No. 23-3531 ___________________________

Bob Robison Commercial Flooring Inc

Plaintiff - Appellant

v.

RLI Insurance Company

Defendant - Appellee ____________

Appeal from United States District Court for the Eastern District of Arkansas - Northern ____________

Submitted: September 24, 2024 Filed: March 19, 2025 ____________ Before COLLOTON, Chief Judge, LOKEN and KOBES, Circuit Judges. ____________ LOKEN, Circuit Judge.

This insurance coverage dispute turns on the proper interpretation under Arkansas law of an exception to property insurance exclusions known as the ensuing loss clause, which restores coverage “when, as a result of an excluded peril, a covered peril arises and causes damage.” Balfour Beatty Constr., LLC v. Liberty Mut. Fire Ins. Co., 968 F.3d 504, 511 (5th Cir. 2020). Ensuing loss provisions began in the wake of the 1906 San Francisco earthquake, when insurers added policy provisions responding to California laws barring them from denying coverage for fire damage that followed the earthquake. See Bethany Boardwalk Grp. LLC v. Everest Sec. Ins. Co., 611 F. Supp. 3d 41, 53-54 (D. Md. 2020). Despite this long pedigree, an ensuing loss clause’s “effect remains clouded in confusion.” Id. at 55 (citation omitted).

In this case, Nabholz Construction Company (“Nabholz”) hired Bob Robison Commercial Flooring, Inc. (“BRCF”) to install a vinyl gym floor with painted volleyball and basketball lines at a middle school in Trumann, Arkansas. BRCF installed the gym floor and subcontracted the painting portion of the project to Robert Liles Parking Lot Services (“Liles”). Liles’s painting work was faulty; issues included crooked lines, incorrect markings, and smudges. Nabholz rejected the gym floor in December 2021. It is undisputed that the rejection resulted solely because of the subcontractor’s misapplication of the paint. Because the defective painting could not be removed from the vinyl flooring, BRCF, to correct the project error, had to remove and replace the floor and paint new lines at a total cost of $181,415.39.

BRCF submitted a claim for its loss to RLI Insurance Company (“RLI”), seeking coverage for the total loss under the Installation Floater Coverage Part of the builder’s risk policy RLI issued to BRCF for a policy period ending June 11, 2022 (the “Policy”). As relevant here, the Coverage Part provided:

PROPERTY COVERED “We” cover only the following property and only to the extent the property is not otherwise excluded or subject to limitations. 1. Coverage - “We” cover direct physical loss or damage caused by a covered peril . . . at “your” “jobsite” and [while] “you” are installing, constructing, or rigging as part of an “installation project”.

PERILS COVERED “We” cover risks of direct physical loss or damage unless the loss is limited or caused by a peril that is excluded.

-2- PERILS EXCLUDED 2. “We” do not pay for loss or damage that is caused by or results from one or more of the following: * * * * * d. “Defects, Errors, Or Omissions In Property” -- “We” do not pay for loss or damage caused by or resulting from inherent defects, errors, or omissions in covered property (whether negligent or not) relating to: 1) design or specifications; 2) workmanship or construction; or 3) repair, renovation, or remodeling.