Farmers Ins. Exchange v. Adams

• Citation: 216 Cal.Rptr. 287,170 Cal.App.3d 712
• Court: California Court of Appeals
• Decision Date: 29 July 1985
• Parties: FARMERS INSURANCE EXCHANGE et al., Plaintiffs and Appellants, v. Lueverda ADAMS et al., Defendants and Respondents. A021020.

Page 287

216 Cal.Rptr. 287

170 Cal.App.3d 712

FARMERS INSURANCE EXCHANGE et al., Plaintiffs and Appellants, v. Lueverda ADAMS et al., Defendants and Respondents.

A021020.

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

July 29, 1985.

Review Denied October 16, 1985.

John B. Hook, Marsha L. Morrow, Michael P. McKisson, Long & Levit, San Francisco, for plaintiffs and appellants.

David W. Rudy, Feeney, Sparks & Rudy, San Francisco, Perry D. Litchfield, Costamagna, Ceccotti & Litchfield, San Rafael, for defendants and respondents.

MERRILL, Associate Justice.

The appellants in this action, Farmers Insurance Exchange, Fire Insurance Exchange, Truck Insurance Exchange and Mid-Century Insurance Company (Farmers) filed a complaint for declaratory relief in Marin County against over 300 named defendants (Insureds) and 5,000 doe defendants. The complaint was later amended to name further defendants. Two demurrers and motions to dismiss were filed by Insureds; one by Christopher and Judith Bryant and one by Richard J. and Patricia Daly. The trial court sustained the demurrers without leave to amend and dismissed the amended complaint. ¹ Judgment was entered accordingly. This appeal followed.

I

In our review of the judgment entered pursuant to the order sustaining the general demurrer, we must accept the material facts alleged in the complaint as true. (Shaeffer v. State of California (1970) 3 Cal.App.3d 348, 355, 83 Cal.Rptr. 347.) The following are the material facts set forth in Farmers' amended complaint.

Northern California experienced a heavy storm in early January of 1982. Many homeowners experienced damage to their real and/or personal property because of subsurface and ground water and earth movement conditions.

Each of the more than 300 named defendants were insured at the time of the storm by one of six types of Farmers' homeowners policies. These policies are "all risk" policies which enumerate various exclusions from coverage including "losses caused by, resulting from, contributed to, aggravated by, or caused indirectly or directly by any earth movement, water damage, or enforcement of ordinance or law." Each of the named Insureds has reported damage to property arising out of conditions created by the January storm, and has submitted a claim under one of the policies issued by Farmers. Insureds reside in communities throughout Northern California from Yuba City to Moss Beach. Farmers denied the claims on the ground that the "efficient proximate cause" of Insureds' losses are excluded perils. The Insureds, on the other hand, contend that included risks were contributing causes of their losses giving rise to coverage under their policies.

By their amended complaint, Farmers sought the following declaration: "[T]hat because of the exclusions and exceptions set forth in the various property insurance policies issued by plaintiffs to defendants, that said policies do not provide coverage for damage or losses arising out of the January storm because the efficient proximate cause of the damage or loss claimed was an excluded cause, notwithstanding that one or more intermediate causes may have contributed to the loss or damage."

II

This appeal presents the question of whether under the factual situation of the case at bench the "efficient proximate cause" analysis, propounded in Sabella v. Wisler (1963) 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889, is necessarily the only analysis to be utilized in determining an insurer's liability for loss under an all-risk homeowner's policy. We hold that it is not.

California courts have applied an "efficient proximate cause" analysis in determining coverage under insurance policies which contain clauses excluding certain risks or perils. It has been adhered to most often in finding that coverage did exist. The basis of these decisions is that where there is one cause which sets other causes in motion, there is coverage for the loss if the cause which set the others in motion is an included risk under the terms of the policy. This is so even though there might be an excluded risk which also contributed to the loss or damage. (Sabella v. Wisler, supra, 59 Cal.2d at pp. 31-32, 27 Cal.Rptr. 689, 377 P.2d 889; Brooks v. Metropolitan Life Ins. Co. (1945) 27 Cal.2d 305, 309-310, 163 P.2d 689.) Our courts have also applied "a concurrent proximate cause" analysis. The import of these holdings is that where there are multiple causes for a loss, one of which is an included risk and one of which is an excluded risk, there is coverage if "a concurrent proximate cause" of the harm is an included risk under the terms of the policy. (State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94, 102-105, 109 Cal.Rptr. 811, 514 P.2d 123; Premier Ins. Co. v. Welch (1983) 140 Cal.App.3d 720, 727, 189 Cal.Rptr. 657.)

Appellants contend that the exclusions in an all-risk homeowner's property damage policy should be construed to exclude insurance coverage whenever the efficient proximate cause of the loss is an excluded peril. In asserting this proposition, they rely primarily on Sabella v. Wisler, supra. However, Farmers' reliance on the Sabella case is misplaced.

Sabella concerned an action by property owners against their insurer for recovery under a policy insuring against "all physical loss." Among other things, the policy excluded loss by settling, cracking and shrinkage.

The home which the insureds purchased in the Sabella case had been built upon filled land. Although the builder was an experienced contractor, he failed to discover the filled nature of the ground or to have tests performed upon the land for such purpose. As a result of the negligence of the builder, the sewer line developed a leak and waste water infiltrated the unstable soil causing subsidence damage to the insureds' house. The trial court concluded that the insurer was exempt from liability as the proximate cause of the loss was "settling," an excluded risk. (Sabella v. Wisler, supra, 59 Cal.2d at pp. 24-26, 27 Cal.Rptr. 689, 377 P.2d 889.) The Supreme Court reversed, holding there was coverage because the rupture of the sewer line, attributable to the negligence of a third party, rather than settling, was the efficient proximate cause of the loss. (Id., at pp. 31-32, 27 Cal.Rptr. 689, 377 P.2d 889, citing 6 Couch, Insurance (1930) § 1463, p. 5298.)

The Sabella court analogized the proximate causation problem therein to that in Brooks v. Metropolitan Life Ins. Co., supra, 27 Cal.2d 305, 163 P.2d 689. In the Brooks case recovery was allowed on a policy insuring against death by accidental means, where the insured, while suffering from an incurable disease, an excluded peril, died in a fire. The Brooks court held that recovery may be had even though a diseased or infirm condition appears to contribute to the death if the included risk, the accident, "sets in progress the chain of events leading directly to death, or if it is the prime or moving cause." (Id., at pp. 309-310, 163 P.2d 689.)

The Sabella case concerned itself with proximate causation in the context of one moving cause and one immediate cause of the damage. In such a circumstance, the Supreme Court held recovery may be had if the efficient moving cause was an included risk under the policy. Clearly the holding in Sabella did not rule out the possibility that there may be coverage when an included peril is a concurrent proximate cause with an excluded peril.

Appellants next assert that cases subsequent to Sabella have adopted the efficient moving cause analysis outlined therein and that this demonstrates the Sabella analysis is the only one to be made in cases of multiple causes and included and excluded risks. In support of this argument appellants cite Sauer v. General Ins. Co. (1964) 225 Cal.App.2d 275, 37 Cal.Rptr. 303 and Gillis v. Sun Ins. Office, Ltd. (1965) 238 Cal.App.2d 408, 47 Cal.Rptr. 868. Neither of these cases provide comfort to Farmers' position.

Similar to Sabella, the Sauer case concerned property damage as a result of a leak in the water pipes below the insureds' home. Water from the pipe leaked into the ground beneath the home, causing the structure to settle and damaging the walls, floors and foundation. The insureds filed a declaratory relief action concerning their rights and obligations under their "home-owner's policy." The policy insured against loss caused by accidental discharge or leakage of water from plumbing. The policy excluded liability for loss caused by earth movement, subsurface water, and settling and cracking. After a court trial, judgment was entered in favor of the insurance company. (Sauer v. General Ins. Co., supra, 225 Cal.App.2d at pp. 276-277, 37 Cal.Rptr. 303.)

The Court of Appeal in Sauer, after extensive recitation of Sabella, concluded without further discussion that the insured was entitled to recovery because the efficient proximate cause of the loss was an included risk, the accidental discharge and leakage of water. (Sauer v. General Ins. Co., supra, 225 Cal.App.2d at pp. 278-280, 37 Cal.Rptr. 303.) We are not persuaded that Sauer's application of the efficient proximate cause analysis to a factual situation parallel to Sabella demonstrates that this is the sole analysis to be applied in all multiple causation fact patterns.

We do not find the Gillis case helpful to Farmers' position. In that case the trial court found that a violent windstorm caused the gangway to be lifted and to fall violently on the insured's docking facility. This caused the docking facility to subside into the water. (Gillis v. Sun Ins. Office, Ltd., supra, 238 Cal.App.2d at pp. 416-417, 47 Cal.Rptr. 868.)

The fire insurance policy in Gillis insured against loss or damage caused by wind but it " 'excluded coverage for loss occurring to the docking facility caused by water or damage from, contributed to or aggrevated [sic ] by surface water or waves.' " (Id., at p. 415, 47 Cal.Rptr. 868.) The...