Background
Industrial Park Center, doing business as Mainspring Capital Group, owned commercial property leased in part to Star Fisheries. Water and salt used in the tenant’s operations and cleaning allegedly damaged concrete stairs, the slab, walls, and subsoil. Damage was identified in 2010, and an engineering firm recommended repairs; Mainspring made some repairs but did not adopt certain recommendations for waterproofing, a vapor barrier, or additional drainage.
Additional, similar damage was found in 2021 and structural issues were confirmed in 2022. Great Northern denied Mainspring’s claim under an all-risk property policy, citing policy exclusions and concluding the loss resulted from inadequate soil preparation, settlement, corrosion, and wear. A federal district court granted the insurer summary judgment on the ground that the loss was reasonably foreseeable and almost certain to occur. On appeal, the Ninth Circuit certified an Arizona-law question to the Arizona Supreme Court.
The Court’s Holding
The Arizona Supreme Court adopted the Restatement’s subjective definition of fortuity. A fortuitous loss is one that, so far as the contracting parties are aware, depends on chance. The relevant inquiry centers on the insured’s knowledge when coverage attached, not whether the loss could later be viewed as reasonably foreseeable.
A loss is non-fortuitous only if the insured knew when coverage began that the loss-causing event had already happened, was already underway, or was certain to happen because no material contingency remained between the facts known to the insured and the event. The court rejected an objective reasonable-foreseeability rule and did not decide whether Mainspring’s particular loss was covered, because the parties still disputed facts relevant to the summary-judgment posture.
Key Takeaways
- Arizona fortuity law uses the insured’s actual knowledge at policy inception.
- Reasonable foreseeability alone does not make a loss non-fortuitous.
- All-risk insurance does not cover losses known to have occurred, to be in progress, or to be certain when coverage attaches.
Why It Matters
The decision establishes Arizona’s governing fortuity standard for insurance contracts, including all-risk policies. Insurers seeking to avoid coverage cannot rely solely on hindsight or proof that damage was foreseeable; they must show the insured knew the loss-causing event was already occurring or certain to occur without a material remaining contingency.