Naabani Twin Stars, LLC; Twin Stars, Ltd. v. St. Paul Fire and Marine Insurance Company

UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
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NAABANI TWIN STARS, LLC; TWIN
STARS, LTD.,
Plaintiffs - Appellants,
v.
ST. PAUL FIRE AND MARINE
INSURANCE COMPANY,
Defendant - Appellee,
and
TRAVELERS COMPANIES, INC.,
Defendant.
No. 20-2168
(D.C. No. 1:19-CV-00197-RB-JFR)
(D. N.M.)
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before TYMKOVICH, Chief Judge, LUCERO, Senior Circuit Judge, and
MATHESON, Circuit Judge.
_________________________________
In 2016, a building owned by Naabani Twin Stars, LLC and Twin Stars, Ltd.
was damaged by an underground water pipe. Twin Stars hired two geotechnical
consultants to assess the cause and extent of the damage. Both consultants agreed the
water from the burst pipe caused soil compression and settlement, which in turn
* This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
FILED
United States Court of Appeals
Tenth Circuit
October 12, 2021
Christopher M. Wolpert
Clerk of Court
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caused the damage to the building—cracks in the floor, buckling of the exterior,
breaking of sheetrock, the inability to close and open doors, significant distortions of
the structural frame, broken welds in the steel framing, and pressure on the fire
suppression lines.
Twin Stars filed a claim with its insurer, St. Paul Fire & Marine Insurance
Company, based on its all-risk and additional coverages policies. St. Paul performed
its own assessment of the building and later denied coverage for the loss because (1)
there was no collapse as defined in the policy, and (2) the “earth movement”
exclusion applied.
Twin Stars sought declaratory judgment in New Mexico state court, and St.
Paul removed the case to New Mexico District Court and moved for summary
judgment. The district court granted summary judgment to St. Paul and dismissed
Twin Stars’s claims for coverage of its losses and alleged bad faith.
Twin Stars argues on appeal that the district court erred in finding (1) there
was no collapse as defined by the policy, (2) the earth movement exclusion precluded
any coverage for either the all-risk policy or the additional coverages, and (3) St.
Paul did not act in bad faith in either its investigation of the damage or denial of
coverage. We have reviewed the record de novo, and for substantially the same
reasons as the district court’s Order, we affirm the grant of summary judgment in
favor of St. Paul.
The definition of collapse in the policy was unambiguous, and the damage to
the building was excluded by the definition. No parts of the building either “fell
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down” or “caved in.” At most, the building suffered damage that was explicitly
excluded by the definition.
But even if the building had suffered a collapse, coverage would have been
precluded by the earth movement exclusion. 1 Twin Stars’s two consultants agreed
the damage to the building was caused by soil compression and settlement, which is
excluded from coverage by the earth movement exclusion: “We won’t cover loss
caused . . . by any earth movement . . . including . . . [e]arth sinking, rising, or
shifting, including soil conditions which cause settling, cracking, or other
disarrangement of foundations or other parts of realty.” App., Vol. I at 85. And “soil
conditions include contraction, expansion, freezing, thawing, erosion, improperly
compacted soil, and the action of water under the ground surface.” Id. at 86.
Because soil conditions caused a shift in the building, which in turn caused the
damage at hand, coverage is precluded by the policy’s exclusion. 2
1 Twin Stars argues the anti-concurrent causation clause in the policy, which
excludes coverage “regardless of any other cause or event that contributes
concurrently or in any sequence to the loss[,]” App., Vol. I at 85, should be abrogated
in favor of the efficient proximate cause, the water leak. In other words, Twin Stars
seeks to render the earth movement exclusion inapplicable because the damage was
also caused by the water from the broken pipe. We need not reach this issue because
we conclude the earth movement exclusion unambiguously applies.
2 Twin Stars contends the additional coverages are not subject to the policy
exclusions, so the collapse coverage should not be subject to the earth movement
exclusion. That is incorrect. The exclusions apply to both the all-risk policy and
additional coverages. Although there is no general policy term explicitly stating so,
we can infer the exclusions are applicable to the entire policy because some
exclusions specifically state they are inapplicable to certain additional coverages.
For example, collapses are specifically excluded from coverage. “We won’t cover
loss caused by or resulting from collapse.” App., Vol. II at 318. But the exclusion
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Finally, Twin Stars did not provide sufficient evidence to demonstrate that St.
Paul acted in bad faith. 3 Twin Stars alleges St. Paul acted in bad faith when it
refused to investigate the damage further even though St Paul’s adjuster noted that
additional investigative measures could have given them a better idea of the effect
the leak had on the building. Aplt. Br. at 29. But Twin Stars fails to demonstrate
what would have changed had St. Paul investigated further. At best for Twin Stars,
St. Paul would have concluded the July 2016 leak caused the soil movement that
caused the damage. That best case conclusion for Twin Stars is exactly what Twin
Stars’s own consultants concluded (and it is the same presumption St. Paul relied on
in denying coverage). Whether the damage was caused by gradual soil movement or
by abrupt soil movement because of the July 2016 leak changes nothing; damage
from either is precluded by the earth movement exclusion. Because Twin Stars fails
to demonstrate what else St. Paul could have done to properly investigate the
damage, we conclude St. Paul did not act in bad faith.
goes on to say that “this exclusion doesn’t apply to the Collapse additional
coverage.” Id. at 319. This indicates that exclusions apply to additional coverages
unless specifically disclaimed. Otherwise, the disclaiming language in the exclusions
would be superfluous.
3 Whether a claim for bad faith can survive when there is no underlying
coverage is an open question in New Mexico. We do not purport to answer it here.
Even assuming for purposes of argument that a claim for bad faith investigation can
survive without underlying coverage, Twin Stars fails to raise enough evidence of
bad faith to survive summary judgment.
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The judgment of the district court is AFFIRMED.
Entered for the Court
Timothy M. Tymkovich
Chief Judge
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