Findlay v. United Pacific Ins. Co.

Decision Date06 June 1996
Docket NumberNo. 63129-8,63129-8
Citation917 P.2d 116,129 Wn.2d 368
PartiesJ. Duncan FINDLAY and Mary E. Findlay, individually and as a marital community, Petitioners, v. UNITED PACIFIC INSURANCE COMPANY, Respondent.
CourtWashington Supreme Court

Reed McClure, Michael S. Rogers, William R. Hickman, Seattle, Harbaugh & Bloom, Gary N. Bloom, Spokane, Debra Stephens, Bryan Harnetiaux, Spokane, for Amicus Curiae.

Ryan, Swanson & Cleveland, John T. Petrie, Seattle, Tewell & Findlay, Andrew Weisbecker, Seattle, for Petitioner.

Bullivant, Houser, Bailey, Pendergrass & Hoffman, Robert F. Riede, James Derrig, Jerret E. Sale, Seattle, for Respondent.

GUY, Justice.

Facts

This case involves a dispute regarding coverage under a homeowners insurance policy. The policyholders, Mary and Duncan Findlay, own a summer cabin which is at the base of a steep slope on a beach in Snohomish County. In early 1991, the slope behind the cabin failed, sliding into the rear of the cabin and causing structural damage. The landslide was caused by rain and wind. The parties agree that heavy rainstorms provided the initial source of water penetration into the steep slope. Then high winds, generated by severe storms, caused large tree roots to loosen the soils on the slope. Subsequent rains penetrated the loose soils and the landslide occurred.

The Findlays had an all-risk homeowners insurance policy with United Pacific Insurance Company. In the "Perils Insured Against" section, the policy states:

We insure for risk of direct physical loss to the property described in Coverages A, B and C EXCEPT: ....

Coverage A, which is now at issue, provides insurance for the dwelling. The "Exclusions" section of the policy states in relevant part:

WE DO NOT COVER LOSS RESULTING DIRECTLY OR INDIRECTLY FROM:

                B. EARTH MOVEMENT TO PROPERTY DESCRIBED IN COVERAGES A
                        DIRECT LOSS CAUSED BY
                RESULTING FROM, CONTRIBUTED TO OR AGGRAVATED BY
                       1.  EARTHQUAKE, LANDSLIDE, MUDFLOW, EARTH SINKING, RISING OR SHIFTING[.]
                

....

WE DO NOT INSURE FOR LOSS TO PROPERTY DESCRIBED IN COVERAGES A ... CAUSED BY ANY OF THE FOLLOWING. HOWEVER, ANY ENSUING LOSS NOT EXCLUDED OR EXCEPTED IN THIS POLICY IS COVERED.

1. WEATHER CONDITIONS, HOWEVER, THIS EXCLUSION ONLY APPLIES IF WEATHER CONDITIONS CONTRIBUTE IN ANY WAY WITH ANY EVENT EXCLUDED IN ITEMS A. THROUGH H. ABOVE TO PRODUCE THE LOSS[.]

The Findlays submitted a claim for the damage to the cabin to United Pacific. The insurer denied coverage on the basis that the weather conditions of rain and wind triggered earth movement to cause the damage and that such a loss was not covered due to the "earth movement" and "weather conditions" exclusions. The Findlays filed an action for a declaratory judgment arguing that these exclusions violated the "efficient proximate cause" rule and should not be enforced.

The parties agreed there was no issue of fact and filed cross motions for summary judgment. The parties agreed that the "efficient proximate cause" of the loss was the rain and wind. The trial court granted the insurer's motion and dismissed the Findlays' action. 1

Division One of the Court of Appeals affirmed the trial court's summary judgment. Findlay v. United Pac. Ins. Co., 78 Wash.App. 17, 895 P.2d 32, review granted, 127 Wash.2d 1021, 904 P.2d 1158 (1995). We accepted review and now affirm the Court of Appeals' decision.

Issue

Does the efficient proximate cause rule apply to mandate coverage when an insurance policy excludes coverage for the peril which was the proximate cause of the loss?

Analysis

In 1983, this Court adopted the "efficient proximate cause" rule. Graham v. Public Employees Mut. Ins. Co., 98 Wash.2d 533, 538, 656 P.2d 1077 (1983). This rule addresses the issue of whether an all-risk insurance policy covers a loss caused by two or more perils when one of the perils is excluded and the other peril is covered. Graham explained that:

Where a peril specifically insured against sets other causes in motion which, in an unbroken sequence and connection between the act and final loss, produce the result for which recovery is sought, the insured peril is regarded as the "proximate cause" of the entire loss.

It is the efficient or predominant cause which sets into motion the chain of events producing the loss which is regarded as the proximate cause, not necessarily the last act in a chain of events.

Graham, 98 Wash.2d at 538, 656 P.2d 1077 (citations omitted). See also 5 John A. Appleman & Jean Appleman, Insurance Law and Practice § 3083, at 309 (1970); 18 Ronald A. Anderson, Couch on Insurance § 74:709, at 1019 (2d rev. ed.1983). The identification of a certain event as the efficient proximate cause of a loss is usually a question of fact. Graham, 98 Wash.2d at 539, 656 P.2d 1077. However, in the present case, the Findlays and United Pacific agree that the efficient proximate cause of the loss was the weather conditions of rain and wind.

In the cases since Graham, we have consistently adhered to the proximate cause rule. Villella v. Public Employees Mut. Ins. Co., 106 Wash.2d 806, 815, 725 P.2d 957 (1986); Safeco Ins. Co. v. Hirschmann, 112 Wash.2d 621, 625, 773 P.2d 413 (1989); McDonald v. State Farm Fire & Casualty Co., 119 Wash.2d 724, 731, 837 P.2d 1000 (1992); Kish v. Insurance Co. of N. Am., 125 Wash.2d 164, 169, 883 P.2d 308 (1994).

The policyholders here rely on the Villella and Hirschmann cases for the proposition that the efficient proximate cause rule applies to mandate coverage under the policy involved in this case. We disagree. The holdings in those cases are consistent with the trial court's and Court of Appeals' denial of coverage under the facts and policy language of the present case.

In Villella, the homeowners sought coverage for damage to the foundation of their home allegedly caused by the builder's failure to install a proper drainage system. They claimed the damage resulted from the builder's negligence (a covered peril), and the insurer claimed the damage resulted from the earth movement (an excluded peril). The homeowner argued the builder's negligence set in motion a sequence of events (including earth movement) culminating in the damage to the house. The policy excluded losses resulting directly or indirectly from earth movement, which included loss " 'caused by, resulting from, contributed to or aggravated by ... earth sinking, rising or shifting.' " Villella, 106 Wash.2d at 809, 725 P.2d 957.

We adhered to the Graham proximate cause rule quoted above and explained: Stated in another fashion, where an insured risk itself sets into operation a chain of causation in which the last step may have been an excepted risk, the excepted risk will not defeat recovery.

Villella, 106 Wash.2d at 815, 725 P.2d 957. We held that the policy would cover the loss if the builder's negligence was the efficient proximate cause. Although earth movement was one cause in the chain of causation, the alleged efficient proximate cause of the loss was the purported negligence of the builder. We therefore remanded for the factual determination of whether the negligence was the efficient proximate cause of the loss. If so, the earth movement exclusionary clause would not exclude coverage. Application of the proximate cause rule to allow coverage was appropriate because the builder's negligence was a peril that was covered by the insurance policy. The policy in Villella did preclude coverage for earth movement, but it did not exclude losses caused by both earth movement and another covered peril. It was not clear from the policy that the loss which occurred would not be covered. Absent extrinsic evidence showing intent, an ambiguous clause in an insurance policy will be strictly construed against the insurer. The rule strictly construing ambiguities in favor of the insured applies with added force to exclusionary clauses which seek to limit policy coverage. E.g., American Star Ins. Co. v. Grice, 121 Wash.2d 869, 874-75, 854 P.2d 622 (1993). In Villella, a straightforward application of the efficient proximate cause rule provided coverage because, under the policy, the alleged proximate cause was an insured risk. This is different from the present case where the proximate cause of the loss (the weather) was a specific named exclusion in the insurance policy.

The Hirschmann case, also relied upon by the Findlays, had very similar facts to this case with regard to the loss, but the insurance policy was significantly different from the United Pacific policy in the present case. In the Hirschmann case, heavy rains saturated the soil causing a landslide which pushed a house off its foundation. The homeowners insurance policy covered loss caused by rain, which was the efficient proximate cause of the loss. However, the policy excluded coverage for damage due to a number of causes (including earth movement) "whether occurring alone or in any sequence with a covered peril." The insurer contended that this broad exclusionary language excluded coverage for any loss resulting from a causal chain which included any excluded peril, regardless of how insignificant the contribution from the excluded peril may have been. We held that an insurer could not, by drafting a variation in exclusionary clause language, deny coverage when a covered peril sets in motion a causal chain the last link of which is an excluded peril. Hirschmann, 112 Wash.2d at 626-27, 773 P.2d 413. It was impossible to tell from reading the policy in that case what losses were being covered and what losses were being excluded.

Because the disputed language in the Hirschmann policy ("whether occurring alone or in any sequence with a covered peril") was in an introductory section, it applied to all exclusions and, if we had accepted the insurer's interpretation, any contribution by any excluded peril, however insignificant, would have always eliminated coverage for a loss. This would have been the...

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