Homeowners Insurance Policy Coverage

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For years California courts struggled with first party coverage disputes where a covered peril and an excluded peril interact to cause a single loss. In 1963 the California Supreme Court created a effective rule for addressing such disputes when it incorporated into law the “efficient proximate cause doctrine” in Sabella v. Wisler (1963) 59 Cal.2d 21.  The “efficient proximate cause” doctrine allowed courts to fashion fair results within the reasonable expectations of the insured and insurer where an excluded peril combined with a covered peril to cause a single loss. However, a flurry of recent decisions is limiting the applicability of the “efficient proximate cause” doctrine by upholding once disfavored anti-concurrent causation policy exclusions. This note will look at the evolving policy exclusions, once disfavored by the courts, which allow insurers to escape application of the efficient proximate cause doctrine.

Efficient Proximate Cause Doctrine

California Insurance Code section 530[1] provides that “[a]n insurer is liable for a loss of which a peril insured against was the proximate cause, although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss of which the peril insured against was only a remote cause.” California courts have construed section 530 as incorporating into law the “efficient proximate cause doctrine,” an interpretive rule for first party insurance disputes involving loses caused by multiple perils, at least one of which is covered by insurance and one of which is not. (Sabella v. Wisler (1963) 59 Cal.2d 21, 31–33.) Pursuant to the efficient proximate cause doctrine, “When a loss is caused by a combination of a covered and specifically excluded risks, the loss is covered if the covered risk was the efficient proximate cause of the loss,” but “the loss is not covered if the covered risk was only a remote cause of the loss, or the excluded risk was the efficient proximate, or predominate cause.” (State Farm Fire & Casualty Co. v. Von Der Lieth (1991) 54 Cal.3d 1123, 1131–1132, 2 Cal.Rptr.2d 183, 820 P.2d 285.) The “efficient proximate cause” of the loss is the predominant, or the most significant cause of the loss. (Garveyv. State Farm Fire & Casualty Co.(1989) 48 Cal.3d 395, 403.)  Where there is a dispute as to the predominate cause of the loss, the question of causation is for the jury to decide. (Garvey (1989) 48 Cal.3d. 395 at 412.)

The Courts reasoned that the efficient proximate cause doctrine created a “workable rule of coverage that provides a fair result within the reasonable expectations of both the insured and the insurer” by focusing the casual inquiry on the most important cause of the loss. (Julian v. Hartford Underwriters Insurance Company (2005) 35 Cal.4th 747, 754.)

Unenforceable Anti-concurrent Causation Exclusions
Since incorporating the efficient proximate cause doctrine into law, California courts routinely held that insurers’ policy exclusions that conflict with section 530 and the efficient proximate cause doctrine were unenforceable. (Garvey (1989) 48 Cal.3d. 395; Howell v. State Farm Fire & Casualty Co. (1990) 218 Cal.App.3d 1446, (overruled on other grounds by Reid v. Google, Inc., (2010) 50 Cal.4th 512.) These so-called anti-concurrent causation provisions seek to exclude from coverage losses caused in part by covered perils when they interact “in any way” with an excluded peril without regard for the efficient proximate cause, or predominate cause of the loss.

In Garvey, the California Supreme Court examined such a provision. There, the plaintiff purchased an “all risk” homeowner’s insurance policy from the defendant insurer. The policy covered “all risks” of physical loss to the covered property not specifically excluded. (Garvey (1989) 48 Cal.3d. 395, 399.) The policy specifically excluded losses “caused by…contributed to or aggravated by earth movement. …” (Id. at 399-400 (emphasis added).) During the policy period, the insured discovered that a room addition located on the covered property began pulling away from the main structure. (Id. at 400.) Opposing experts agreed that both the negligence of the contractor that constructed the room addition, a covered peril, and soils settlement and slope creep, an excluded earth movement peril, contributed to the loss. (Id. at 412.)  The insurer denied coverage relying on the earth movement exclusion and argued that the contractor’s negligence was irrelevant in light of the fact that the excluded “earth movement” peril “contributed to or aggravated” the damage to the covered property. (Id. at 400.) The California Supreme Court refused to enforce the policy exclusion to the extent that it failed to identify the predominate cause of the property damage. (Id. at 412-413.)  The Supreme Court remanded the action back to the trial court to determine the efficient proximate cause of the damaged property necessary to resolve the coverage dispute.

The Court of Appeal in Howell reached a similar conclusion when it held that an insurer providing coverage under an “all risk” property insurance policy cannot contractually exclude coverage when an insured peril is the efficient proximate cause of a loss. (Howell (1990) 218 Cal.App.3d at 1448, 1458.) Like Garvey, the insured in Howell suffered property damage from a landslide, e.g., earth movement, and sought to recover under her “all risk” homeowner’s insurance policy.  (Id. at 1449-1452.) The landslide occurred after heavy rains weakened a slope recently devastated by fire. (Id. at 1449.) The homeowner’s insurance policy covered losses caused by fire but contained the following exclusions:

“‘We do not insure under any coverage for loss…which would not have occurred in the absence of…the following excluded events. We do not insure for such loss regardless of: a) the cause of the excluded event; or b) other causes of the loss; or c) whether other causes acted concurrently or jointly in any sequence with the excluded event to produce the loss. …’ The policy then listed ‘Earth Movement and Water Damage’ as specific perils excluded under the [policy].”

(Id. at 1449-1450.)

The trial court granted the insurer’s motion for summary judgment on the basis of the earth movement and water damage exclusions, thus precluding coverage. The Court reached this conclusion despite the fact that the insured’s expert attributed the slide to the fire, a covered peril. (Id. at 1451-1452.) The Court of Appeal reversed and remanded for a determination of the efficient proximate cause of the slope failure. (Id. at 1458.) The court reasoned that giving full effect to the exclusion provisions at issue would exempt the insurer from covering an insured peril even though it was the proximate cause of the loss. (Id. at 1453.) Such a result would directly violate section 530. (Id.) Moreover, such a result would eviscerate an insured’s reasonable expectation “that a loss will be covered if it is proximately caused by a covered peril, even though other remote and excluded causes may concur in producing the loss.” (Id. at 1466.)

Recently Enforced Anti-concurrent Causation Clauses

            More recently, California courts have upheld anti-concurrent causation exclusions similar to those seemingly disfavored in both Garvey and Howell.

Similar to both Garvey and Howell, the insured homeowners in Julian suffered property damage from a landslide and sought to recover under their “all risk” homeowner’s insurance policy. (Julian (2005) 35 Cal.4th at 751.) Here, prolonged rains induced a landslide which damaged the insured’s home. (Id.) The “all risk” homeowners insurance policy contained a provision similar to the one in Howell, which stated that it did not insure against loss “caused directly or indirectly” by any excluded peril, “regardless of any other cause or event contributing concurrently…to the loss.'” (Id. (emphasis added.)) The policy then excluded coverage for earth movement, water damage and third party negligence. Additionally, the policy excluded loss caused by weather conditions if the weather conditions “contribute in any way” with another excluded peril such as earth movement, water damage or third party negligence. (Id. at 752.) After investigation, the insurer denied coverage on the basis that the landslide was caused either by earth movement, water damage, third party negligence, or weather conditions combining with another excluded peril.  (Id.) The trial court granted summary judgment in favor of the insurer, the Court of Appeal affirmed and the Supreme Court granted review. (Id. at 753.)

The issue before the Supreme Court, as they saw it, was “whether section 530 and the efficient proximate cause doctrine inflexibly prohibit an insurer from insuring against some manifestations of weather conditions, but not others.” (Id at 759.) The insureds contended that weather conditions alone, a covered peril, caused the loss. (Id. at 750-751.) They argued that the efficient proximate cause doctrine prohibited the insurer from invoking the weather conditions exclusion. More specifically, they contended that the “contributes in any way” language was analogous to the policy terms in Howell and Garvey, and allowed an insurer to defeat coverage for a loss proximately caused by a covered peril simply by finding some remote excluded peril in the sequence of causation. (Id. at 758.)  In other words, because the insurance policy “provided coverage for losses caused by weather conditions under some conditions, it must cover losses caused by weather conditions under all circumstances or else run afoul of the efficient proximate cause doctrine.” (Id. at 759).  The Supreme Court rejected the argument. (Id.)

The Supreme Court held that “an insurance company can limit the coverage…as long as such limitation conforms to the law and is not contrary to public policy (citation omitted).” (Id.) Thus, exclusions providing coverage for some manifestation of a particular peril, but not others, are enforceable so long as the exclusion is not contrary to law or policy, and provided a reasonable insured could “readily understand from the policy language which perils are covered and which are not.” (Id.) The Supreme Court acknowledged that the application of the policy language “contribute in any way with” may lead to troubling situations running afoul of the efficient proximate cause doctrine. (Id. at 760.) However, that was not the case in Julian because each potential predominate cause of the landslide, i.e., earth movement, water damage, third party negligence, and weather conditions combining with another excluded peril, where plainly excluded by the policy.  The Court thus rejected the insured’s contention that a weather condition alone caused the loss. (Id. at 760-761). The Supreme Court reasoned “applying the exclusion to the facts of this case brings about a ‘fair result within the reasonable expectations of both the insured and insurer.'”  (Id. at 761.)

Following the Supreme Court’s decision in Julian, the Court of Appeal, Second District, reached similar conclusions in De Bruyn v. Superior Court (2008) 158 Cal.App.4th 1213 and Freedman v. State Farm Ins. Co. (2009) 173 Cal.App.4th 957.  In De Bruyn, the court enforced a policy provision excluding coverage for mold damage even where a covered peril, accidental discharge of water, caused the loss. (De Bruyn (2008) 158 Cal.App.4th at 1216.) Likewise, in Freedman, the court enforced a policy provision excluding coverage for third party negligence when it combined in any way with the excluded water damage peril, to cause the loss. (Id. at 959.) It can be argued that the policy exclusions enforced in De Bruyn and Freedman respectively had the same sweeping and pernicious effects as the policy terms involved in Garvey and Howell. Nevertheless, the Second District enforced the provisions after determining that it brought about a fair result within the reasonable expectations of both the insured and insurer.


The decisions in Julian, De Bruyn and Freedman cast considerable doubt on the viability of the efficient proximate cause doctrine going forward. In fact, the Court of Appeal in Freedman stated that the insured’s efficient proximate cause argument was “based on a form of analysis that [was] superseded by the Supreme Court’s decision in Julian. (Id.) However, the Supreme Court acknowledged in Julian that its approach may lead to “troubling questions” while attempting to determine whether to enforce an anti-concurrent causation provision, or to apply the efficient proximate cause doctrine. (Julian (1990) 35 Cal.4th at 760.) The troubling questions prophesized by the Supreme Court have arrived.  The lesson for the first party coverage attorney is that he/she can expect underwriters to continue pushing the envelope of anti-concurrent causation policy exclusions until the Supreme Court further defines their bounds.

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