MEMORANDUM OPINION & ORDER

(Fed.R.Civ.P. 56)

BRUCE S. JENKINS, Senior District Judge.

On June 10, 2010, plaintiff Cincinnati Insurance Company ("Cincinnati") commenced this action seeking a declaratory judgment that Cincinnati has no duty to defend or indemnify AMSCO under the terms of its commercial general liability insurance policies and commercial umbrella liability policies with respect to "any claims in the Third Party Complaints filed by J & L Windows, Inc. (`J & L') and other various claimants ... against AMSCO, in any and all actions arising out of or related to construction of homes located in various subdivisions in Nevada," including several civil cases pending before the Nevada state district courts.1 Further, Cincinnati "seeks a determination that it owes no duty of equitable contribution or indemnity" to Arrowood Indemnity Company ("Arrowood") "for defense costs and/or fees paid by it on AMSCO's behalf as a result of the underlying litigation."2 In turn, both AMSCO and Arrowood filed answers and counterclaims against Cincinnati, seeking "a declaratory judgment finding that Cincinnati is required to defend and indemnify AMSCO from the Nevada claims and lawsuits and that Cincinnati is obligated to reimburse AMSCO for its litigation expenses incurred as a result of Cincinnati's refusal to extend coverage under its policies,"3 as well as a declaratory judgment that Cincinnati owes Arrowood "a duty of equitable contribution or indemnity for defense costs and/or fees paid by ARROWOOD on behalf of AMSCO" as a result of the same Nevada claims and lawsuits.4

The Declaratory Judgment Act reads in pertinent part:

28 U.S.C. § 2201(a) (2012 ed.). The Declaratory Judgment Act does not provide an independent basis for jurisdiction. Rather, it provides courts with discretion to fashion a remedy in cases where federal jurisdiction already exists. Heydon v. MediaOne of Southeast Mich., Inc., 327 F.3d 466, 470 (6th Cir.2003). In this case, the subject matter jurisdiction to hear Cincinnati's declaratory judgment action properly arises out of diversity jurisdiction pursuant to 28 U.S.C. § 1332(a), and there exists "a substantial controversy between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941). Accordingly, the Court finds that Cincinnati's claims and the counterclaims of AMSCO and Arrowood present a justiciable controversy under 28 U.S.C. § 2201(a).

"In a diversity action," including one seeking declaratory relief, "we apply the substantive law of the forum state, including its choice of law rules." Pepsi-Cola Bottling Co. of Pittsburg, Inc. v. PepsiCo, Inc., 431 F.3d 1241, 1255 (10th Cir. 2005) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 495-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)); Stickley v. State Farm Mut. Auto. Ins. Co., 505 F.3d 1070, 1076 (10th Cir.2007). Indeed,

Wade v. EMCASCO Ins. Co., 483 F.3d 657, 665-66 (10th Cir.2007).

FACTUAL BACKGROUND

Since 1949, AMSCO has manufactured and sold windows for use in homes. AMSCO sells its products through wholesale distributors and dealers, including J & L Windows, Inc. ("J & L"), which purchased windows from AMSCO and resold them. AMSCO does not install its window products in residential structures; nor does it hire its own contractors or subcontractors to do so. The AMSCO windows at issue in this case were sold through J & L and were ultimately installed in new homes constructed in the State of Nevada. A number of homeowners have since asserted claims against the contractors who built their homes, alleging numerous construction defects in their homes, including the windows, and that those defects caused property damage to their homes. (AMSCO refers to these claims collectively as the "Homeowner Claims"). The contractors, in turn, asserted claims against J & L and others, who then asserted third-party claims against AMSCO.

Some of the Homeowner Claims have ripened into civil litigation in the Nevada State courts. Others have been asserted pursuant to "Chapter 40," a specific Nevada statute governing construction defect claims. See Nev.Rev.Stat. §§ 40.600 to 40.635. Prior to filing a civil complaint, Chapter 40 requires a homeowner to file a Notice of Compliance, setting forth in reasonable detail the defects in the home and the known nature and extent of the damages caused by such defects, and providing the contractor the opportunity to inspect the residence and repair any damages found. See Nev.Rev.Stat. § 40.645.5 Pursuant to Chapter 40, a contractor must also forward the notice to each subcontractor and/or supplier "whom the contractor reasonably believes is responsible for a defect specified in the notice." Nev.Rev. Stat. § 40.646. AMSCO received Chapter 40 notices for each of the Homeowner Claims at issue in this case.

AMSCO had purchased comprehensive general liability ("CGL") policies from the predecessor of Arrowood Indemnity Company/Arrowpoint Capital ("Arrowood") for the period of time from 1998 to 2002; from Cincinnati for the period from 2002 to 2007; and from the predecessor of Chartis for the period of 2007 to 2009.6 Based upon its receipt of the Chapter 40 notices and/or service of process in the Nevada civil litigation, AMSCO tendered its defense of the Homeowner Claims to the three insurers. Arrowood and Chartis assumed their obligation to defend AMSCO in several cases, but Cincinnati declined to do so, instead filing this declaratory judgment proceeding to absolve itself of any duty to defend or indemnify AMSCO with reference to the Homeowner Claims.

The specific Homeowner Claims which Cincinnati has refused to defend are summarized in the parties' summary judgment memoranda7 and will not be detailed herein. In each instance, the claimants allege the existence of window-related defects, namely, that windows made by AMSCO were defective and/or defectively installed, and that the window defects caused property damage to the interior and/or exterior of the house beyond the window defects themselves — that is, that the faulty workmanship involving AMSCO's windows caused property damage to something other than the insured's work product.

The Pending Motions

On June 14, 2011, AMSCO filed a Motion for Summary Judgment or in the Alternative to Certify a Legal Question to the Utah Supreme Court,8 asserting that (1) Cincinnati's duty to defend AMSCO under the terms of its commercial general and umbrella liability insurance policies must be determined from the allegations set forth in the various third-party claims against AMSCO, referred to therein as the "Homeowner Claims;" (2) that those claims allege "occurrences" triggering Cincinnati's duty to defend AMSCO; (3) that there are no applicable policy exclusions upon which Cincinnati can rely to avoid this duty; and (4) there exists no genuine dispute of any material fact. AMSCO seeks an order requiring Cincinnati to defend AMSCO against the Homeowner Claims and pay all fees AMSCO has incurred defending against the Homeowner Claims, or alternatively, asks this court to certify to the Utah Supreme Court "the purely legal question of whether the Homeowner Claims underlying this action obligate Cincinnati to defend AMSCO under Utah law."9

On October 11, 2011, Cincinnati filed a memorandum in opposition to AMSCO's motion,10 together with a cross-motion for summary judgment against AMSCO,11 asserting that under Utah law, AMSCO's alleged negligence in manufacturing defective windows in Utah that were later sold and installed in homes located in a Nevada does not constitute an "occurrence" within the meaning of Cincinnati's insurance policies; thus "Cincinnati has no duty to defend or indemnify AMSCO under the terms of the insurance contracts for any of the claims asserted in the underlying litigation."12

Cincinnati and Arrowood also filed cross-motions for summary judgment on the issue whether Cincinnati owes Arrowwood equitable contribution or indemnity for defense costs paid by Arrowood on behalf of AMSCO in connection with the Nevada claims and litigation.13

These summary judgment motions came before the court for hearing on December 5, 2011. At that time, the court heard the arguments of counsel and took the matter under advisement.14

ANALYSIS

Burden of Proof

In a declaratory judgment action regarding liability insurance coverage, the burden of proof depends in part on the specific issue in dispute. See Utah Farm Bureau Ins. Co. v. Dairyland Ins. Co., 634 F.2d 1326, 1328 (10th Cir. 1980). The burden of establishing coverage under an insurance policy is on the party who asserts that a loss comes within the coverage of the policy, even when the insurer commences a declaratory action to resolve the question. Id.; see also Fireman's Fund Ins. Co. v. Videfreeze, 540 F.2d 1171, 1174-76 (3d Cir.1976); Hartford Accident & Indem. Co. v. Shaw, 273 F.2d 133, 137 (8th Cir. 1959) (holding that the burden of proving coverage under the omnibus clause of an insurance policy is upon the person seeking coverage); Reliance Life Ins. Co. v. Burgess, 112 F.2d 234, 238 (8th Cir. 1940) ("[i]t is a fundamental rule that the burden of proof in its primary sense rests upon the party who, as determined by the pleadings, asserts the affirmative of an issue"); Barker v. Goldberg, 705 F.Supp. 102, 104-05 (E.D.N.Y.1989).

As the Utah Court of Appeals explains in Young v. Fire Insurance Exchange, 2008 UT App 114, 182 P.3d 911:

2008 UT App 114, at Par. 28, 182 P.3d at 918-19; see also Morris v. Farmers Home Mut. Ins. Co., 28 Utah.2d 206, 209, 500 P.2d 505, 507 (1972) (stating that insured "has the burden of proving that his loss comes within the coverage stated in the policy"); Whitlock v. Old Am. Ins. Co., 21 Utah.2d 131, 134, 442 P.2d 26, 27 (1968) (where "the company asserts a defense of noncoverage on the ground of an exception stated in the policy, the general rule of insurance law is that this is in the nature of an affirmative defense; and that the company has the burden of proving by a preponderance of the evidence that the loss comes within the exception stated in the policy").

Thus, although Cincinnati initiated this declaratory judgment action, it is AMSCO and Arrowood, as the parties asserting coverage, that have the burden to prove AMSCO's entitlement to coverage under the terms of Cincinnati's policy. Only if AMSCO and Arrowood meet their burden of establishing that the loss falls within the scope of the policies' coverage provisions does the burden shift to Cincinnati to prove that the claim is not covered because of an exclusion. See LDS Hosp., Div. of Intermountain Health Care v. Capitol Life Ins. Co., 765 P.2d 857, 859 (Utah 1988).

Construction of Policy Language

To begin with, "`[w]e construe insurance contracts by considering their meaning to a person of ordinary intelligence and understanding, ... in accordance with the usual and natural meaning of the words, and in the light of existing circumstances, including the purpose of the policy.'" Lopez v. United Auto. Ins. Co., 2012 UT 10, ¶ 17, 274 P.3d 897, 902 (quoting Doctors' Co. v. Drezga, 2009 UT 60, ¶ 12, 218 P.3d 598, 603).

Fire Ins. Exchange v. Oltmanns, 2012 UT App. 230, ¶ 6, 285 P.3d 802, 805.15 Accordingly, any ambiguities in the insuring agreement, or its exclusions, are resolved in favor of the insured. Doctors' Co. v. Drezga, 2009 UT 60 at ¶ 12, 218 P.3d at 603 (defining ambiguity as a provision that is "`capable of more than one reasonable interpretation because of uncertain meanings of terms, missing terms, or other facial deficiencies." (quoting WebBank v. Am. Gen. Annuity Serv. Corp., 2002 UT 88, ¶ 20, 54 P.3d 1139 (internal quotation marks omitted))). "This rule of strict construction is justified by `the need to afford the insured the protection he or she endeavored to secure by paying premiums.'" Id. (quoting Auto Lease Co. v. Cent. Mut. Ins. Co., 7 Utah.2d 336, 325 P.2d 264, 266 (1958)).16

Mellor v. Wasatch Crest Mut. Ins. Co., 2009 UT 5, ¶ 16, 201 P.3d 1004, 1009 (citations omitted); see also U.S. Fidelity and Guar. Co. v. Sandt, 854 P.2d 519, 521 (Utah 1993) ("Since 1921 this Court has expressed its commitment to the principle that `insurance policies should be construed liberally in favor of the insured and their beneficiaries so as to promote and not defeat the purposes of insurance." (quoting Richards v. Standard Acc. Ins. Co., 58 Utah. 622, 200 P. 1017, 1020 (1921))).17

The Insurer's Duty to Defend

Under Utah law, as Judge Campbell has explained,

Ohio Cas. Ins. Co. v. Cloud Nine, LLC, 464 F.Supp.2d 1161, 1166 (D.Utah 2006), rev'd on other grounds, 458 Fed.Appx. 705 (10th Cir.2012).

AMSCO correctly asserts that under Utah law,18 it is well-established that "`an insurer's duty to defend is broader than its duty to indemnify.'" Fire Ins. Exch. v. Estate of Therkelsen, 2001 UT 48, ¶ 22, 27 P.3d at 560 (quoting Sharon Steel Corp. v. Aetna Cas. & Sur. Co., 931 P.2d 127, 133 (Utah 1997)). Indeed, "an insurer may have a duty to defend an insured even if ... the insurer is ultimately not liable to indemnify the insured." Id.19

This broad duty to defend is triggered when "the allegations in the underlying complaint ... if proved, could result in liability under the policy." Nova Cas. Co. v. Able Const., Inc., 1999 UT 69, ¶ 8, 983 P.2d 575, 578 (citing Sharon Steel Corp. v. Aetna Cas. & Sur. Co., 931 P.2d 127, 133 (Utah 1997) (citing Deseret Fed. Sav. & Loan Ass'n v. United States Fidelity & Guar. Co., 714 P.2d 1143, 1146 (Utah 1986))); Great American Ins. Co. v. Woodside Homes, 448 F.Supp.2d 1275, 1278 (D.Utah 2006) ("If the duty to defend attaches to any claim alleged in a complaint, the insurer is obligated to undertake the defense of its insured for all claims raised in the complaint."). Accordingly, the insurer's duty to defend arises if there is potential, not actual, liability. Sharon Steel, 931 P.2d at 133 (noting the "defense duty arises when the insurer ascertains facts giving rise to potential liability under the insurance policy"). To negate its duty to defend, an insurer must, therefore, do more than point to a potential lack of insurance coverage regarding one of the claims at issue (or a potentially applicable policy exclusion); instead, the insurer must demonstrate that none of the allegations of the underlying claim is potentially covered (or that a policy exclusion conclusively applies to exclude all potential for such coverage).

When determining whether the insurer has a duty to defend a particular claim of loss, at the outset the court focuses on two documents: the insurance policy and the underlying complaint:

Benjamin v. Amica Mut. Ins. Co., 2006 UT 37, ¶ 16, 140 P.3d 1210, 1214.20 In Therkelsen, the Utah Supreme Court noted that an insurance contract may base the duty to defend on the face of the complaint and its allegations, or on the facts and circumstances underlying the complaint; "whether extrinsic evidence is admissible to determine whether an insurer has a duty to defend an insured turns on the parties' contractual terms." 2001 UT 48, at ¶¶ 22-25, 27 P.3d at 560-61.

Equine Assisted Growth and Learning Ass'n v. Carolina Cas. Ins. Co., 2011 UT 49, ¶ 10, 266 P.3d 733, 736 (footnotes omitted) (quoting Therkelsen, 2001 UT 48, ¶ 25, 27 P.3d at 561 and Benjamin, 2006 UT 37, ¶ 16, 140 P.3d at 1214 (quoting Therkelsen, 2001 UT 48, ¶ 21, 27 P.3d 555)). As Therkelsen explains, "[i]f the parties make the duty to defend dependent on the allegations against the insured, extrinsic evidence is irrelevant to a determination of whether a duty to defend exists." 2001 UT 48, ¶ 25, 27 P.3d at 561 (emphasis added). "Indeed, in such a case it would be error for the trial court to consider extrinsic evidence, as it is wholly irrelevant to the issue of whether the insurer has a duty to defend its insured." Id. at ¶ 23, 27 P.3d 555 (footnote omitted).21

The question is whether the Cincinnati policies' duty-to-defend clause "is triggered by the facial language of a complaint or whether the clause is triggered by the actual facts underlying the complaint." Equine Assisted Growth & Learning Ass'n v. Carolina Cas. Ins. Co., 2009 UT App 200, ¶ 25, 216 P.3d 971, 972, aff'd, 2011 UT 49, 266 P.3d 733.22

Initially, Cincinnati's CGL policies provided:

The policies were amended in October 2003 to read:

Cincinnati's policies define "suit" as follows:

As far as the Nevada civil litigation is concerned, this policy language conditions Cincinnati's duty to defend AMSCO upon allegations contained on the face of the complaint, without resort to extrinsic evidence of the facts underlying the claim.26

The Nevada homeowners' Chapter 40 notices present a different question. The Nevada Chapter 40 process contemplates an informal resolution of homeowner complaints regarding construction defects through notice, inspection and repair by the construction contractor and its subcontractors, but does not itself provide for compulsory arbitration of the homeowners' construction defect claims.27 The Chapter 40 process thus does not constitute a "suit" within the terms of Cincinnati's CGL policies unless, as set forth above, the homeowners claim "property damage" covered by the policy and AMSCO participates in this alternate dispute resolution process with Cincinnati's consent.28 Absent Cincinnati's consent, AMSCO's receipt of a Chapter 40 notice may not trigger Cincinnati's duty to defend under its CGL policies.

Cincinnati's Theory of Coverage

As pleaded in its Complaint, Cincinnati's defense of AMSCO's assertion of coverage forms essentially along two lines: (1) that the claims asserted against AMSCO involve losses that did not result from an "occurrence" within the meaning of its general or umbrella liability policies; and (2) even if the losses resulted from an "occurrence," they fall within one or more express exclusions from coverage under Cincinnati's policies.29

On the parties' cross-motions for summary judgment, Cincinnati contends that "[u]nder Utah law, AMSCO's alleged negligence in manufacturing defective windows does not constitute an `occurrence' within the meaning of Cincinnati's insurance policies."30 Therefore, there is no coverage under the terms of its policies for AMSCO with respect to the claims asserted in the underlying Nevada litigation, and Cincinnati has no duty to defend or indemnify AMSCO under the terms of its insurance policies for any of the claims asserted in the underlying Nevada litigation against AMSCO.31

The Meaning of "Occurrence"

The coverage dispute between Cincinnati and AMSCO mainly arises out of the definition of "occurrence" contained in Cincinnati's CGL policies. The CGL policies cover AMSCO's losses for "those sums that the insured [AMSCO] becomes legally obligated to pay as damages because of... `property damage' to which this insurance applies."32 This insurance coverage "applies ... to `property damage' only if: (1) The ... `property damage' is caused by an `occurrence'...."33 Cincinnati's CGL policies define an "occurrence" as meaning "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."34 The policies do not further define the term "accident," and they offer little or no additional guidance delineating the nature of a covered "occurrence."

The adoption of the term "occurrence" to define coverage of an insured loss represents one step in the continuing evolution of standard CGL insurance policies:

United States Fidelity & Guar. Co. v. Morrison Grain Co., 734 F.Supp. 437, 443 (D.Kan.1990); accord, 1 R. LONG. THE LAW OF LIABILITY INSURANCE § 1.21, at 1-88 (1990); 7A J. APPLEMAN, INSURANCE LAW AND PRACTICE §§ 4492-93 (Berdal ed. 1979).35 Adopting the concept of "occurrence" in order to broaden the available coverage was wholly consistent with the overall purpose of a CGL policy:

James Graham Brown Foundation, Inc. v. St. Paul Fire & Marine Ins. Co., 814 S.W.2d 273, 278 (Ky.1991) (citing Note, The Applicability of General Liability Insurance to Hazardous Waste Disposal, 57 S. Cal. L. Rev. 745 (1984)). Moreover, "[c]ourts and commentators alike are in agreement that the term `occurrence' is to be broadly and liberally construed in favor of extending coverage to the insured." Id. (citing Buckeye Union Ins. Co. v. Liberty Solvents & Chem. Co., Inc., 17 Ohio App.3d 127, 477 N.E.2d 1227 (1984)); see also United States Fidelity & Guar. Co. v. Sandt, 854 P.2d at 522-23.

Counsel for the parties proffer competing readings of a series of cases decided by the Utah Supreme Court and by federal courts — both this District and the Tenth Circuit — applying Utah law to decide the question of "occurrence."

The Utah Cases

In Hoffman v. Life Ins. Co., 669 P.2d 410 (Utah 1983), the Utah Supreme Court considered whether the death of the insured was "accidental" within the meaning of his insurance policy. Mr. Hoffman was shot to death by police officers during an armed confrontation that took place after the insured had parked his vehicle in his driveway at the end of a chase on and off the freeway. At the time, the insured was very distraught and probably intoxicated. The insurer argued that Hoffman's death was not "accidental" because it was a reasonably foreseeable consequence of his actions, and that "every person is held to intend the natural and probable consequences of his actions," echoing the language of Richards v. Standard Accident Ins. Co., an earlier Utah case.36 669 P.2d at 415.

The Hoffman court began its analysis with the Richards standard: "a person is a victim of an accident when, from the victim's point of view, the occurrence causing the injury or death is not a natural and probable result of the victim's own acts." Id. at 416 (emphasis in original). Observing that "[t]he standard stated in Richards has been applied consistently by this Court,"37 Hoffman then drew a distinction between that standard and the foreseeable consequences of the insured's own negligence: "[a]s this Court stated in Kellogg, supra, 114 Utah at 572, 201 P.2d at 952, the test is not whether the result was foreseeable, but whether it was expected. See also Schmidt v. Industrial Commission, Utah, 617 P.2d 693 (1980) (Wilkins, J., concurring) ("accident" is "an unlooked for mishap which is not expected or designed")." Id.38

The doctrine of foreseeability is used in tort law to establish the scope of the duty of a person to exercise reasonable care to avoid harming others. In insurance law, however, the issue is one of contractual meaning, i.e., what is the nature of the risk described by the term "accident" or "accidental" that the insurance company insures against. In construing such contractual provisions, our point of view is "that of the average man." [Handley], 106 Utah at 190, 147 P.2d at 322 (quoting Lewis v. Ocean Accident & Guarantee Corp., 224 N.Y. 18, 21, 120 N.E. 56, 57 (1918)). Accident insurance policies "are purchased with the understanding that if death results from an unintended or an intended cause where it was not the expected but the supposedly improbable result[, the death is] covered by the policy." Handley, supra, 106 Utah at 190, 147 P.2d at 322. The layman views an accident as any result which is not expected. See Kellogg, 114 Utah at 572, 201 P.2d at 951-52 (discussing Handley). Webster states that "EXPECT usually implies a high degree of certainty ..." and defines the term as "to consider probable or certain...." Webster's Third International Dictionary (1976).

Id. (quoting Handley, 106 Utah at 192, 147 P.2d at 322).39

In Hoffman, the insured's death during the confrontation with three police officers was foreseeable, but was not the expected or probable result unless "Hoffman did in fact directly threaten the lives of the officers" when he was emerging from his vehicle holding a gun. Id. at 418.

In Nova Casualty Co. v. Able Construction, Inc., 1999 UT 69, 983 P.2d 575, the Utah Supreme Court considered whether an insurer had a duty to defend claims against its insured for intentional misrepresentation, negligent misrepresentation, and breach of warranty. The court ultimately held that allegations of intentional misrepresentation and negligent misrepresentation in conjunction with the sale of real property do not constitute an "occurrence" or "accident" under a commercial general liability insurance policy. The Nova Casualty court first determined that intentional misrepresentation is a willful misrepresentation, as is fraud, and thus cannot be an "accident" covered by the policy; in addressing negligent misrepresentation, the court explained that "allegations of negligent misrepresentation are not an occurrence or accident under commercial general liability insurance policies because the insured had the intent to induce reliance," and the buyers' reliance was the intended result. 1999 UT 69, at ¶¶ 14, 16, 983 P.2d at 579, 580.40 Nova Casualty distinguished Hoffman — which the trial court had relied upon "for the proposition that the term `accident' in liability insurance contracts includes damages resulting from negligent conduct" — from its insureds' failure to disclose the risk of landslide:

Id. at ¶¶ 15-16, 983 P.2d at 580.41

In N.M. ex rel. Caleb v. Daniel E., 2008 UT 1, 175 P.3d 566, the Utah Supreme Court considered whether a serious head injury caused by an eight-year-old child striking another child with a hockey stick was the intended or expected result of an "accident" within the meaning of a homeowner's liability insurance policy.42 Again invoking the Richards standard, the court explained that harm or damage "is not accidental if it is the result of actual design or intended by the insured," or it "is not accidental if it is the natural and probable consequence of the insured's act or should have been expected by the insured." 2008 UT 1, at ¶ 7, 175 P.3d at 569 (footnote omitted). "The first category presents a factual question as to what the insured intended. The second category generally presents a legal question as to what the average individual would expect to happen under the circumstances." Id., 173 P.3d at 569-70 (citing Hoffman, 669 P.2d at 419). The court next undertook to "resolve the question of whether we focus on the actions of the tortfeasor or the resulting injury as being accidental in nature," noting that "[a]ccording to this court's clear precedent, we focus on the accidental nature of the injury." Id. at ¶ 10, 173 P.3d at 570. The court rejected the reasoning of the Utah Court of Appeals in two cases that focused on the nature of the insured's actions "because it conflicts with this court's clear precedent":

Id. at ¶ 11, 173 P.3d at 570-71 (quoting Hoffman, 669 P.2d at 416) (footnotes omitted).43 Indeed, relying on foreseeability to define an accidental occurrence under an insurance policy would defeat the very purpose of liability insurance:

Id. at ¶ 11 n. 7, 175 P.3d at 571 n. 7.

A year later, in Helf v. Chevron U.S.A., Inc., 2009 UT 11, 203 P.3d 962, the Utah Supreme Court summarized its ruling in N.M. ex rel. Caleb v. Daniel E. as follows:

2009 UT 11, at ¶ 29, 203 P.3d at 970-71 (emphasis in original; footnotes omitted).44

From these Utah cases, we may glean that the fact that injury or damage may be the foreseeable consequence of the insured's own negligence does not foreclose a finding that such injury or damage was accidental, and resulted from an "occurrence" within the meaning of a commercial general liability policy. Indeed, the Utah Supreme Court's emphatic rejection of foreseeability as the measure of the accidental nature of injury or damage resulting from the insured's conduct precludes any notion that the intended, expected or even the "natural and probable" consequences of the insured's actions may be equated with the "foreseeable" consequences of the insured's negligence. As the Utah Supreme Court explained in N.M. ex rel. Caleb v. Daniel E., "We have clearly held that `the test is not whether the result was foreseeable, but whether it was expected.'" 2008 UT 1, at ¶ 11, 175 P.3d at 571 (quoting Hoffman, 669 P.2d at 416).

The Federal Cases

Several recent cases decided in this District have undertaken to apply the Utah law defining occurrences in terms of accidental injury or damage in the liability insurance context.

In H.E. Davis & Sons, Inc. v. North Pacific Insurance Co., 248 F.Supp.2d 1079 (D.Utah 2002), a case involving a plaintiff insured's failure to adequately prepare and compact soils for a lot upon which a school was to be built, the defendant insurance company argued that the insured's inadequate preparation of the soil at the building site "was not an `accident' because plaintiff intended to perform adequately, but apparently did so negligently. Thus, regardless of plaintiff's negligence or the ultimate poor quality of its work, plaintiff could foresee the natural consequences of its actions." Id. at 1084 (emphasis in original).45 Judge Sam agreed, noting that the insured had "failed to adequately compact the soil, with natural and foreseeable results. So long as the consequences of plaintiff's work were natural, expected, or intended, they cannot be considered an `accident.' If there is no `accident,' there is no `occurrence' to trigger coverage under the [p]olicy." Id. (footnote omitted). H.E. Davis & Sons did not squarely address claims of resultant damage to other property as resulting from an occurrence.46

In Great American Ins. Co. v. Woodside Homes Corp., 448 F.Supp.2d 1275 (D.Utah 2006), Judge Campbell summarized H.E. Davis & Sons, Inc. in these terms: "the court held that Utah law does not consider negligent work performed by an insured to be an occurrence because the consequences of negligent work are reasonably foreseeable and therefore no `accident' resulting from that work can occur." Id. at 1280. In Woodside Homes, the insured asserted coverage under its general liability insurance policies for claims arising from allegedly defective home construction by the insured's subcontractors. The question presented was "whether faulty work performed by an insured's subcontractor can be considered an accident, and therefore an occurrence" within the meaning of the insured's policies. Id. Judge Campbell pointed to language in the Hoffman case saying that "a person is a victim of an accident when, from the victim's point of view, the occurrence causing the injury ... is not a natural and probable result of the victim's own acts," 669 P.2d at 416, and concluded that "[g]iven the Utah Supreme Court's focus on the acts of the insured when determining whether there has been an occurrence, it follows that the negligent acts of Woodside's subcontractors can be considered an occurrence from Woodside's `point of view,'" and "that defective subcontractor work is covered under policies like that at issue here." 448 F.Supp.2d at 1282.

In a more recent case involving facts strikingly similar to this one, Judge Campbell relied upon her own opinion in Woodside Homes — which in turn relied on H.E. Davis & Sons — to deny coverage under a general liability policy for property damage resulting from alleged construction defects involving windows, doors and frames supplied by the insured. Cincinnati Ins. Co. v. Linford Bros. Glass Co., No. 2:08-CV-387-TC, 2010 WL 520490, 2010 Lexis 11226 (D.Utah, decided Feb. 9, 2010). The Linford opinion decided the "occurrence" question in a single paragraph:

2010 WL 520490, at *3. As in H.E. Davis & Sons, the "occurrence" question was decided in terms of foreseeability — an approach that has been explicitly rejected by the Utah Supreme Court, first in Holland and more recently in N.M. ex rel. Caleb v. Daniel E.47

In Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153 (10th Cir.2010), the court of appeals followed the lead of Woodside Homes and H.E. Davis & Sons, Inc. in stating that "[u]nder Wyoming and Utah law, `the natural results of [an insured's] negligent and unworkmanlike construction do not constitute an occurrence triggering coverage under a [CGL] policy.'" 618 F.3d at 1174.48

Referring to N.M. ex rel. Caleb v. Daniel E., the Bartile panel observed that "[t]he Utah Supreme Court recently clarified that `harm or damage is not accidental if it is the natural and probable consequence of the insured's act or should have been expected by the insured,'" and that "Utah law focuses on the unexpectedness of the result or injury." 618 F.3d at 1174 (quoting N.M. ex rel. Caleb v. Daniel E., 175 P.3d at 569). Bartile also noted the Utah court's rejection of foreseeability as the measure of the accidental nature of an "occurrence":

Id. at 1174 n. 16. Yet the Bartile panel rejected the insured's argument that H.E. Davis & Sons, Inc.'s reliance on foreseeability of damage in defining an "occurrence" is inconsistent with N.M. ex rel. Caleb v. Daniel E.'s rejection of foreseeability as a measure:

Id. at 1175 n. 18. This explanation proves unclear at best. To say that the damage resulting from negligent construction was not "expected" suggests that it was accidental, yet H.E. Davis & Sons reached the contrary conclusion because such damage was "foreseeable," and therefore "natural." 248 F.Supp.2d at 1084. Thereafter, the Utah court again explicitly rejected foreseeability as the applicable standard in N.M. ex rel. Caleb v. Daniel E.

Prior Tenth Circuit authority had acknowledged that "Utah has adopted a broad definition of accident" in insurance policies, and that "[t]he Utah court also has noted that in a liability policy, `courts have generally held that `accident' includes results negligently caused by the insured.'" Allstate Insurance Co. v. Worthington, 46 F.3d 1005, 1011 (10th Cir. 1995) (quoting Hoffman, 669 P.2d at 416 n. 2).49 Of course, counsel had alerted the Worthington panel to the existence of the Hoffman case.

Not so in H.E. Davis & Sons, where counsel for both the insurer and the insured failed even to cite to Hoffman in their summary judgment memoranda, with the insurer relying instead upon Nova Casualty and its discussion of negligent misrepresentation as intentional conduct.50

The opinions that subsequently rely upon H.E. Davis & Sons as an accurate statement of Utah law do so without examining its underpinnings in the Utah case law. In Linford, the most recent example, counsel for the parties again did not call the court's attention to the Hoffman opinion — or even to the Utah Supreme Court's explicit rejection of the foreseeability standard in N.M. ex rel. Caleb v. Daniel E. — which was cited by insurer's counsel for the proposition that "when determining what constitutes an `accident,' Utah courts look at the `natural and probable consequence' of an act."51 Instead, counsel equated the foreseeable consequences of the insured's negligence with the "natural" consequences of an act.

In this case, AMSCO has refused to concede the argumentative ground claimed by Cincinnati in the name of H.E. Davis & Sons and Linford, turning instead to the opinions of the Utah Supreme Court in Hoffman and N.M. ex rel. Caleb v. Daniel E. — authoritative opinions that govern this diversity action on questions of Utah law. See Wade, 483 F.3d at 665-66 ("The federal court must follow the most recent decisions of the state's highest court."); Grain Dealers Mut. Ins. Co. v. Lower, 979 F.2d 1411, 1416 (10th Cir.1992) ("`we must apply the most recent statement of state law by the state's highest court'" (quoting Southwest Forest Indus., Inc. v. Sutton, 868 F.2d 352, 354 (10th Cir.1989), cert. denied, 494 U.S. 1017, 110 S.Ct. 1320, 108 L.Ed.2d 496 (1990))).

Wankier v. Crown Equipment Corp., 353 F.3d 862, 866 (10th Cir.2003) (citing Blackhawk-Central City Sanitation Dist. v. Am. Guar., 214 F.3d 1183, 1194 n. 4 (10th Cir. 2000), and Koch v. Koch Indus., Inc., 203 F.3d 1202, 1231 (10th Cir.2000)).

Yet the same is not true of prior district court opinions. While principles of stare decisis bind panels of the court of appeals to follow the "law of the circuit" embodied in prior opinions of that court,

Garcia v. Tyson Foods, Inc., 534 F.3d 1320, 1329 (10th Cir.2008). "Even where the facts of a prior district court case are, for all practical purposes, the same as those presented to a different district court in the same district, the prior `resolution of those claims does not bar reconsideration'" by another district judge "`of similar contentions. The doctrine of stare decisis does not compel one district court judge to follow the decision of another.'" Threadgill v. Armstrong World Indus., Inc., 928 F.2d at 1371 (footnote omitted) (quoting State Farm Mut. Auto. Ins. Co. v. Bates, 542 F.Supp. 807, 816 (N.D.Ga. 1982)). "Where a second judge believes that a different result may obtain, independent analysis is appropriate." Id.52 As the Eleventh Circuit explained in Fishman & Tobin, Inc. v. Tropical Shipping & Const. Co., Ltd., 240 F.3d 956 (11th Cir.2001),

Id. at 965 (citations omitted). The Supreme Court acknowledged this distinction in Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996): "If there is a federal district court standard, it must come from the Court of Appeals, not from the over 40 district court judges in the Southern District of New York, each of whom sits alone and renders decisions not binding on the others," id. at 430 n. 10, 116 S.Ct. 2211, and more recently in Camreta v. Greene, ___ U.S. ___, 131 S.Ct. 2020, 179 L.Ed.2d 1118 (2011): "`A decision of a federal district court judge is not binding precedent in either a different judicial district, the same judicial district, or even upon the same judge in a different case.'" Id. at 2033 n. 7 (quoting 18 James Wm. Moore, Moore's Fed. Practice § 134.02[1][d], at p. 134-26 (3d ed. rev. 2011) (footnote omitted)).

Thus, as AMSCO suggests, in addressing the Utah law of accidental "occurrence," this court is not bound to follow the prior opinions of other judges of this District in H.E. Davis & Sons, Woodside Homes, or even Cincinnati Ins. Co. v. Linford.

AMSCO's Theory of Coverage

AMSCO submits that Under Utah law, "the analysis of whether there has been an occurrence under a CGL policy of insurance turns on what an insured intends or expects, and not on what the insured foresees,"53 and "[u]nder the Utah definition of accident, allegations of consequential or resultant damages attributable to an insured's negligence, but which are unexpected or unintended by an insured, are similarly sufficient to trigger potential coverage under the CGL Policies."54 In this case, "none of the Homeowner Claims implicated by Cincinnati's declaratory judgment action contain any allegations that AMSCO intended or expected the alleged damages to flow from its design and manufacture of its windows. Indeed, the allegations reveal that the alleged defects in AMSCO's windows caused unexpected resultant damages to other property."55 In each instance, AMSCO submits, the Nevada Homeowner Claims allege that defects in the installation of AMSCO's windows or in the windows themselves resulted in more than property damage to the AMSCO windows; the alleged defects resulted in "[w]ater damage to the carpet, padding, floors, walls, and ceilings of the residences,... [w]ater damage to the drywall and carpeting, ... [w]ater marks at the soffit, corbels, sills and walls throughout the house, caused by leaking.... [m]oisture infiltration into the underlying building, framing, and wall assembly components" and "[r]esultant deterioration of the stucco surrounding the windows," among other property damage.56 AMSCO argues that at a minimum, the "Resultant Damages" are the unintended and unexpected result of an "occurrence" within the meaning of Cincinnatti's CGL policy language, and that such allegations trigger Cincinnati's duty to defend AMSCO under the terms of those policies.57

Cincinnati acknowledges that "all of the claims can be reduced to an allegation that AMSCO purportedly manufactured windows in a defective manner which caused damage to other property,"58 but argues that "[t]he claims for defective windows and doors and resulting damages due to water intrusion are claims which are the natural and probable consequence of any design and/or manufacturing defect in those windows,"59 and thus cannot be covered as the result of an accidental "occurrence" under the terms of Cincinnati's policies.

"Resultant Damage" as an "Occurrence"

A well-known insurance law treatise explains that

9A Lee Russ & Thomas F. Segalla, Couch on Insurance § 129:4, at pp. 129-13 to 129-14 (3d ed. 2005) (footnotes omitted).

While courts are far from unanimous in their reading of "occurrence" in CGL policies, a significant number of State courts recognize the distinction between defective workmanship and damage to other property resulting from the defective workmanship. In General Security Ind. Co. v. Mt. States Mut. Cas., 205 P.3d 529 (Colo.Ct. App.2009), the Colorado Court of Appeals concluded that "the better rule is that a claim for damages arising from poor workmanship, standing alone, does not allege an accident that constitutes a covered occurrence, regardless of the underlying legal theory pled." 205 P.3d at 534. In doing so, it adopted the majority view:

Id. at 534-35 (citations omitted). "Further," the Colorado court observed, "a corollary to the majority rule is that an `accident' and `occurrence' are present when consequential property damage has been inflicted upon a third party as a result of the insured's activity...." Id. at 535 (citations omitted).

Id.60 As to the majority rule,61 the Colorado court cited cases such as Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 908 A.2d 888 (2006), in which the Supreme Court of Pennsylvania adopted the majority rule, holding

908 A.2d at 899 (footnotes omitted). In doing so, the Pennsylvania court noted that

Id. at 899 n. 10 (quoting Roger Henderson, Insurance Protection for Products Liability and Completed Operations; What Every Lawyer Should Know, 50 Neb. L. Rev. 415, 441 (1971) (emphasis added)). Kvaerner concluded that "[t]he underlying suit in this case avers only property damage from poor workmanship to the work product itself.... As faulty workmanship does not constitute an "accident" as required to set forth an occurrence under the CGL policies, we hold that National Union had no duty to defend or indemnify Kvaerner in the action brought by Bethlehem." Id. at 900.

The Kvaerner court in turn relied on L-J, Inc. v. Bituminous Fire and Marine Ins. Co., 366 S.C. 117, 621 S.E.2d 33 (2005), in which the South Carolina Supreme Court ruled that faulty road construction workmanship resulting in the deterioration of the roads "is not something that is typically caused by an accident or by exposure to the same general harmful conditions, we hold that the damage in this case did not constitute an occurrence" under the policies. 366 S.C. at 123, 621 S.E.2d at 36 (footnote omitted). The L-J court noted that "[t]he CGL policy may, however, provide coverage in cases where faulty workmanship causes a third party bodily injury or damage to other property, not in cases where faulty workmanship damages the work product alone." Id. at n. 4 (emphasis in original). The L-J court explained:

366 S.C. at 123-24, 621 S.E.2d at 36. "Therefore," the High Country Assocs. court had concluded,

139 N.H. at 43, 45, 648 A.2d at 477, 478. The court in High Country Assocs. distinguished two prior New Hampshire cases, McAllister v. Peerless Insurance Co., 124 N.H. 676, 474 A.2d 1033 (1984), and Hull v. Berkshire Mutual Insurance Co., 121 N.H. 230, 427 A.2d 523 (1981), because in those cases "the damage claimed was only defective workmanship," and "`defective work, standing alone, did not result from an occurrence.'" Id.

Other courts dealing with similar claims for resultant damage to property other than the defective workmanship have reached similar conclusions. See, e.g., ACUITY v. Burd & Smith Const., Inc., 2006 ND 187, 721 N.W.2d 33 (N.D.2006) (ruling that property damage caused by an insured's faulty workmanship was a covered occurrence under a CGL insurance policy to the extent the faulty workmanship caused bodily injury or property damage to property other than the insured's work product); Westfield Ins. Co. v. Sheehan Const. Co., Inc., 580 F.Supp.2d 701 (S.D.Ind.2008) (explaining that under Indiana law, risk that the goods, products or work of the insured will cause damage to property other than to the product or completed work itself is covered by CGL insurance policies, and serves to limit contractors' tort liability for damage to property caused by their work); CMK Development Corp. v. West Bend Mut. Ins. Co., 395 Ill.App.3d 830, 335 Ill.Dec. 91, 917 N.E.2d 1155 (1st Dist.2009) (noting that defective workmanship in a construction project can be covered under a CGL policy if it damaged something other than the project work product itself); Travelers Indem. Co. of America v. Moore & Associates, Inc., 216 S.W.3d 302, 308 (Tenn.2007) (ruling that alleged water penetration from faulty window installation by named insured's subcontractor was "accident" and, thus, "occurrence" within the meaning of CGL policy); Crossmann Cmtys. of North Carolina, Inc. v. Harleysville Mut. Ins. Co., 395 S.C. 40, 50, 717 S.E.2d 589, 594 (2011) (holding that the definition of "occurrence" in CGL policies is ambiguous and must therefore be construed in favor of the insured, but also clarifying "that negligent or defective construction resulting in damage to otherwise non-defective components may constitute `property damage,' but the defective construction would not"); Town & Country Property, L.L.C. v. Amerisure Ins. Co., 111 So.3d 699, 2011 WL 5009777, at *5 (Ala.2011) (observing that "we may conclude that faulty workmanship itself is not an occurrence but that faulty workmanship may lead to an occurrence if it subjects personal property or other parts of the structure to `continuous or repeated exposure' to some other `general harmful condition ... and, as a result of that exposure, personal property or other parts of the structure are damaged."); cf. Cincinnati Ins. Co. v. Motorists Mut. Ins. Co., 306 S.W.3d 69, 80 n. 45 (Ky.2010) (noting that "[i]t appears as if a general rule exists whereby a CGL policy would apply if the faulty workmanship caused bodily injury or property damage to something other than the insured's allegedly faulty work product" (citing 9A Couch on Insurance § 129:4 (3d ed. 2009))).

In Greystone Const., Inc. v. National Fire & Marine Ins. Co., 661 F.3d 1272 (10th Cir.2011), the court of appeals observed that

661 F.3d at 1282-83 (citations omitted) (applying Colorado law).62 After examining General Security and other Colorado cases, the court of appeals concluded that

Id. at 1285. "In assessing whether damage caused by poor workmanship was foreseeable," the Greystone panel reasoned,

Id. at 1285-86 (emphasis added).63 The court concluded that "faulty workmanship, standing alone, is not caused by an accident — but that damage to other property caused by the faulty workmanship (including both the nondefective work product of the contractor and third-party property) is the result of an accident," and thus results from an "occurrence" within CGL policy coverage; "the property damage alleged here," viz., movement of the basement floor and damage to upper living areas, allegedly resulting from house's continuous exposure to expansive soils due to poor design and construction of house's soil-drainage and structural elements, "may result from an occurrence triggering a duty to defend the policyholder." Id. at 1287, 1289.

In this case, Cincinnati's summary judgment memoranda acknowledge none of this.

Instead, Cincinnati argues that "AMSCO's alleged negligence does not constitute an accident or an occurrence," and that "Utah law is in conformity with cases from other jurisdictions holding that faulty workmanship does not constitute an `occurrence' under CGL policies," citing the General Security and Kvaerner cases discussed above.64 Cincinnati makes no reference to General Security's "corollary to the majority rule" that "an `accident' and `occurrence' are present when consequential property damage has been inflicted," or that "the Tenth Circuit and Colorado courts have found an "occurrence" when additional, consequential property damages were alleged as a result of the faulty workmanship." 205 P.3d at 535. Nor does Cincinnati point out the Kvaerner court's observation that "`the risk intended to be insured is the possibility that the goods, products or work of the insured ... will cause bodily injury or damage to property other than to the completed work itself and for which the insured [may] be found liable.'" 908 A.2d at 899 n. 10.

Resultant Damage and "Occurrence" Under Utah Law

Of the Utah and federal cases referenced by the parties, only Linford directly addresses whether damage to other property caused by defective workmanship results from a covered "occurrence," but it does so summarily, with no substantive analysis of the issue beyond its reference to Woodside Homes. Woodside Homes in turn relies on H.E. Davis & Sons for the general proposition that "the consequences of negligent work are reasonably foreseeable and therefore no `accident' resulting from that work can occur." 448 F.Supp.2d at 1280 ("H.E. Davis directly answers the question of whether an insured's negligent work can be considered an accident under a commercial general liability policy"). Linford makes no reference to N.M. ex rel. Caleb v. Daniel E., and does not attempt to reconcile the Utah Supreme Court's rejection of foreseeability analysis with H.E. Davis & Sons, in which the "occurrence" issue was decided in terms of foreseeability.

In the Bartile case, the court of appeals recognized that in N.M. ex rel. Caleb v. Daniel E., the Utah Supreme Court "was concerned that importing the meaning of `foreseeability' from tort law would `render[ ] coverage completely illusory'"; that under Utah law "`the test is not whether the result was foreseeable, but whether it was expected'"; Bartile states that "`Utah law focuses on the unexpectedness of the result or injury,'" and "uses the concept of `expected' in its definition of `accident.'" 618 F.3d at 1174 & n. 16 (quoting N.M. ex rel. Caleb v. Daniel E., 175 P.3d at 569, 571 n. 7).65 Bartile affirmed the district court's application of Wyoming law, and observed that "[u]nder Wyoming and Utah law, `the natural results of [an insured's] negligent and unworkmanlike construction do not constitute an occurrence triggering coverage under a [CGL] policy.'" Id. (quoting Great Divide Ins., 2006 WL 3933078, at *8). But in Bartile, the claims all arose out of construction defects caused by "Bartile's allegedly negligent roofing work," without reference to any damage to other nondefective property. Thus, Bartile did not squarely address the question presented here, namely whether damage to other property resulted from a covered "occurrence," as AMSCO insists.66

"In determining state law" in this diversity action,

8 Fed. Proc. L. Ed. Courts and Judicial System § 20:623, at 660 (2005) (footnotes omitted). Where the Utah Supreme Court has not squarely addressed the particular question now before this court, this court must predict how Utah's "highest court would rule." FDIC v. Schuchmann, 235 F.3d 1217, 1225 (10th Cir.2000); see also Wood v. Eli Lilly & Co., 38 F.3d 510, 512 (10th Cir.1994) (explaining that the objective is to ascertain and apply state law so that the result obtained is the result that would be reached in the state court; "we must in essence sit as a state court and predict how the highest state court would rule").

Having examined the Utah Supreme Court opinions discussing "accident" and "occurrence," and in particular the Hoffman and N.M. ex rel. Caleb v. Daniel E. cases, this court is persuaded that the Utah Supreme Court, if presented with the question, would hold that where defective workmanship causes damage to property other than the work product itself, that such damage results from an accidental "occurrence" within the meaning of CGL policy language.

The negligence-based foreseeability analysis of H.E. Davis & Sons, extended without further analysis to the "resultant damage" issue by Linford, simply cannot be reconciled with the Utah Supreme Court's admonition that "[w]e have clearly held that `the test is not whether the result was foreseeable, but whether it was expected,'" N.M. ex rel. Caleb v. Daniel E., 2008 UT 1, at ¶ 11, 175 P.3d at 571 (quoting Hoffman, 669 P.2d at 416).

The Utah court has acknowledged that in the "area of liability insurance, courts have generally held that `accident' includes results negligently caused by the insured," Hoffman, 669 P.2d at 416 n. 2, and it has itself ruled that the term encompasses an insured's negligent conduct.67 Its determination that "the common meaning of the term [accident] is defined in terms of whether the event was naturally and probably expected or anticipated by the insured," and that "it is that definition which must be applied, and not one founded on foreseeability," id. at 416, supports this court's conclusion,68 as does the Utah court's expressed concern that "[i]f foreseeability were the measure of what constitutes an accident," then insurers "would never have a duty to indemnify policy holders, rendering coverage completely illusory" because if "an injury is foreseeable, the insurer could avoid the duty to indemnify by asserting that the injury was not an accident"69 — which was precisely what happened in H.E. Davis & Sons and Linford.70

Certification of a Question

AMSCO "requested certification in the event that this Court found that the tension between settled Utah law, as articulated by the Utah Supreme Court in Caleb and Hoffman, and recent interpretations of Utah law, as articulated in the decisions of the federal district court in Linford, Woodside Homes, and H.E. Davis, rendered the resolution of the state law issue unusually difficult enough to warrant certification." (AMSCO Opp. Mem. at 2-3.)

In this diversity case, there really can be no meaningful tension between the opinions of the Utah Supreme Court and prior opinions of this court because (1) the Utah Supreme Court speaks authoritatively on questions of Utah law and when it does speak, this court (and our court of appeals) gives deference to what it says; and (2) prior opinions of other federal district judges such as H.E. Davis and Linford have no binding stare decisis effect on this court in this case. The Utah cases discussing "occurrence," particularly Hoffman and more recently N.M. ex rel. Caleb v. Daniel E., provide helpful guidance in predicting that the Utah Supreme Court would conclude that an "occurrence" within the meaning of Cincinnati's policy language includes "an accident caused by or resulting from faulty workmanship, including damage to any property other than the work product,"71 such as the "resultant damage" alleged against AMSCO in the Nevada litigation.

This conclusion is further buttressed by our court of appeals' recent opinion in Greystone explaining that "a strong recent trend in the case law interprets the term `occurrence' to encompass unanticipated damage to nondefective property resulting from poor workmanship." 661 F.3d at 1282.72 These cases "generally hold that damage caused by faulty workmanship is neither expected nor intended from the standpoint of the policyholders and, therefore, receives coverage so long as it does not fall under a policy exclusion." Id. at 1283. As the court of appeals noted in Bartile, Utah law "uses the concept of `expected' in its definition of `accident,'" and "that `the test is not whether the result was foreseeable, but whether it was expected.'" 618 F.3d at 1174 n. 16 (quoting N.M. ex rel. Caleb v. Daniel E., 175 P.3d at 571). Given this consistency as to expected or intended results, the Utah court would likely follow the trend identified in Greystone and reach the same conclusion about the resultant damage in this case.

Thus, at this point, there appears to be no need to certify a question to the Utah court on this issue.

Cincinnati's Coverage Exclusions

In its Complaint, Cincinnati raised several exclusions for coverage as applying to the claims alleged against AMSCO, each of which Cincinnati asserted would relieve it of any duty to defend AMSCO as to those claims. AMSCO moved for summary judgment as to those exclusions form coverage as well as the "occurrence" issue. While Cincinnati vigorously opposed AMSCO on the "occurrence" issue and filed its own cross-motion for summary judgment on that question, it did not submit any argument opposing summary judgment as to the exclusions from coverage, apparently conceding the issue.73

AMSCO should thus be granted summary judgment as to the effect of those exclusions in this case.

Cross-Motions re: Arrowood's Counterclaim

As summarized above, Arrowood filed a counterclaim against Cincinnati seeking a declaratory judgment that Cincinnati owes Arrowood "a duty of equitable contribution or indemnity for defense costs and/or fees paid by ARROWOOD on behalf of AMSCO" as a result of the same Nevada claims and lawsuits.74 Arrowood moved for summary judgment on that counterclaim, and Cincinnati filed a cross-motion for summary judgment against Arrowood on the same issue.75 Both insurers filed memoranda supporting and opposing their respective motions.

Arrowood's memoranda offers little more than the bare assertion that it is entitled to indemnity and/or equitable contribution from Cincinnati for unidentified costs that Arrowood has incurred in its defense of AMSCO in the Nevada litigation. For its part, Cincinnati argues that Arrowood's counterclaim is barred by collateral estoppel in light of the Linford litigation discussed above.

In this Circuit, "[c]ollateral estoppel bars relitigation of a specific issue only when certain conditions are met:"

Northern Arapaho Tribe v. Harnsberger, 697 F.3d 1272, 1285 (10th Cir.2012) (quoting Nichols v. Bd. of Cnty. Comm'rs, 506 F.3d 962, 967 (10th Cir.2007)). "Collateral estoppel, otherwise known as issue preclusion, prevents parties or their privies from relitigating facts and issues in the second suit that were fully litigated in the first suit." Moss v. Parr Waddoups Brown Gee & Loveless, 2012 UT 42, ¶ 23, 285 P.3d 1157, 1164 (emphasis in original) (quoting Jensen ex rel. Jensen v. Cunningham, 2011 UT 17, ¶ 41, 250 P.3d 465, 476-77 (quoting Oman v. Davis Sch. Dist., 2008 UT 70, ¶ 31, 194 P.3d 956, 965 (quoting Snyder v. Murray City Corp., 2003 UT 13, ¶ 35, 73 P.3d 325, 332)))).76

In this case, Cincinnati's assertion of collateral estoppel fails because the issue of Arrowood's entitlement to indemnity and/or equitable contribution from Cincinnati was raised in the Linford action, but was not "actually litigated and necessarily adjudicated in the prior proceeding," Harnsberger, 697 F.3d at 1285, or "completely, fully and fairly litigated" and "decided in the prior adjudication," Jensen, 2011 UT 17, at ¶ 41, 250 P.3d at 477, as issue preclusion requires. In Linford, as explained above, Judge Campbell decided that under Utah law, the property damage alleged against the insured was not the result of an "occurrence" and was thus not covered by Cincinnati's policy. That ruling disposed of the merits of that case, and the court never reached the question whether Cincinnati owed a duty of indemnity or equitable contribution to Arrowood because neither insurer had a duty to defend the insured in that case. Any opinion as to indemnity or equitable contribution would have been purely advisory, and not a proper subject for declaratory relief. See, e.g., Rio Grande Silvery Minnow v. Bureau of Reclamation, 601 F.3d 1096, 1109-10 (10th Cir.2010) (noting that "[i]t is well established that what makes a declaratory judgment action a proper judicial resolution of a case or controversy rather than an advisory opinion is the settling of some dispute which affects the behavior of the defendant toward the plaintiff" (internal quotation marks omitted)). Where neither Cincinnati nor Arrowood was held to have a duty to defend Linford, any ruling as to indemnity or contribution between insurers in that context would have had no real-world effect on those parties.77

Apart from the failure of Cincinnati's collateral estoppel argument, this court is not persuaded that based upon the materials submitted to this court, Arrowood has met its initial Rule 56 burden to demonstrate its entitlement to summary judgment as a matter of law on its counterclaim. For one thing, Arrowood's abbreviated statement of material facts78 does not specifically identify any claims against AMSCO as to which Arrowood and Cincinnati provided concurrent liability coverage and are actually or potentially "liable for the same loss." Workers Compensation Fund v. Utah Business Ins. Co., 2013 UT 4, ¶ 19, 296 P.3d 734 (2013).

Id. at ¶¶ 19-20, 296 P.3d at 739.

Arrowood may yet be able to establish its claim for equitable contribution or indemnity from Cincinnati, but to this point, it has not done so. To that extent, its motion for summary judgment shall be denied.

Cincinnati's cross-motion for summary judgment likewise fails because of Cincinnati's near-total reliance upon its collateral estoppel theory and its failure to meet its initial Rule 56 burden to establish the absence of a genuine issue as to an absence of concurrent coverage of the same claimed loss.79

For the reasons explained in some detail above,

IT IS ORDERED that AMSCO's Motion for Summary Judgment or in the Alternative to Certify a Legal Question to the Utah Supreme Court, filed June 14, 2011 (CM/ECF No. 24), to the extent explained above, is hereby GRANTED IN PART and DENIED IN PART;

IT IS FURTHER ORDERED that Defendant and Counterclaimant Arrowood Indemnity Company's Motion for Summary Judgment and Joinder in AMSCO's Motion for Summary Judgment or in the Alternative to Certify a Legal Question to the Utah Supreme Court, filed July 7, 2011 (CM/ECF No. 29), is hereby GRANTED IN PART and DENIED IN PART for the same reasons and to the same extent as AMSCO's motion, and is DENIED as to Arrowood's counterclaim;

IT IS FURTHER ORDERED that The Cincinnati Insurance Company's Motion for Summary Judgment Against AMSCO Windows, filed October 11, 2011 (CM/ECF No. 48), is DENIED; and

IT IS FURTHER ORDERED that The Cincinnati Insurance Company's Cross-Motion for Summary Judgment on Arrowood Indemnity Company's Counterclaims, filed October 11, 2011 (CM/ECF No. 46), is hereby DENIED.