The 9th Circuit Court of Appeals (9th Circuit) recently issued an unpublished decision affirming the District Court’s grant of summary judgement in favor of BITCO General Insurance Corporation (BITCO). Bitco Gen. Ins. Corp. v. Union Ridge Ranch, LLC, Nos. 24-6473, 24-6474, 2025 LX 492319 (9th Cir. Oct. 29, 2025).

Inland Co. (Inland) built a series of retaining walls for Union Ridge Ranch (URR). A portion of these walls failed and URR filed suit. During the course of discovery, it was revealed that a geotechnical engineering consultant tested Inland’s work on the project and identified numerous defects two months prior to the eventual failure. In light of these defects, the third-party purchaser withdrew from its agreement to purchase the subject parcel from URR. URR and Inland also met to discuss the defects raised by the geotechnical report and Inland agreed to reduce the contact price. Additionally, another geotechnical engineer hired by URR testified that there were obvious issues with the wall dating back to its original construction. Inland and URR ultimately reached a settlement. Subsequently, Inland sought indemnity from BITCO as a result of the settlement paid to URR.

BITCO filed a Declaratory Judgement Action in the United States District Court for the Western District of Washington (the “Western District”) seeking, in part, a judicial determination that it owed no indemnity obligation to Inland.  BITCO moved for summary judgement on the specific issue of whether the “impaired property” exclusion applied. This exclusion, in relevant part, provided:

“Property Damage” to “impaired property” or property that has not been physical injured arising out of:

(1)  a defect, deficiency, inadequacy or dangerous condition in “your product” or “your work.”

The Western District found this exclusion applied because URR’s claimed losses arose out of the defects contained in Inland’s work, including the grading work. The Western District granted summary judgement in favor of BITCO and found no coverage for Inland. URR and Inland appealed to the 9th Circuit.

On appeal, Inland conceded that the failed retaining walls fell within the definition of “impaired property.”  However, it argued that an exception to the exclusion applied.

The 9th Circuit affirmed the Western District’s finding that coverage was unavailable because URR’s claimed losses arose out of Inland’s work. Furthermore, the 9th Circuit pointed out that the “impaired property” exclusion also applied to the diminution of value of property adjacent to the failed wall as it sustained damage and loss of value as a direct result of Inland’s work.

The 9th Circuit recognized that the “impaired property” exclusion does in fact contain an exception for the “loss of use of other property arising out of sudden and accidental physical injury to ‘your product’ or ‘your work’ after it has been put to its intended use.” The parties disputed who had the burden of proving the existence of an exception fell on BITCO or Inland.

The 9th Circuit held that even if BITCO did bear the burden, it was abundantly clear that the exception did not apply. In the context of Washington Insurance Law, the phrase “sudden and accidental” generally means “unexpected and unintended”. Under this inquiry, the issue is whether the Inland, “subjectively expected or intended” that the wall would fail. The 9th Circuit concluded that there was no genuine dispute of material fact in that Inland knew or expected the wall would fail.

In reaching its conclusion, the 9th Circuit noted that two geotechnical engineers informed Inland and URR of issues with the wall well before it failed. Furthermore, the withdrawal of the third-party purchaser and subsequent reduction of the contract price is evidence that the parties had subjective knowledge of imminent failure. The 9th Circuit held that these facts undermined Inland’s argument that failure was unexpected. As such, in the months before the wall failed, Inland was on notice of the issues with the wall and that failure was expected. As a result, the 9th Circuit concluded that exception did not apply and coverage was unavailable.

This decision brings clarity to the nuances of the impaired property exclusion and related issues that have long been subject to dispute in Washington.

At Lether Law Group, we are committed to helping our Clients understand and navigate the dynamic and ever-changing world of insurance and complex litigation. Our experienced team continues to provide outstanding legal services in the 9th Circuit in addition to State and Federal Courts across Washington, Oregon, Idaho, California, Alaska, and Hawai’i. If you or someone you know needs legal representation or assistance, please do not hesitate to contact us or visit our website at www.letherlaw.com

On July 21, 2025, after almost 15 years of litigation, the 9th Circuit Court of Appeals affirmed the Western District Of Washington’s summary judgment decision in favor of Northland Insurance Company dismissing all contractual and extra-contractual claims. The 9th Circuit found that injunctive relief and discretionary costs arising therefrom do not constitute covered monetary damages. Furthermore, the 9th Circuit held that money damages resulting from an insured’s deliberate actions cannot constitute a covered “occurrence.” Lether Law Group represented Northland in both the Western District Washington and 9th Circuit Court of Appeals.

In 2012, an injunction was entered against Kitsap Rifle and Revolver Club (KRRC) whereby the club was prohibited from using its property as a shooting range until in complied with Kitsap County’s permitting requirements. Per KRRC, such permitting costs were approximately $400,000. It was undisputed that these costs were “the result of KRRC’s deliberate actions.”

KRRC then sought commercial general liability insurance coverage for the costs to comply with the injunction and obtain permits. KRRC also argued that the costs to comply with permitting was a covered defense cost. KRRC further asserted that Northland’s refusal to pay such fees and costs constituted bad faith, violation of Washington’s Consumer Protection Act, and violation of the Insurance Fair Conduct Act.

The District Court dismissed the KRRC’s claims, finding that the KRRC caused damage to its own property in developing the land in violation of Kitsap County ordinances. The District Court reasoned that, as the Northland policies strictly provided coverage for damage to third-party property, damage to KRRC’s own property did not qualify for coverage. Further, the District Court agreed with Northland that the KKRC’s claims did not constitute monetary damages as required by the policies because no such monetary damages had been incurred. Finally, the District Court found that the Club’s claims did not constitute an “occurrence” because permitting costs were not only foreseeable but also known and ignored by the Club.

The 9th Circuit affirmed in whole. “[T]he monetary damages for which KRRC seeks coverage—are the result of KRRC’s deliberate actions…Consequently, whatever money damages KRRC faces are not attributable to an “occurrence” and are therefore not covered by Northland’s CGL policies.” The 9th Circuit further held that the permitting costs were “a discretionary cost KRRC must pay only because it elected to develop its property” and therefore were not a defense cost or otherwise within the scope of the Northland policies.

Lether Law Group has extensive experience in the Washington State Courts, the Washington State Court of Appeals, Washington Federal Courts, and the 9th Circuit Court of Appeals litigating insurance coverage disputes in a wide variety of claims. If you have questions about commercial general liability coverage, Washington extra-contractual claims, or 9th Circuit’s decision, we invite you to contact us directly.