                                                                            FILED
                           NOT FOR PUBLICATION
                                                                            MAY 17 2016
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS


                            FOR THE NINTH CIRCUIT


LUCKY LEATHER, INC.,                             No. 14-55019

              Plaintiff - Appellant,             D.C. No. 2:12-cv-09510-MMM-
                                                 PLA
 v.

MITSUI SUMITOMO INSURANCE                        MEMORANDUM*
GROUP; MITSUI SUMITOMO
INSURANCE COMPANY OF
AMERICA; MITSUI SUMITOMO
INSURANCE USA, INC.,

              Defendants - Appellees.


                   Appeal from the United States District Court
                      for the Central District of California
                  Margaret M. Morrow, District Judge, Presiding

                              Submitted May 2, 2016**
                                Pasadena, California

Before: PREGERSON, BYBEE, and N.R. SMITH, Circuit Judges.




        *
             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).
      Appellant Lucky Leather, Inc. (“Lucky Leather”), a retailer of leather goods

in Los Angeles, purchased a commercial insurance policy from Appellee Mitsui

Sumitomo Insurance Company (“Mitsui”). After water from a rainstorm

penetrated its basement and damaged its merchandise, Lucky Leather filed a claim

for coverage with Mitsui. Mitsui determined that the damage was excluded from

Lucky Leather’s insurance policy and denied coverage. In response, Lucky

Leather sued Mitsui for breach of contract and for breach of the covenant of good

faith and fair dealing, and requested punitive damages. After discovery, the district

court granted summary judgment on all claims to Mitsui. We have jurisdiction

under 28 U.S.C. § 1291, review a district court’s grant of summary judgment de

novo, Pavoni v. Chrysler Grp., LLC, 789 F.3d 1095, 1098 (9th Cir. 2015), and we

affirm.

      1. Mitsui did not breach its insurance contract with Lucky Leather. The

district court properly determined that the water that damaged Lucky Leather’s

inventory was surface water, see, e.g., Water, Black’s Law Dictionary (10th Ed.

2014) (defining “surface water” as “[w]ater lying on the surface of the earth but not

forming part of a watercourse or lake . . . most commonly derive[d] from rain,

springs, or melting snow”), and correctly found that damage caused by surface




                                          2
water was unambiguously excluded from Lucky Leather’s insurance policy with

Mitsui.

      Lucky Leather’s attempt to fit the water damage into the exception to the

surface water exclusion contained in its insurance policy with Mitsui is unavailing.

It makes no difference that the surface water that damaged Lucky Leather’s

inventory pooled on the ground after exiting a neighbor’s drainage pipe; the

drainage pipe did not back up or overflow, but rather expelled rain water onto the

ground precisely as designed. See Cardio Diagnostic Imaging, Inc. v. Farmers Ins.

Exch., 212 Cal. App. 4th 69, 76 (2012) (holding that a “lay person would

understand” the language in the exception cited by Lucky Leather to “include both

water that comes up out of a sewer, drain or sump (‘backs up’) and water that spills

over from a sewer, drain, or sump (‘overflows’) due to a blockage”) (emphasis

added).

      2. Even if we were to find that Mitsui breached its insurance contract with

Lucky Leather, because the parties had a genuine and reasonable dispute over

whether coverage was due, Lucky Leather’s claim for breach of the covenant of

good faith and fear dealing fails. See Chateau Chamberay Homeowners Ass’n v.

Assoc. Int’l Ins. Co., 90 Cal. App. 4th 335, 347 (2001) (“It is now settled law in

California that an insurer denying or delaying the payment of policy benefits due to


                                          3
the existence of a genuine dispute with its insured as to the existence of coverage

liability or the amount of the insured’s coverage claim is not liable in bad faith

even though it might be liable for breach of contract.”).

      3. Lucky Leather has not put forward any evidence that Mitsui’s conduct

was “oppressive, fraudulent, or malicious.” PPG Indus., Inc. v. Transamerica Ins.

Co., 20 Cal. 4th 310, 319 (1999) (citing Cal. Civ. Code § 3294(a)). Accordingly,

no award of punitive damages is warranted.

      AFFIRMED.




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