                                                                           FILED
                           NOT FOR PUBLICATION                              DEC 27 2011

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




                            FOR THE NINTH CIRCUIT



 WILLMAR DEVELOPMENT, LLC, an                    No. 10-35979
 Oregon limited liability company,
                                                 D.C. No. 6:09-cv-06213-AA
              Plaintiff - Appellee,

     v.                                          MEMORANDUM *

 ILLINOIS NATIONAL INSURANCE
 COMPANY; LEXINGTON INSURANCE
 COMPANY,

              Defendants - Appellants.



                   Appeal from the United States District Court
                            for the District of Oregon
                   Ann L. Aiken, Chief District Judge, Presiding

                     Argued and Submitted December 8, 2011
                               Seattle, Washington

Before: GUY,** McKEOWN, and TALLMAN, Circuit Judges.




          *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
      The Honorable Ralph B. Guy, Jr., Senior United States Circuit Judge, Sixth
Circuit, sitting by designation.
      Appellants Illinois National Insurance Company and Lexington Insurance

Company (“appellants”) appeal an adverse grant of summary judgment in favor of

appellee Willmar Development, LLC (“Willmar”). The district court granted

summary judgment on Willmar’s claim that appellants breached their duty to

defend a lawsuit alleging negligence against Willmar in the site-selection and

construction of a new home. We have jurisdiction under 28 U.S.C. § 1291, and we

affirm.

      To trigger an insurer’s duty to defend under Oregon law, the insured must

demonstrate that the conduct alleged in the underlying complaint falls within the

insured’s policy coverage. See Nielsen v. St. Paul. Cos., 583 P.2d 545, 547 (Or.

1978). In this case, the underlying complaint must have alleged “property

damage” from an “occurrence” to trigger the duty to defend. There was an

“occurrence” in this case because the damages were unintended, accidental results

of Willmar’s alleged negligence. See Finley v. Prudential Life & Cas. Ins. Co.,

388 P.2d 21, 26 (Or. 1963); see also Mut. of Enumclaw Ins. Co. v. Gutman, 21

P.3d 101, 105 (Or. Ct. App. 2001) (“The question is whether the insured

specifically intended the harm suffered . . . .”).

      The complaint also alleged “property damage” as defined by the policy.

Appellants contend that “property damage” excludes damage to the insured’s own


                                            2
product, but they can point to no authority under Oregon law to support that claim.

Cf. Anthem Elec., Inc. v. Pac. Emp’rs Ins. Co., 302 F.3d 1049, 1057 (9th Cir. 2002)

(applying California law). The plain language of the policy covers property

damage “arising out of” Willmar’s work, including “operations performed by”

Willmar. Because the complaint alleges that Willmar negligently performed the

site-preparation and home-construction, resulting in damage from settling of the

foundation, the damage arises out of Willmar’s negligent performance. This

constitutes “property damage” under the policy.

      Because Willmar has demonstrated that the conduct alleged in the

underlying complaint is covered by the policy, appellants bear the burden of

proving that a specific policy exclusion bars coverage for the alleged conduct.

Emp’rs Ins. of Wausau v. Tektronix, Inc., 156 P.3d 105, 119 (Or. Ct. App. 2007).

Appellants point to a number of specific policy exclusions, none of which bar

coverage in this case.

      First, appellants point to the policy’s “Land Subsidence Exclusion.”

Although no Oregon court has interpreted such a provision, the majority of courts

that have interpreted such provisions have found them ambiguous as to their

application to land subsidence resulting from man-made causes, and have

ultimately resolved such ambiguity in favor of the insured. See 3 Allan D. Windt,


                                          3
Insurance Claims and Disputes § 11:23A (5th ed. 2011) (citing, inter alia, Murray

v. State Farm Fire & Cas. Co., 509 S.E.2d 1 (W. Va. 1998) (collecting cases); Cox

v. State Farm Fire & Cas. Co., 459 S.E.2d 446, 447 (Ga. Ct. App. 1995)); see also

Nautilus Ins. Co. v. Vuk Builders, Inc., 406 F. Supp. 2d 899, 904–05 (N.D. Ill.

2005). The rationale in these cases is persuasive. The district court correctly

followed that rationale in this case, and held that the land-subsidence exclusion

does not bar coverage for land subsidence from man-made causes.

      Second, appellants point to “Exclusion J” and “Exclusion K” in the policy.

These exclusions do not apply in this case because specific exceptions to the

exclusions allow coverage for the alleged conduct.

      Finally, appellants argue that “Exclusion L”—the “your work”

exclusion—bars coverage in this case. This exclusion does not apply if the

damaged work was performed by a subcontractor. The underlying complaint

alleges negligence on the part of “Defendant Willmar, and/or Defendant’s agents.”

This allegation raises the possibility that the work was performed by a

subcontractor, thus triggering the insurers’ duty to defend. See Schnitzer Inv.

Corp. v. Certain Underwriters at Lloyd’s of London, 104 P.3d 1162, 1169 (Or. Ct.

App. 2005) (holding that underlying letter raised possibility of allegations of

contaminated groundwater, even though letter did not expressly mention


                                          4
groundwater). The district court correctly held that the subcontractor exception

applies, negating the exclusion.

      AFFIRMED.




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