’” Bliss Sequoia alleged that the bodily injury at issue was a “but-for” cause of Bliss Sequoia’s professional-negligence liability. The panel held that pure but-for causation would result in infinite liability for all wrongful acts, and therefore, the law almost never employs that standard without limiting it in some way. The law cuts off remote chains of causation by applying common law principles of proximate causation. Further, the personal-injury lawsuit against the water park arose “because of bodily injury,” but the claims of professional negligence did not. Because Bliss Sequoia’s policy did not cover those claims, Allied had no duty to defend or indemnify Bliss Sequoia against them.
Court Description: Oregon Insurance Law. The panel affirmed the district court’s summary judgment in favor of Allied Property & Casualty Insurance Company in a diversity insurance action concerning coverage for any liability that Bliss Sequoia Insurance and Risk Advisors might incur for damages because of bodily injury. One of Bliss Sequoia’s clients was a water park, and after a park guest was injured, the park sued Bliss Sequoia for professional negligence, alleging that the coverage limits on the park’s liability insurance were too low. In 2014, Bliss Sequoia procured coverage on behalf of the water park with an overall limit of $5 million. A year later, a boy was seriously injured at the park, and his family ultimately settled for $49 million. Facing liability well in excess of its insurance coverage, the water park sued Bliss Sequoia for professional negligence. Bliss Sequoia sought coverage from its general liability insurer, Allied Property, which denied coverage. Bliss Sequoia filed this action seeking a declaratory judgment that Allied had a duty to defend and indemnify. Allied’s policy provided that it covered any sums Bliss Sequoia was “legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage.’” Bliss Sequoia alleged that the bodily injury at issue was a “but-for” cause of Bliss Sequoia’s professional-negligence liability. The panel held that pure but-for causation would result in infinite liability for all wrongful acts, and therefore, the law almost never employs that standard without limiting it in some way. The law cuts off remote chains of causation by applying common law principles of proximate causation. The panel considered the central question posed by the case: Would Oregon courts construe “because of bodily injury” in the policy to refer to pure but-for causation, or would they impose some more restrictive causation standard? The Oregon Court of Appeals in Holman Erection Co. v. Employers Insurance of Wausau, 920 P.2d 1125 (Or. Ct. App, 1996), held that policy coverage for damages “because of bodily injury” did not extend to a breach-of-contract suit another step removed from any injury. Pure but-for causation was not enough. The panel held that although there was no Oregon Supreme Court case directly on point, nothing in Oregon jurisprudence suggested that Oregon courts would depart from the general principles of causation that American courts apply in this and other contexts. In addition, the Oregon Supreme Court has applied those principles to the interpretation of insurance contracts in Oakridge Community Ambulance Service, Inc. v. United States Fidelity & Guaranty Co., 563 P.2d 164 (Or. 1977) (providing that a pure but- for causation analysis has no place in Oregon insurance law). In light of this authority, the panel saw little reason to delay the resolution of the case by certifying the question to the Oregon Supreme Court. The panel concluded that the phrase “because of bodily injury” in Bliss Sequoia’s insurance policy included only damages that reasonably or foreseeably resulted from bodily injury—not just any that may arise in a daisy chain of lawsuits connected in some way to someone’s injury. Accordingly, the personal-injury lawsuit against the water park arose “because of bodily injury,” but the claims of professional negligence did not. Because Bliss Sequoia’s policy did not cover those claims, Allied had no duty to defend or indemnify Bliss Sequoia against them. Judge O’Scannlain dissented. Because there is no controlling precedent in the decisions of Oregon appellate courts on the question of whether, under Oregon insurance law, there is “any reasonable doubt” as to the meaning of the term “because of,” he would certify this case to the Supreme Court of Oregon. He dissented from the majority’s decision to reach the merits.
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