United States District Court, D. Idaho
MEMORANDUM DECISION AND ORDER
Lynn Winmill Chief U.S. District Court Judge
before the Court is Plaintiff's Motion for Partial
Summary Judgment (Dkt. 33). The motion is fully briefed, and
the Court heard oral argument on May 25, 2018. For the
reasons stated below, the Court denied Plaintiff's
January 2014, the Flying A Ranch hired Industrial
Ventilation, Inc. (“IVI”) to treat a crop of
potatoes to prevent sprouting. Pl.'s Statement of
Undisputed Facts ¶ 1, Dkt. 33-2 (“Pl.'s
SOF”). The potatoes were stored in a storage facility.
Id. Flying A Ranch was insured against the risk of
loss or damage to the storage facility and the stored
potatoes by Liberty Northwest Insurance Corporation
(“Liberty”). Id. ¶ 8.
treated the stored crop of potatoes by spraying them with a
sprout-inhibiting chemical. Id. ¶ 2. A fire
broke out while IVI was spraying the potatoes, damaging the
storage facility and the stored crop of potatoes.
Id. At the time of the fire, IVI carried a
Commercial General Liability policy through Cincinnati
Insurance Company. Id. ¶ 4-5 (“the
Policy”). The Policy covers “property
damage” for which the insured becomes legally
obligated. Id. ¶ 5. The Policy contains an
exclusion, however, for “property damage [to] that
particular part of any property that must be restored,
repaired or replaced because ‘your work' was
incorrectly performed on it.” Id. (the
“j. (6) exclusion”).
September 8, 2016, Liberty filed a lawsuit against IVI in the
Seventh Judicial District of the State of Idaho, seeking to
recover the amounts it paid out to Flying A Ranch to cover
the costs of property and related damages due to the fire.
See Compl. Ex. B, Dkt. 1-2. These costs included the
costs of the stored potatoes, which were damaged by the fire.
Id. Liberty alleged that the fire was the result of
IVI having “negligently and carelessly delivered
dormancy-enhancing and sprout-inhibiting agricultural
chemicals” into the storage facility's ventilation
system. Id. ¶ 16-20, 22. Cincinnati is
defending IVI in the underlying state action, subject to a
reservation of rights. Pl.'s SOF ¶ 10, Dkt.
10, 2017, Cincinnati filed this action seeking declaratory
judgment that it has no duty to indemnify IVI for the cost of
any damage to the potatoes. Id. ¶ 11 (seeking a
declaration that “the Policy excludes coverage for the
damage to, or replacement cost of” the lot of seed
potatoes damaged in the fire, pursuant to the j. (6)
exclusion). IVI and Liberty dispute, as a matter of
law, that the exclusion applies, on the grounds that the
treatment of the potatoes with sprout inhibiting chemicals
was not performed “incorrectly.” See
IVI's Statement of Disputed Facts ¶ 6-7, Dkt.
63 (“IVI's SOF”) (“There is no evidence
that IVI performed its work in a ‘faulty'
manner”); Liberty's Statement of Undisputed
Facts, ¶ 14, Dkt. 56 (“Liberty's
SOF”) (suggesting that the fire was caused by “an
accidental ignition, ”not by IVI's incorrect
treatment of the potatoes).
judgment is appropriate where a party can show that, as to
any claim or defense, “there is no genuine dispute as
to any material fact and the movant is entitled to judgment
as a matter of law.” Fed.R.Civ.P. 56(a). One of the
principal purposes of the summary judgment “is to
isolate and dispose of factually unsupported claims . . .
.” Celotex Corp. v. Catrett, 477 U.S. 317,
323-24 (1986). The evidence must be viewed in the light most
favorable to the non-moving party, and the Court must not
make credibility findings. Id. at 255.
underlying action alleges that IVI's negligence caused a
fire which damaged the seed potatoes. See Compl. Ex.
B, Dkt. 1-2. Cincinnati's duty to indemnify IVI rests on
whether the damage to the potatoes is covered by the Policy.
Deluna v. State Farm Fire and Cas. Co., 233 P.3d 12,
16 (Idaho 2008) (“the duty to indemnify is triggered .
. . where an insurance company would be obligated to pay the
underlying action”). “In construing an insurance
policy, the Court must look to the plain meaning of the words
to determine if there are any ambiguities.” Cascade
Auto Glass, Inc. v. Idaho Farm Bureau Ins. Co.,
115 P.3d 751, 754 (Idaho 2005). “If the Court finds any
ambiguities in the insurance policy, they must be construed
against the insurer.” Id. “The burden is
on the insurer to use clear and precise language if it wishes
to restrict the scope of coverage and exclusions not stated
with specificity will not be presumed or inferred.”
Clark v. Prudential Property and Cas. Ins. Co., 66
P.3d 242, 245 (Idaho 2003).
(6) exclusion bars coverage for “property damage [to]
that particular part of any property that must be restored,
repaired or replaced because ‘your work' was
incorrectly performed on it.” Pl.'s SOF
¶ 5. The parties offer two alternative interpretations
for when “work” is “incorrectly
performed” on the “particular part.”
Cincinnati alleges that the exclusion applies to any claim
for damages to the particular part that arises during the
course of performing the work. In other words, Cincinnati
argues that because IVI was hired to perform work on the
potatoes, if damage occurs to the potatoes then the work was
argue, however, that the j. (6) exclusion applies only to
losses resulting from a failure to perform the work on the
particular part in a workmanlike manner. Under this
interpretation, the j. (6) exclusion does not relate to
damages caused by intervening negligent acts by the insured.
Instead, it serves to prevent the insurance company from
being responsible for consequential damages resulting from a
failure to perform a job in a workmanlike manner. In other
words, Defendants argue that the j. (6) exclusion operates to
differentiate general liability coverage from professional
liability coverage. Under this ...