INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Court’s gotta ask, is this accidental?
A dispute arose between Great Northern Insurance Company (Great Northern) and Industrial Park Center LLC, d/b/a Mainspring Capital Group (Mainspring). Mainspring suffered damage to a commercial building it owned. Great Northern had, for many years, provided a commercial property policy for their building. It was written on an all-risks basis (broad coverage that is subject to exclusions specified in the policy).
Mainspring’s building included a long-time lessor, Star Fisheries, Inc., that operated as a wholesale seafood distributor. The distributor began use of part of the building in 1990. One issue concerning the lessor’s operations was that the slab-on-grade foundation as well as the exterior concrete stairs were hosed down with fresh water throughout each workday.
In 2010, an executive of Mainspring noticed damage to the walls and stairs (all composed of concrete) at the space occupied by Star Fisheries. That discovery prodded Mainspring to hire an engineering firm (herein referred to as MBJ) to make a thorough inspection of the site.
MBJ’s report (completed in 2010) revealed several issues. The Star Fisheries stairs were spalled (fragmented) and cracked, and steel reinforcement bars were visible and corroded. An on-grade concrete slab floor contained minor cracks. Finally, Star Fisheries’ adjacent exterior walls exhibited cracking, spalling, peeling paint as well as discolored paint and concrete.
Another firm invited in by Mainspring did soil testing in the area occupied by Star Fisheries and reported that the soil moisture was high, likely causing damage from soil expansion/contraction. That firm also reported problems with inadequate/improperly installed floor drains and poorly sealed joints.
MBJ’s final report filed in late 2010 included five sets of recommendations. Besides recommending that Mainspring accurately determine sources of water ingress, they also involved repairs, replacements, crack/joint sealing, demolition and replacement of concrete stairs, installation of a second drainage tile system, repair of concrete tilt walls as well as use of measures to prevent future damage.
By the end of 2011, Mainspring had adhered to most of the recommendations made by MBJ. However, they ignored the suggestions regarding preventative measures. Instead, Mainspring made adjustments to Star Fisheries’ lease. It would require the lessor to pay for any and all site remediation costs that were necessary at the time the company ended their lease.
In 2021, while an outside firm was hired to do routine concrete building repairs, the firm observed and reported damage in the area occupied by Star Fisheries that were, essentially, the same as was experienced in 2010.
Further investigation resulted in recommendation of replacing the concrete stairs as well as a need to remove and replace adjacent concrete panels that were so damaged that the building’s structural integrity was threatened. Mainspring filed a claim with Great Northern. After the insurer investigated the situation, it advised that it would not cover the loss.
Great Northern shared with Mainspring that their policy included exclusions for faulty-workmanship, inherent-vice, settling and wear and tear. The insurer held that the damage it investigated indicated decades of issues that did not qualify for coverage.
Mainspring and Great Northern communicated with each other, expanding and refining their positions to no avail. Mainspring then sued for coverage. Its position was that Great Northern was guilty of breach of the duty of good faith and breach of the insurance contract. The insurer later filed its own request for summary judgment, opposing Mainspring’s allegations.
A district court found in favor of Great Northern, reasoning that the damage was both foreseeable and inevitable as Mainspring never took measures to prevent moisture intrusion. Further, the court noted that Mainspring’s previous lease adjustment to add a remediation requirement as direct evidence that it foresaw the likelihood of additional damage. Mainspring appealed.
The higher court examined the matter and recognized an issue that was broader than the specifics of the litigants’ arguments. It realized that, to date, there were no published appellate-level decisions available to guide any court in examining whether a given loss was fortuitous (accidental). Rather than analyzing the issue further and with the agreement of both Mainspring and Great Northern, the court prepared a question that was presented to the state’s Supreme Court for certification.
Industrial Park Center LLC, d/b/a Mainspring Capital Group v. Great Northern Insurance Company—U.S. Court of Appeals for the Ninth Circuit—Nos. 24-4788, 25-295—December 23, 2025.
