                              NOT FOR PUBLICATION                        FILED
                        UNITED STATES COURT OF APPEALS                   OCT 24 2016
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                               FOR THE NINTH CIRCUIT



 PEDRO ARROYO,                                     No.    14-16878

            Plaintiff - Counter-                   D.C. No. 4:13-cv-02810-JSW
            defendant - Appellant,

   v.                                              MEMORANDUM*

 UNIGARD INSURANCE COMPANY,

            Defendant - Counter-claimant -
            Appellee.

                       Appeal from the United States District Court
                          for the Northern District of California
                        Jeffrey S. White, District Judge, Presiding

                              Submitted October 20, 2016**
                                San Francisco, California

Before: GRABER and MURGUIA, Circuit Judges, and COLLINS,*** Chief
District Judge.



        *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
        ***
              The Honorable Raner C. Collins, United States Chief District Judge
for the District of Arizona, sitting by designation.
      Plaintiff Pedro Arroyo appeals from the district court’s decision on cross-

motions for summary judgment in this insurance coverage dispute. The district

court granted summary judgment in favor of Defendant Unigard Insurance

Company on the ground that Unigard did not owe a duty to defend its insured, Jack

Neal & Sons, Inc. and Jack Neal (collectively, “JNS”), in Arroyo’s previous state

court action alleging that JNS’s improper development and management of his

vineyard caused property damage. We hold that Unigard did not owe a duty to

defend JNS in Arroyo’s state court action and, therefore, is not liable to Arroyo.

      1. We have jurisdiction under 28 U.S.C. § 1291. A district court’s decision

on cross-motions for summary judgment is reviewed de novo. See Guatay

Christian Fellowship v. Cty. of San Diego, 670 F.3d 957, 970 (9th Cir. 2011).

Under California law, an insurer must provide a defense for its insured against any

“suit which potentially seeks damages within the coverage of the policy.” Horace

Mann Ins. Co. v. Barbara B., 846 P.2d 792, 795 (Cal. 1993) (internal quotation

marks omitted). Once it appears that claims against the insured create a potential

for indemnity, the insurer’s defense duty will continue “until it has been shown

that there is no potential for coverage.” Montrose Chem. Corp. of Cal. v. Superior

                                          2
Court, 861 P.2d 1153, 1157 (Cal. 1993). In other words, “the insurer must prove

[the underlying claims] cannot” fall within the policy coverage in order to be

relieved of its duty to defend. Id. at 1161.

      Here, the district court properly concluded that Exclusion J(5) of Unigard’s

insurance policy issued to JNS precluded coverage of Arroyo’s state-court claims.

Exclusion J(5) specifically states that Unigard’s policy does not cover “property

damage” to “[t]hat particular part of real property on which you . . . are performing

operations, if the ‘property damage’ arises out of those operations.” The district

court properly construed “that particular part of real property” to cover Arroyo’s

entire vineyard that JNS was hired to develop and manage. The district court also

properly concluded that “are performing operations” does not exclude only

property damage that developed simultaneously as the work was being performed,

but also property damage that clearly flows from the insured’s work on the

property. Because all of Arroyo’s property damage alleged in his state court action

arose out of JNS’s operations, Exclusion J(5) relieved Unigard of its duty to defend

JNS and, therefore, Unigard is not liable to Arroyo.

      AFFIRMED.




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