NOT FOR PUBLICATION FILED

UNITED STATES COURT OF APPEALS JUL 23 2024

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

MICHAEL KAUFMAN; LISA KAUFMAN, No. 23-35424 a married couple, D.C. No. 2:22-cv-00539-BJR Plaintiffs-Appellants,

v. MEMORANDUM*

STATE FARM FIRE AND CASUALTY

COMPANY, a foreign insurer,

Defendant-Appellee.

Appeal from the United States District Court for the Western District of Washington Barbara Jacobs Rothstein, District Judge, Presiding

Argued and Submitted July 12, 2024 Seattle, Washington

Before: McKEOWN, CLIFTON, and DE ALBA, Circuit Judges.

Plaintiffs-Appellants Michael and Lisa Kaufman (“the Kaufmans”) appeal a

grant of summary judgment for Defendant-Appellee State Farm Fire and Casualty

Company (“State Farm”) on claims of breach of contract and violations of the duty

of good faith, the Washington Consumer Protection Act (“CPA”), and the

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Washington Insurance Fair Conduct Act (“IFCA”). Because the parties are familiar

with the facts, procedural history, and arguments, we do not recount them here. We

affirm.

1. The district court did not abuse its discretion by considering a

declaration from State Farm’s engineering expert that State Farm attached to its

cross-motion for summary judgment. This declaration did not ambush the

Kaufmans with a new expert opinion on the probable causes of their water damage

where State Farm had timely: (i) disclosed that their engineering expert would

testify to “opinions and conclusions as to the possible cause(s)” of the Kaufmans’

loss; and (ii) turned over the investigative reports documenting the opinions and

conclusions of that expert. The expert’s supplemental investigative report can

reasonably be read to contain the conclusions that the Kaufmans maintain was new

expert opinion in the declaration. The Kaufmans had sufficient notice to depose the

expert on the exact perimeters of his investigative conclusions and attendant

testimony but did not do so. Finally, the expert declaration is relevant to the

Kaufmans’ breach of contract claim because Washington has rejected “coverage by

estoppel.” See Coventry Assocs. v. Am. States Ins. Co., 961 P.2d 933, 939–40

(Wash. 1998).

2. The district court properly granted summary judgment against the

Kaufmans on their breach of contract claim. Washington’s “efficient proximate

2 23-35424 cause” rule precludes insurers from denying coverage “whe[n] an insured risk . . .

sets into operation a chain of causation in which the last step may have been an

excepted risk.” Hill & Stout PLLC v. Mut. of Enumclaw Ins. Co., 515 P.3d 525,

535 (Wash. 2022) (quoting McDonald v. State Farm Fire & Cas. Co., 837 P.2d

1000, 1004 (Wash. 1992)). However, this rule does not require insurers to identify

the singular cause of a loss where all possible causes—determined by the insurer’s

reasonable investigation—are excluded risks. State Farm’s engineering expert

declared that the chances are “de minimis” that something other than improper

compaction or differential earth movement caused the Kaufmans’ loss, and the

Kaufmans have offered no competing expert, evidence, facts, or explanations to

rebut this assertion. There is, accordingly, no issue of fact as to the range of

possible causes of the Kaufmans’ loss.

Both “improper compaction” and “earth movement” are “Losses Not

Insured” under the Kaufmans’ policy with State Farm. Even accepting arguendo

that the “improper compaction” exclusion is subject to an ensuing loss provision,

the “water . . . below the surface of the ground” exclusion otherwise operates to

preclude coverage. The policy’s plain text excludes loss caused by any

underground water. The term “water” in the relevant exclusion is modified only by

the phrase “below the surface of the ground” and the provision does not otherwise

exempt or distinguish underground water released by specific sources. The

3 23-35424 Kaufmans’ loss is, therefore, excluded in any event.

3. The district court properly granted summary judgment against the

Kaufmans on their extracontractual claims alleging violations of common law and

regulatory duties of good faith, the CPA, and the IFCA. No reasonable juror could

conclude that State Farm overemphasized its interests, undertook an insufficient

investigation, or failed to articulate an adequate basis—such that its denial of

coverage was unreasonable—where State Farm promptly retained an independent

engineering expert to investigate the Kaufmans’ loss and grounded its coverage

determination in the conclusions reached by that expert. When the Kaufmans

contested the denial of coverage, State Farm reopened its investigation—the results

of which confirmed the initial determination—and supplemented its explanation.

The record does not indicate that the Kaufmans conducted their own investigation

into the cause of the basement flooding. They simply requested a reconsideration

of the coverage denial, which State Farm obliged, albeit with the same result.1

AFFIRMED.

1 As the Kaufmans’ bad faith claims fail for lack of unreasonable insurer conduct, we do not address their remaining arguments concerning bad faith damages.

4 23-35424