Chadwick v. Fire Ins. Exchange

• Decision Date: 11 August 1993
• Docket Number: No. A053480,A053480
• Citation: 21 Cal.Rptr.2d 871,17 Cal.App.4th 1112
• Court: California Court of Appeals Court of Appeals
• Parties: Franklin S. CHADWICK et al., Plaintiffs and Appellants, v. FIRE INSURANCE EXCHANGE, Defendant and Respondent.

Page 871

21 Cal.Rptr.2d 871

17 Cal.App.4th 1112

Franklin S. CHADWICK et al., Plaintiffs and Appellants, v. FIRE INSURANCE EXCHANGE, Defendant and Respondent.

No. A053480.

Court of Appeal, First District, Division 3, California.

Aug. 11, 1993.

Review Denied Dec. 1, 1993.

Gerald R. Welch and Michael D. Nelson, Nelson & Leighton, Danville, for plaintiffs and appellants.

Clarke B. Holland and Michael F. Scully, Thornton, Taylor, Downs & Becker, San Francisco, for defendant and respondent.

WERDEGAR, Associate Justice.

Franklin S. Chadwick and Charlene D. Mandel (homeowners) were the insureds under a broad peril homeowner's insurance policy issued by Fire Insurance Exchange (FIE). They noticed cracking in their walls, the cause of which was found to be substandard design and construction of the house's wall and floor framing. FIE denied coverage on the grounds the policy excluded loss from "cracking," "latent defect" and "inherent vice." Homeowners sued for breach of contract, breach of the covenant of good faith and fair dealing, and additional tort causes of action. The superior court granted summary judgment for FIE, finding as a matter of law the loss was predominantly caused by latent defect or inherent vice. We reverse.

FACTS

Summary judgment is proper if there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ.Proc., § 437c, subd. (c).) In reviewing that determination, we construe the moving party's papers strictly and those of the opposing party liberally. (Howell v. State Farm Fire & Casualty Co. (1990) 218 Cal.App.3d 1446, 1448, 267 Cal.Rptr. 708.) Viewed in that light, the record discloses the following facts.

Homeowners noticed cracks in the interior sheetrock of their house, which according to the complaint was "new." After the builder made cosmetic repairs, the cracks reappeared and homeowners were advised to obtain a professional investigation of the cause. They reported the loss to FIE.

FIE retained McGill-Martin-Self, a civil engineering firm, which in turn commissioned an investigation by Robert C. Kendall and Associates, consulting engineers. In addition to observing cracking and deflection visible on the surface, these engineers removed small portions of the sheetrock in homeowners' house and larger areas in a neighboring home with the same design and similar damage.

The engineers retained by FIE found numerous deficiencies in the design and construction of the house's floor and frame, including: lack of proper contact or connection Homeowners also retained a consulting engineer, Lee Mattis. Mattis agreed that many of the house's problems were due to substitution of "Truswal floor trusses for 2 by 12 joists...." His declaration continues: "My site investigation found additional construction deficiencies related to the substitution of the Truswal trusses: [p] a) Proper provisions for shear transfer and blocking were not designed or installed.... Truswal addressed vertical loads and provided drawings with truss sizes and locations. Fine print on these drawings states that lateral force bracing is to be designed by others." Mattis also noted five "[p]oor framing practices" that were "plainly visible from the crawl space." He concluded the contractor and developer had performed below the construction industry standard of care and homeowners' loss was "primarily due to poor framing practices" associated with the use of floor trusses.

                between structural members;  deviations from the framing plan, e.g., the use of a heavier header than called for;  and deviation from the flooring plans, in particular the substitution of "gang-nailed floor trusses for 2 X 12 floor joists" creating an "unusual connection" with "no solid framing between the bearing wall above and the support beam below."   The engineers concluded these deficiencies provided insufficient support for the house's floor and walls, allowing deflections and cracking of the sheetrock
                

In their complaint, homeowners alleged they learned of the framing deficiencies only through expert inspection: "At no time prior to Robert C. Kendall and Associates and McGill-Martin-Self inspections had the visual cracking in the sheetrock at the home been such as to place a reasonable person on notice of such deficiencies." In depositions, homeowners similarly stated they would not have been able to detect or recognize the framing deficiencies without expert assistance.

The policy alleged to have been in force at the time the loss manifested was the Third Edition of FIE's "Protector Plus Homeowners Package Policy--California." Under this policy, FIE insured against "accidental direct physical loss" to the dwelling, subject to stated exclusions. Exclusion 6 disavowed coverage for loss from, inter alia: "Wear and tear; marring; deterioration; inherent vice; latent defect; ... cracking ... of ... walls, floors, roofs or ceiling; ..."

The superior court found, "as a matter of law, that plaintiffs' loss was predominantly caused by latent defect or inherent vice, and is therefore excluded by the terms of the insurance policy issued by defendant."

DISCUSSION

I. Efficient Proximate Cause

Homeowners' primary contention on appeal is that the defective framing, even if deemed a latent defect or inherent vice, was merely the result of another, nonexcluded peril, to wit, "negligent construction," which they argue was the efficient proximate cause of the loss. (Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal.3d 395, 403-404, 257 Cal.Rptr. 292, 770 P.2d 704.) We reject this argument because builder negligence, under the facts of this case, is not a peril distinct from the creation of the defective framing. (See Finn v. Continental Ins. Co. (1990) 218 Cal.App.3d 69, 72, 267 Cal.Rptr. 22.)

"As [the Supreme Court] explained in Garvey, supra, 48 Cal.3d at pages 406-407, [257 Cal.Rptr. 292, 770 P.2d 704] the scope of coverage under an all-risk homeowner's policy includes all risks except those specifically excluded by the policy. 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. (Id. at p. 402 [257 Cal.Rptr. 292, 770 P.2d 704.) ] ... [p] ... [The court] emphasized in Garvey, supra, 48 Cal.3d at page 408, [257 Cal.Rptr. 292, 770 P.2d 704] that if third party negligence is not excluded under such a policy, it is a covered peril. As we stated, third party negligence under a homeowner's policy is a 'risk of physical loss' under the policy. (Ibid.)" (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.)

California courts have consistently applied the efficient proximate cause analysis where two or more distinct actions, events or forces combined to create the damage. (E.g., Sabella v. Wisler (1963) 59 Cal.2d 21, 26, 31-32, 27 Cal.Rptr. 689, 377 P.2d 889 [negligent construction of sewer and inadequate compaction of fill (covered perils), both causing settling (excluded peril) ]; Sauer v. General Ins. Co. (1964) 225 Cal.App.2d 275, 278, 37 Cal.Rptr. 303 [leakage of water from plumbing system (covered) and sinking of earth (excluded) ]; Gillis v. Sun Ins. Office, Ltd. (1965) 238 Cal.App.2d 408, 419, 47 Cal.Rptr. 868 [windstorm (covered) and water (excluded) ]; Premier Ins. Co. v. Welch (1983) 140 Cal.App.3d 720, 725, 189 Cal.Rptr. 657 [negligent installation of sewer (covered) and saturation of earth in heavy rain (excluded) ]; Garvey v. State Farm Fire & Casualty Co., supra, 48 Cal.3d at pp. 412-413, 257 Cal.Rptr. 292, 770 P.2d 704 [negligent construction (covered) and earth movement (excluded) ]; Howell v. State Farm Fire & Casualty Co., supra, 218 Cal.App.3d at pp. 1459-1460, 267 Cal.Rptr. 708 [fire (covered) and earth movement (excluded) ]; State Farm Fire & Casualty Co. v. Von Der Lieth, supra, 54 Cal.3d at pp. 1127-1128, 1133, 2 Cal.Rptr.2d 183, 820 P.2d 285 [third party negligence in failing to stabilize and dewater earth (covered) and earth movement and rising groundwater (excluded) ]; Brian Chuchua's Jeep, Inc. v. Farmers Ins. Group (1992) 10 Cal.App.4th 1579, 1580-1581, 1583, 13 Cal.Rptr.2d 444 [earthquake (covered) and leaking gasoline storage tank (excluded) ].)

When, however, the evidence shows the loss was in fact occasioned by only a single cause, albeit one susceptible to various characterizations, the efficient proximate cause analysis has no application. An insured may not avoid a contractual exclusion merely by affixing an additional label or separate characterization to the act or event causing the loss. Thus, in Finn v. Continental Ins. Co., supra, a loss was caused by leakage from a broken sewer pipe and coverage had been denied under an exclusion for seepage or leakage. The insured did not show some additional force, act or event had broken the pipe, but simply argued the "break," rather than the "leak," was the efficient proximate cause. (218 Cal.App.3d at pp. 71-72, 267 Cal.Rptr. 22.) The appellate court rejected that argument, holding the hypothesized "break" was not conceptually distinct from the observed "leak"; rather, " 'leakage' and 'seepage' necessarily imply some break or gap in the thing leaking." (Id. at p. 72, 267 Cal.Rptr. 22.) Consequently, the court held, the case "involved not multiple causes but only one, a leaking pipe." (Ibid.)

In the case at bar, the undisputed evidence showed the loss (the cracking walls) resulted from the use of certain deficient framing techniques in construction of the house. As in Finn, supra, homeowners here point as an efficient proximate cause to no event, action or force other than the building of the house, but simply argue the defects were in turn the result of the builder's negligence. Whether characterized as negligent, intentional or innocently inadvertent, the peril itself--the defective framing--is one and the same. To say builder...