In a dispute between two insurers, the Ninth Circuit relied upon Nevada law in finding that the burden of proving that an exception to the exclusion applies was on the insured. Zurich Am. Ins. Co. v. Ironshore Specialty Ins. Co., 2022 U.S. App. LEXIS 1626 (9th Cir. Jan. 20, 2022).
Ironshore insured seven subcontractors. The policy included an exclusion providing there was no coverage for any property damage for the subcontractors' for "work performed prior to the policy inception." An exception to the exclusion provided that the exclusion did not apply to property damage that was "sudden and accidental and takes place within the policy period."
The seven subcontractors were sued for work they had performed. Zurich defended and indemnified the subcontractors. Zurich then sued Ironshore 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 the that the exception to the exclusion was not applicable. Ironshore appealed.
The Ninth Circuit found that 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 was not applicable. The Nevada Supreme Court had held that (1) the burden of proving the applicability of an exception to an exclusion for coverage fell 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."
Therefore, the burden of proving that the exception to the exclusion for coverage was applicable fell on Zurich. The judgment issued by the District Court was reversed.
