An Allied Group Inc. unit does not have to defend or indemnify an insurance broker for professional negligence in a case involving a water park accident based on its policy language, a federal appeals court said Thursday in a divided opinion, in affirming a lower court ruling.

Salem, Oregon-based Bliss Sequoia Insurance & Risk Advisors Inc. held an insurance policy from Allied unit Allied Property and Casualty Insurance Co. that covered any liability Bliss Sequoia incurred for damages because of bodily injury, according to Thursday’s ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in Bliss Sequoia Insurance & Risk Advisors Inc; Huggins Insurance Services Inc. v. Allied Property & Casualty Co.

Bliss Sequoia obtained $5 million in coverage for client Cowabunga Bay Water Park in Henderson, Nevada, the ruling said. A year later, a six-year-old boy was seriously injured in a near-drowning incident at the water park, allegedly because of the park’s insufficient lifeguard staffing. The boy’s family sued the park, which ultimately settled the case for $49 million, or $44 million shy of its liability coverage.

The water park sued Bliss Sequoia for professional negligence.  As part of a settlement agreement with the parents, the water park assigned its claims against Bliss Sequoia to the family, and the parents also filed their own litigation against the broker.

In response, Bliss Sequoia asked Allied to defend and indemnify it against the professional negligence claims. Allied denied coverage, and Bliss Sequoia filed suit in U.S. District Court in Eugene, Oregon, seeking a declaratory judgment that Allied had a duty to defend and indemnify it.

The district court granted Allied summary judgment. The majority opinion of the three-judge appeals court panel said in its ruling that the critical language in Allied’s policy says it covers any sums that Bliss is “legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage.’”

“Blue Sequoia asserts that the claims against it for professional negligence arose ‘because of’ the boy’s bodily injury,” the ruling said. “That strikes us as a highly improbable understanding of the scope of the coverage that Bliss Sequoia bargained for.”

The phrase “because of bodily injury” in the policy “includes only damages that reasonably or foreseeably result from bodily injury - not just any that may arise in a daisy chain of lawsuits connected in some way to someone’s injury,” it said.

Accordingly, the parents’ “personal-injury suit against the water park arose ‘because of bodily injury,’ but the claims of professional negligence did not,” the ruling said.

The dissenting opinion said the case should be considered by the Oregon Supreme Court.

Attorneys in the case did not respond to requests for comment.