Hollyway Cleaners & Laundry Company, Inc.; v. Central National Insurance Company of Omaha, Inc.

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
HOLLYWAY CLEANERS & LAUNDRY
COMPANY, INC.; et al.,
Plaintiffs - Appellants,
v.
CENTRAL NATIONAL INSURANCE
COMPANY OF OMAHA, INC.,
Defendant - Appellee.
No. 15-55973
D.C. No. 2:13-cv-07497-ODW-E
MEMORANDUM*
Appeal from the United States District Court
for the Central District of California
Otis D. Wright II, District Judge, Presiding
Submitted May 2, 2016**
Pasadena, California
Before: PREGERSON, BYBEE, and N.R. SMITH, Circuit Judges.
Appellee Central National Insurance Company of Omaha, Inc. issued a
liability insurance policy to appellant Hollyway Cleaners & Laundry, a dry
FILED
MAY 17 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

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cleaning business. Hollyway was sued in California state court for contaminating
its premises with cleaning solvents. Hollyway asked Central Insurance, its insurer,
to defend Hollyway under the parties’ policy. But Central Insurance refused, and
Hollyway brought this action requesting a declaration that Central Insurance must
defend Hollyway in the California case. The district court granted summary
judgment to Central Insurance, holding that the insurer had no duty to defend
Hollyway because there was no evidence that could possibly trigger Central
Insurance’s liability. We reverse and remand back to the district court.
We review a grant of summary judgment de novo. Padfield v. AIG Life Ins.
Co., 290 F.3d 1121, 1124 (9th Cir. 2002).
Notably, “the insurer has a higher burden than the insured” on a summary
judgment motion disputing a duty to defend. Am. States Ins. Co. v. Progressive
Cas. Ins. Co., 180 Cal. App. 4th 18, 27 (2009). The insurer is only relieved of its
duty if it can conclusively prove there is no potential coverage. Id. In other words,
“the insured need only show that the underlying claim may fall within policy
coverage; the insurer must prove it cannot.” Id. (citation omitted); see also Gray v.
Zurich Ins. Co., 65 Cal. 2d 263, 275 (1966).
Central Insurance’s liability under the policy is triggered only in the event of
an accidental spill. The parties agree that the sole question is whether Central
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Insurance has conclusively proven that there were no “accidental” spills of solvent
at Hollyway’s store.
California courts have explained that “accidental,” in this context, means
that an event was both (1) unintentional and (2) unexpected. No one contends
Hollyway's spills were intentional; the question is whether Central Insurance has
proven that all spills at Hollyway’s were “expected” and thus not an accident under
the Hollyway’s policy.
To show a spill was expected in this context, the insurer must prove that the
insured “subjectively knew or believed [the spill] was highly likely to occur.”
State v. Allstate Ins. Co., 45 Cal. 4th 1008, 1024 (2009). Spills must occur
regularly before California courts will find, as a matter of law, that a reasonable
jury must find that the insured subjectively expected a spill. Id. at 1027. For
example, in one case, “four or five spills” over the course of several years “hardly
constituted” an “expected” event. A-H Plating, Inc. v. Am. Nat'l Fire Ins. Co., 57
Cal. App. 4th 427, 438 (1997).
Taking all evidence in the light most favorable to Hollyway, there is a
genuine dispute as to whether accidental spills occurred at Hollyway’s store.
Hollyway’s employees, Hollyway’s owner, and an independent solvent delivery
driver all testified that solvent spills occurred on the premises. And none of the
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evidence in the record indicates that these spills happened with such frequency that
they were, as a matter of law, expected. The few spills described in the record
were less frequent than the spills the court found insufficient to foreclose the
insurer’s duty to defend in A-H Plating.
Central Insurance failed to meet its heavy burden to prove conclusively that
there is no potential for coverage in this case. Because there is a genuine dispute
of fact as to whether Central Insurance is liable under Hollyway’s policy, summary
judgment was inappropriate.
REVERSED and REMANDED.
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