                                                                           FILED
                           NOT FOR PUBLICATION                              JAN 22 2010

                                                                       MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



FAR NORTHWEST DEVELOPMENT                        No. 09-35488
COMPANY LLC, a Washington limited
liability company; FARAMARZ                      D.C. No. 2:05-cv-02134-RSM
GHODDOUSSI, an individual,

             Plaintiffs - Appellants,            MEMORANDUM *

  v.

COMMUNITY ASSOCIATION
UNDERWRITERS OF AMERICA INC.,
a foreign insurance company;
WESTPORT INSURANCE
CORPORATION, a foreign insurance
company,

             Defendants - Appellees.



                   Appeal from the United States District Court
                      for the Western District of Washington
                   Ricardo S. Martinez, District Judge, Presiding

                      Argued and Submitted January 11, 2010
                               Seattle, Washington

Before: KLEINFELD, TASHIMA, and TALLMAN, Circuit Judges.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      The Somerset Village Townhomes Condominium Association (the

“Association”), acting as Faramarz Ghoddoussi’s (“Ghoddoussi”) assignee,

appeals the district court’s finding that it is not entitled to indemnity from its

insurer, Community Association of Underwriters of America (“CAU”). It also

appeals the district court’s holding that CAU did not act in bad faith in denying

defense to Ghoddoussi. As the facts are known to the parties, they will not be

repeated here, except as necessary to explain our decision. We have jurisdiction

under 28 U.S.C. § 1291, and we affirm.

      Because we can affirm on any ground supported by the record, see McSherry

v. City of Long Beach, 584 F.3d 1129, 1135 (9th Cir. 2009), we conclude that CAU

is not required to provide coverage on these facts because the damage to the

condominiums was not an “accident” as contemplated by its policy. Washington

courts have said that, for an accident to occur, “[t]he means as well as the result

must be unforeseen, involuntary, unexpected and unusual.” Detweiler v. J.C.

Penney Cas. Ins. Co., 751 P.2d 282, 284 (Wash. 1988). Ghoddoussi admitted in

his sworn statement that he turned a blind eye to problems both during and after

construction because he was worried he might lose additional money on the

project. As a matter of law, the damage resulting from Ghoddoussi’s actions was

not an accident under Washington law.


                                            2
      There was no error in the district court’s determination that CAU did not act

in bad faith in denying defense to Ghoddoussi. A sua sponte grant of summary

judgment was appropriate because the Association was able to fully present its

arguments to the court. See Corales v. Bennett, 567 F.3d 554, 570 (9th Cir. 2009)

(holding that, even though defendants did not explicitly move for summary

judgment, the district court was authorized to make a sua sponte determination if

the plaintiff “was on notice to come forward with its evidence”). Our previous

decision in this case made no mention of the Association’s bad faith claim, thus

leaving that issue open on remand. See Liberty Mut. Ins. Co. v. EEOC, 691 F.2d

438, 441 (9th Cir. 1982) (citations omitted) (stating that “[l]ower courts are free to

decide issues on remand so long as they were not decided on a prior appeal”). We

hold that the merits of the Association’s bad faith claim do not warrant reversal

because it was objectively reasonable for CAU initially to believe that, under State

Farm Fire & Casualty Co. v. English Cove Ass’n, 88 P.3d 986 (Wash. Ct. App.

2004), the owned-property exclusion barred coverage to Ghoddoussi.

      Each party shall bear its own costs on appeal.

      AFFIRMED.




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