Ninth Circuit Narrows Scope of Coverage for "Damages Because of ‘Bodily Injury’"
The Ninth Circuit, applying Oregon law, limited the scope of the insuring agreement for “damages because of ‘bodily injury'” and found there was no duty to defend. Bliss Sequoia Ins. & Risk Advisors, Inc. v. Allied Prop. & Cas. Ins. Co., 2022 U.S. App. LEXIS 29905 (9th Cir. Oct. 27, 2022).
In 2014, the operator of the water park sought professional risk-management advice from Bliss Sequoia Insurance and Risk Advisors, Inc. regarding coverage sufficient to insure the water park. Bliss procured coverage with an overall limit of $5 million.
One year later, a six-year-old was seriously injured in a near-drowning incident at the water park, allegedly due to the park’s insufficient staffing of lifeguards. The boy’s family sued the park, which ultimately settled for $49 million. The water park’s liability coverage was $44 million short.
As part of the settlement agreement with the injured boy’s family, the water park assigned its claims against Bliss to the family. The family sued Bliss, who tendered to its general liability insurer, Allied Property and Casualty Insurance, to defend and indemnify against the professional negligence claims. Bliss argued that the insuring agreement promising to pay sums that Bliss “becomes legally obligated to pay as damages because of ‘bodily injury'” triggered coverage. Allied denied coverage, however, and Bliss filed suit in the District of Oregon.The district court granted summary judgment to Allied, concluding that the claims against Bliss did not arise “because of bodily injury,”
Bliss appealed and asserted that the claims against it for professional negligence arose “because of” the child’s bodily injury. If “because of” was understood in its broadest possible sense, Bliss had a point. The child’s injury caused his family to sue the water park, which in turn caused the park to sue Bliss for professional negligence.
This went too far, however. While Bliss’s liability would not have been incurred but for the child’s injury, it was equally true that it would not have been incurred but for the construction of the water park years before. Bliss’s professional-negligence claims did not involve damages “because of bodily injury.”
The phrase “because of bodily injury” included only damages that reasonably or foreseeably resulted from bodily injury – not just any that may arise in a chain of lawsuits connected in some way to someone’s injury. The family’s personal injury suit against the water park arose “because of bodily injury,” but the claims of professional negligence did not. Allied had no duty to defend or indemnify Bliss.
