Zurich American Insurance Company v. Ironshore Specialty Insurance Company

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ZURICH AMERICAN INSURANCE
COMPANY,
Plaintiff-Appellee,
and
AMERICAN GUARANTEE AND
LIABILITY INSURANCE COMPANY,
Plaintiff,
v.
IRONSHORE SPECIALTY INSURANCE
COMPANY,
Defendant-Appellant.
No. 18-16857
D.C. No.
2:13-cv-02191-GMN-CWH
MEMORANDUM*
Appeal from the United States District Court
for the District of Nevada
Gloria M. Navarro, District Judge, Presiding
Submission Deferred April 14, 2020
Submitted January 18, 2022**
San Francisco, California
FILED
JAN 20 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

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Before: BERZON and IKUTA, Circuit Judges, and LEMELLE,*** District Judge.
Ironshore Specialty Insurance Company (“Ironshore”) appeals the district
court’s final judgment in favor of plaintiff insurance companies (collectively,
“Zurich”). We have jurisdiction under 28 U.S.C. § 1291, and we reverse.1
Ironshore’s insurance contract with seven subcontractors included an
exclusion providing (among other things) that the policy did not apply to any
property damage for the subcontractors’ work “performed prior to policy
inception.” Zurich Am. Ins. Co. v. Ironshore Specialty Ins. Co., 964 F.3d 804, 807
(9th Cir. 2020). This exclusion was subject to an exception, which stated that the
exclusion provision did not apply to property damage that “is sudden and
*** The Honorable Ivan L.R. Lemelle, United States District Judge for the
Eastern District of Louisiana, sitting by designation.
1 We decide this appeal (referred to as Zurich II) concurrently with an appeal
raising substantially identical issues, Zurich American Insurance Co. v. Ironshore
Specialty Insurance Co., ___ Fed. Appx. ___ (2022) (Zurich I).
2

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accidental and takes place within the policy period.” Id.2 After the seven
subcontractors were sued for work they had performed, Zurich defended and
indemnified the subcontractors, and then brought an action against Ironshore in
district court seeking contribution and indemnification for defense and settlement
costs. The parties stipulated that all construction work at issue had been completed
before the inception of Ironshore’s policy and that none of the complaints against
the subcontractors alleged that sudden and accidental damage had occurred after
the inception of Ironshore’s policy. After a bench trial, the district court ruled in
favor of Zurich on the ground that Ironshore failed to carry its burden of showing
that the exception to the exclusion was not applicable. The final judgment that
Ironshore appeals concerned contribution and indemnification as to six of the
2 The relevant exclusion provision states:
This insurance does not apply to any “bodily injury” or “property
damage”:
1. which first existed, or is alleged to have first
existed, prior to the inception of this policy.
“Property damage” from “your work”, or the work of
any additional insured, performed prior to policy
inception will be deemed to have first existed prior
to the policy inception, unless such “property
damage” is sudden and accidental and takes place
within the policy period . . . .
Id.
3

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subcontractors. The district court also denied Ironshore’s motion for
reconsideration under Rule 60(b) of the Federal Rules of Civil Procedure.
The district court erred in holding that Zurich was entitled to judgment
because Ironshore failed to meet its burden of proving that the exception to the
exclusion provision was not applicable. In connection with the related appeal of
Zurich I, we certified two open questions of state law to the Nevada Supreme
Court. See Zurich Am. Ins. Co. v. Ironshore Specialty Ins. Co., 964 F.3d 804, 806
(9th Cir. 2020), certified questions answered, 497 P.3d 625 (Nev. 2021). In
response, the Nevada Supreme Court held that (1) the burden “of proving the
applicability of an exception to an exclusion for coverage in an insurance policy”
falls on the insured, and (2) the insured “may rely on any extrinsic evidence that
was available to the insurer at the time the insured tendered the defense to the
insurer.” Zurich Am. Ins. Co. v. Ironshore Specialty Ins. Co., 497 P.3d 625, 626
(Nev. 2021).
In light of this ruling, the burden of proving that the exception to the
exclusion for coverage was applicable fell on Zurich. We reject Zurich’s argument
that the lack of any evidence that sudden and accidental property damage occurred
after the inception of Ironshore’s policy is sufficient to carry Zurich’s burden of
proving that the exception to the exclusion is applicable, potentially or otherwise.
4

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Moreover, Zurich does not ask for an opportunity to present evidence to the district
court that was available to the insurer when the defense was tendered and that
shows that sudden and accidental property damage occurred after the inception of
Ironshore’s policy. Therefore, we reverse the district court’s final judgment.3
REVERSED.
3 We reject Ironshore’s alternative argument that the decision in Zurich I in
favor of Ironshore had a preclusive effect on the district court’s judgment in this
case. The district court’s order, entered on March 24, 2017, was a final judgment
because it left “no issue of law or fact essential to the adjudication” open for future
determination, Kirsch v. Traber, 414 P.3d 818, 821 (Nev. 2018), and it preceded
the decision in Zurich I, which became final on August 24, 2017.
5

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