The Arizona Supreme Court recently issued an important opinion that every claim practitioner handling insurance coverages should read. In Industrial Park Center, LLC v. Great Northern Insurance Company, the court explained that a foreseeable loss is not necessarily an uninsurable loss. 1 This sounds obvious because insurance is designed to protect against foreseeable risks, but it took a trip through the federal courts and a certified question to get there.

The case involved a commercial building occupied by a seafood distributor that regularly used water and salt in its operations. The building owner discovered moisture-related damage in 2010, hired engineers, and completed most of the recommended repairs. It did not install several additional measures, including a waterproof floor coating and vapor barrier, which had been presented as optional alternatives. Additional and much more serious structural damage was discovered years later.

Great Northern denied the claim based primarily on exclusions for wear and tear, settling, corrosion, faulty workmanship, and inherent vice. In the ensuing litigation, however, the federal district court found the loss was not fortuitous because additional damage was reasonably foreseeable and almost certain to occur.

The Arizona Supreme Court rejected that test. A loss is non-fortuitous only when the insured actually knew, when coverage attached, that the loss-causing event had already occurred, was already underway, or was certain to occur because no material contingency remained. This is a subjective standard focused on what the insured actually knew at the relevant time. It is not based on what the insured should have known or what an engineer can declare was inevitable after the loss occurred.

Knowledge that property faces a risk of damage is not the same as knowledge that damage is certain. Otherwise, many of the risks commonly insured under property policies, whether caused by fire, water intrusion, wind damage, equipment failure, and defective construction, could be declared non-fortuitous simply because somebody could have anticipated them.

The practical question for property insurance practitioners is what the insured actually knew when the coverage attached and did any material uncertainty remain? Answering that question requires a careful timeline. Engineering reports, repair records, internal communications, lease provisions, underwriting submissions, inspections, and renewal applications will all become important. In a progressive-loss case involving multiple policy periods, the analysis should be performed separately for each inception and renewal date.

The opinion also teaches that failing to follow every recommendation does not automatically destroy fortuity. That failure may be relevant to an exclusion, causation, mitigation, or the insured’s credibility. But poor maintenance, imperfect judgment, and even appreciation of a serious risk are not the same as actual knowledge that a loss is certain.

The unresolved battleground will be defining the “loss-causing event.” An insurer will describe that event broadly, perhaps as years of ongoing moisture exposure or corrosion. The policyholder will usually describe it more precisely as the later hidden deterioration or structural damage that remained uncertain after prior repairs. Practitioners should carefully distinguish the condition creating the risk, the physical process allegedly causing damage, the damage itself, and when the damage became discoverable.

This decision does not mean Great Northern has lost the coverage case. It can still argue that the damaging corrosion was already underway when the relevant coverage attached. It can also rely on the policy’s written exclusions. Fortuity gets the policyholder past one significant obstacle; it does not eliminate the rest of the policy.

The broader lesson is a good one. Courts should not use hindsight to create an exclusion the insurer did not write. Insurance covers risks. It does not cover known certainties. There is a considerable difference between those two concepts, and the Arizona Supreme Court wisely placed the line where it belongs.

Thought For The Day

“In the Grand Canyon, Arizona has a natural wonder which, so far as I know, is absolutely unparalleled throughout the rest of the world.”
—Theodore Roosevelt, remarks at the Grand Canyon, May 6, 1903

1 Industrial Park Center, LLC v. Great Northern Ins. Co., 509 P.3d 1195 (Ariz. 2026).