https://www.azcourts.gov/Portals/0/OpinionFiles/Supreme/2026/CV250330CQ.pdf?ver=0xv7554d8ZDX9l9Twiu1nQ%3d%3d

“FORTUITOUS” LOSS UNDER ALL-RISK COMMERCIAL INSURANCE DEFINED AS “ONE THAT SO FAR AS THE  PARTIES, TO THE CONTRACT  ARE AWARE, IS DEPENDENT ON CHANCE. A LOSS IS NON-FORTUITOUS ONLY WHEN THE INSURED KNEW, AT THE TIME COVERAGE ATTACHED, THAT THE LOSS-CAUSING EVENT HAD ALREADY OCCURRED, WAS OCCURING OR CERTAIN TO OCCUR” IT IS A SUBJECTIVE STANDARD

Industrial Park Center [(dba)Mainspring ] leased its building to Star Fisheries which, over 30 years, damaged the concrete floor, walls and stairs with water used for daily cleaning.  The damage was remediated but the recommendation for a water-proof floor was not followed. No insurance claim was made.

Later, 2021, new and similar damage was discovered the result of the same cleaning practice, only this time the damage was determined to be structural. Mainspring made a claim for this loss with its commercial all-risk insurer, Great Northern Insurance Company [GNIC]. GNIC denied the claim taking the position the loss was the result of poor/inadequate soil preparation and compaction, settlement, and long-term corrosion,” and concluding the loss was within the policy's inherent-vice, faulty-workmanship, settling, and wear-and-tear exclusions.” The claim was denied a second time despite new reports the damage was consistent with salt and water damage.

Mainspring brought suit in Maricopa County Superior court where the case as removed to the United States District Court of Arizona on diversity jurisdiction. The district court granted GNIC summary judgment finding the loss was not “fortuitous” as required by the parties because it was “reasonably foreseeable.” Mainspring appealed to the Ninth Circuit Court of Appeals which then certified the coverage question to the Arizona Supreme Court.

The supreme court adopted the majority view reflected in The Restatement (First) of Contracts § 291 cmt. a and held:

A loss is non-fortuitous only when the insured

knew, at the time coverage attached, that the loss-causing event had already

occurred, was already in progress, or was certain to occur because no

material contingency remained between the facts known to the insured and

the loss-causing event.  This is a subjective standard that focuses on the

insured's knowledge at the time of contracting.