                                                                           FILED
                                                                            DEC 29 2009
                           NOT FOR PUBLICATION
                                                                        MOLLY C. DWYER, CLERK
                                                                         U .S. C O U R T OF APPE ALS

                    UNITED STATES COURT OF APPEALS

                            FOR THE NINTH CIRCUIT



SUPERSTITION CRUSHING, LLC, an                   No. 08-16454
Arizona limited liability company,
                                                 D.C. No. 2:07-cv-00694-HRH
             Plaintiff - Appellant,

  v.                                             MEMORANDUM *

TRAVELERS CASUALTY AND
SURETY COMPANY OF AMERICA, a
Delaware corporation,

             Defendant - Appellee.



                    Appeal from the United States District Court
                             for the District of Arizona
                    H. Russel Holland, District Judge, Presiding

                     Argued and Submitted December 3, 2009
                            San Francisco, California

Before: B. FLETCHER, THOMAS, and N.R. SMITH, Circuit Judges.

       Superstition Crushing, LLC (“Superstition”) sought reimbursement, under

the Employee Dishonesty Coverage Form of each of its five Travelers Commercial



        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Crime Policies, for funds embezzled from it. Both parties moved for summary

judgment. Thereafter, the district court granted summary judgment for Travelers.

We have jurisdiction under 28 U.S.C. § 1291 and we affirm. Because the parties

are familiar with the facts and procedural history of this case, we do not recite them

here.

        We review de novo the district court’s grant of summary judgment and may

affirm on any ground supported by the record. Dietrich v. John Ascuaga's Nugget,

548 F.3d 892, 896 (9th Cir. 2008). “We must determine, viewing the evidence in

the light most favorable to the nonmoving party, whether there are any genuine

issues of material fact and whether the district court correctly applied the relevant

substantive law.” Id. (internal quotation marks and citation omitted). Here, there

are no material facts in dispute. Because this case arises under diversity

jurisdiction, we apply Arizona law. See Kabatoff v. Safeco Ins. Co. of Am., 627

F.2d 207, 209 (9th Cir. 1980).1

        Applying Arizona law, we find that there were five separate policies, not one

continual policy. See generally State Farm Mut. Auto. Ins. Co. v. Ash, 888 P.2d

1354, 1359 (Ariz. Ct. App. 1994) (“Existing [automobile] policyholders whose


        1
        We note that Karen Kane, Inc. v. Reliance Ins. Co., 202 F.3d 1180 (9th Cir.
2000) is not controlling here. We must apply Arizona law. Karen Kane applied
California law.

                                           2
policies expire and who elect to continue their coverage by paying the premium

billed on the insurer’s renewal notice are purchasers of such insurance to the same

extent as persons who purchase new policies.” (citation omitted)). While State

Farm only addresses automobile policies, we find no reason that this precedent

would not be applied to fidelity policies.

      Applying Arizona law to insurance contract interpretation, we interpret

insurance contracts “according to their plain and ordinary meaning.” Am. Family

Mut. Ins. Co. v. White, 65 P.3d 449, 452 (Ariz. Ct. App. 2003) (internal quotation

marks omitted). “When policy language is unambiguous, the court does not create

ambiguity to find coverage.” Id. If a policy clause is ambiguous, however, we

must “interpret it by looking to legislative goals, social policy, and the transaction

as a whole.” First Am. Title Ins. Co. v. Action Acquisitions, LLC, 187 P.3d 1107,

1110 (Ariz. 2008) (citing Employers Mut. Cas. Co. v. DGG & CAR, Inc., 183 P.3d

513, 515 (Ariz. 2008)). “If an ambiguity remains after considering these factors,

we [then] construe it against the insurer.” Id. We do not, however, resort to

construing ambiguities against the insurer “unless other interpretive guides fail to

elucidate a clause’s meaning.” Id.

      Here, the policy language of the contracts is clear and unambiguous.

General Conditions 4, 10, 11, 12, 15(b), and the policy definition of “occurrence,”


                                             3
make it clear that Superstition is limited to one Limit of Insurance per occurrence

(here the entire embezzlement, as discussed further below). Specifically, General

Condition 4 limits coverage to losses discovered no later than one year from the

end of the policy period. Thus, because Superstition discovered its loss in July

2006, General Condition 4 limited coverage to the 2004/2005 policy (which was

cancelled in November 2005) and the 2005/2006 policy (which expired in

November 2006). General Condition 11, however, further limits coverage to one

single policy’s amount recoverable if the loss took place over more than one policy

period. Thus, under these two provisions, Superstition is limited to coverage for

the discovered loss up to a limit of insurance of $250,000.

      Coupled with General Condition 12, which prohibits cumulation of policy

limits regardless of the amount of years the contract is in force, these conditions

clearly demonstrate that coverage is limited to one limit of insurance which is

payable under the current policy year’s contract.

      In addition, nothing in the language of either General Condition 10 or

General Condition 15(b) suggests that Superstition could claim coverage under its

prior policies. These provisions only allow Superstition to “tack on” its losses that

were incurred prior to discovery deadline.




                                           4
      The policies define an “occurrence” as “all loss caused by, or involving, one

or more ‘employees’, whether the result of a single act or series of acts.”

Examining the structure of the policies, we conclude that a new policy year does

not trigger the beginning of a new “occurrence,” as Superstition claims. Rather,

the term “occurrence” unambiguously can span more than one policy period.

      General Condition 10 covers certain losses that happen before the beginning

of each policy period, and is “part of, not in addition to,” the $250,000 limit of

insurance. That limit is a per-occurrence coverage limit. The proviso that

coverage under General Condition 10 is “part of, not in addition to,” the $250,000

per-occurrence coverage limit only makes sense if an “occurrence” can begin

before the beginning of one policy period and continue into another one. That

proviso would be necessary only if one and the same occurrence could begin

during a period of prior insurance and continue into the current period.

      The fact that one employee was guilty of multiple embezzlements does not

mean that there were multiple occurrences, because all of her embezzlements were

part of a single “series of acts.” Here, there was only one occurrence, a series of

embezzlements by one employee. Thus, this interpretation is supported by the

policy language as a whole, as well as by Arizona case law. In Employers, the

Arizona Supreme Court addressed the term “occurrence” in the context of a series


                                           5
of thefts by a single employee. The court noted that “[a]lthough there may be more

than one ‘occurrence’ per year under the policy, it does not follow that losses

resulting from a single employee’s embezzlement scheme are themselves separate

occurrences.” 183 P.3d at 517.

      In Employers, the Arizona Supreme Court also addressed public policy

concerns at issue here. The court noted that the insured’s interpretation, that an

“occurrence” happens each time there is an individual theft, actually hurts insureds

who suffer small losses during the policy period, because thefts smaller than the

deductible “would be treated separately, preventing the insured from recovering at

all in such cases.” Employers, 183 P.3d at 519. This premise is equally true, even

if an “occurrence” was a “series of acts” in a single policy period. Accordingly,

even if this policy language were ambiguous, public policy concerns would

necessitate interpreting the policy language as limiting an “occurrence” to one limit

of insurance during the current policy period.

      Lastly, Superstition argues that, under the reasonable expectations doctrine,

it is entitled to recover under each of the policies. We disagree. Under the

reasonable expectations doctrine, Arizona courts will not enforce standardized

insurance policy language in the following situations:




                                          6
      1. Where the contract terms, although not ambiguous to the court,
      cannot be understood by the reasonably intelligent consumer who
      might check on his or her rights, the court will interpret them in light
      of the objective, reasonable expectations of the average insured; [or]
      2. Where the insured did not receive full and adequate notice of the
      term in question, and the provision is either unusual or unexpected, or
      one that emasculates apparent coverage; [or]
      3. Where some activity which can be reasonably attributed to the
      insurer would create an objective impression of coverage in the mind
      of a reasonable insured; [or]
      4. Where some activity reasonably attributable to the insurer has
      induced a particular insured reasonably to believe that he has
      coverage, although such coverage is expressly and unambiguously
      denied by the policy.

Gordinier v. Aetna Cas. & Sur. Co., 742 P.2d 277, 283-84 (Ariz. 1987) (internal

citations omitted). None of these situations exist here. Rather (as noted by the

district court), Superstition’s expectation is simply the “fervent hope usually

engendered by loss.” Am. Family, 65 P.3d at 455 (internal quotation marks

omitted). Based upon the plain and unambiguous language of the contracts,

Travelers only provided coverage for one policy limit for all losses discovered

(during a particular policy period) that were caused by the act/acts of an employee

(or employees working together). Thus, the reasonable expectation doctrine does

not apply.

      AFFIRMED.




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