Insurance Requires Fortuity to be an Insured Risk

Post 5485

In Industrial Park Center, LLC, doing business as Mainspring Capital Group v. Great Northern Insurance Company, a foreign insurer, No. CV-25-0330-CQ, Supreme Court of Arizona (September 1, 2026).

The United States Court of Appeals for the Ninth Circuit certified the following question to this Court:

Is damage to property a “fortuitous” loss when, based on the insured’s knowledge at the time the insurance policy issued, it was reasonably foreseeable that such damage was almost certain to occur if certain preventative measures were not taken?

FACTUAL BACKGROUND

Mainspring owned commercial property leased to Star Fisheries for decades. Star Fisheries’ use of water and salt allegedly caused structural damage over time. In 2010, Mainspring learned of damage and made some repairs but did not implement all recommended preventive measures. In 2021–2022, additional similar structural damage was discovered, and Mainspring submitted a claim under its all-risk policy with Great Northern Insurance Company (GNIC). GNIC denied coverage, arguing the loss resulted from long-term deterioration and excluded causes. The federal district court granted summary judgment to GNIC, finding the loss reasonably foreseeable and almost certain to occur.

GNIC reviewed the loss and retained an engineering firm, Nelson Forensics LLC (“Nelson”), to investigate the damage and its cause. Nelson claimed the deterioration was largely around the space Star Fisheries leased, and the damage was consistent with exposure to a corrosive environment for years or even decades. Nelson also concluded that while Star Fisheries’ water and salt usage “may have exacerbated” damage to a different portion of the building, some of the other damage could not be attributed to the use of water and salt.

Ultimately, GNIC denied coverage for Mainspring’s loss, explaining that 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. Mainspring requested that GNIC reconsider the denial.

LAW

Arizona recognizes that all-risk insurance policies cover only fortuitous losses, even if the policy does not expressly say so. Insurance exists to cover risk, not certainty. Because Arizona had not previously defined “fortuitous loss,” the Court adopted the Restatement definition: a fortuitous event is one that, so far as the parties are aware, depends on chance.

ANALYSIS

The Arizona Supreme Court rejected an objective “reasonable foreseeability” test. It reasoned that many insured risks are foreseeable; if foreseeability alone defeated coverage, all-risk insurance would lose much of its purpose.

Instead, the proper test is subjective and focuses on what the insured actually knew when coverage attached.

LACK OF FORTUITY

A loss is not fortuitous merely because the insured knew there was a risk, even a serious one.

It becomes non-fortuitous only if the insured knew the loss-causing event had already occurred, was already underway, or was certain to occur because no meaningful contingency remained.

The Supreme Court also emphasized that insurers can protect themselves through underwriting, premiums, and express exclusions. Courts should not rewrite policies to deny coverage for risks the insurer could have excluded more clearly.

DISCUSSION

The Supreme Court found consistent Arizona insurance law and public policy national authority, especially cases rejecting hindsight-based determinations of inevitability. The Supreme Court disagreed with the Ninth Circuit’s reasoning to the extent it suggested that reasonable foreseeability can make a loss non-fortuitous.

CONCLUSION

The Arizona Supreme Court answered the certified question by holding:

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.

The standard is subjective, focusing on the insured’s knowledge at the time of contracting — not on hindsight or objective foreseeability.

ZALMA OPINION

When an insured is aware of a risk that would cause an injury or where the injury had already occurred before the inception of the policy, it is not fortutious, was already in progress, or was certain to occur because no material contingency remained.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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