Garvey v. State Farm Fire and Cas. Co.

• Decision Date: 30 May 1986
• Citation: 227 Cal.Rptr. 209,201 Cal.App.3d 1174
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 201 Cal.App.3d 1174 201 Cal.App.3d 1174 Jack I. GARVEY and Rita A. Garvey, Plaintiffs and Respondents, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant and Appellant. AO17878.

Page 209

227 Cal.Rptr. 209

Previously published at 201 Cal.App.3d 1174

201 Cal.App.3d 1174

Jack I. GARVEY and Rita A. Garvey, Plaintiffs and Respondents, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant and Appellant.

AO17878.

Court of Appeal, First District, Division 4, California.

May 30, 1986.

As Modified June 5, 1986.

Review Granted Sept. 18, 1986.

David W. Rudy, Feeney, Sparks and Rudy, San Francisco, for plaintiffs and respondents.

Joseph W. Rogers, Jr., Susan M. Popik, Rogers, Joseph, O'Donnell & Quinn, Otto F. Becker, Clark B. Holland, Thornton, Taylor & Downs, San Francisco, for defendant and appellant.

John R. Maloney, LeBoeuf, Lamb, Leiby & MacRae, San Francisco, for amicus curiae (Non-Marine Underwriters at Lloyd's of London).

SABRAW, Associate Justice.

Defendant State Farm Fire and Casualty Company appeals from a directed verdict and a jury verdict in favor of its insureds, plaintiffs Jack and Rita Garvey. We reverse.

I. Facts and Procedure

Plaintiffs bought their house in the mid-1970s. A few years later they noticed that a house addition which had been built in the early 1960s had begun to pull away from the main structure. There ensued numerous phone calls, letters, meetings and investigations as plaintiffs tried to determine from defendant whether the damage was covered by their homeowner's property insurance policy. After many months of investigation defendant told plaintiffs they were not covered because the policy specifically excluded coverage for earth movement.

Plaintiffs sued, claiming that although their policy excluded coverage for damage caused by earth movement, it provided coverage for damage caused by negligence. They asserted their loss was caused mainly (or at least proximately) by negligent construction of the house addition and hence the loss was covered. They also claimed that defendant had decided to deny their claim before adequately investigating, that subsequent "investigations" were undertaken merely to confirm the original denial, and that, therefore, denial constituted, inter alia, breach of the implied covenant of good faith and fair dealing. Plaintiffs sought as relief (i) policy benefits, (ii) general damages for economic detriment and emotional distress, and (iii) punitive damages.

After defendant rested on the twelfth day of trial the court granted a directed verdict for plaintiffs on the coverage issue. The court informed the parties it was following the Supreme Court's decision in State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94, 109 Cal.Rptr. 811, 514 P.2d 123, and that plaintiffs were covered under their policy because negligent construction, a covered risk, was a concurrent proximate cause of the damage. The jury subsequently found defendant liable for $47,000 in policy benefits and general damages, and one million dollars in punitive damages. The court denied defendant's motions for judgment notwithstanding the verdict and for a new trial, and declined to issue a remittitur with respect to the punitive damages award. This appeal followed.

II. Analysis

This case presents a not uncommon question of coverage under a so-called "all risk" insurance policy: when one cause of a loss is an excluded risk, and another cause of the same loss is a covered risk, how does a court determine whether the policy provides coverage? Defendant contends that under our facts both Insurance Code section 532 and case law require that we determine there was no coverage. Defendant is wrong on each contention. ¹ We conclude however, that the trial court incorrectly directed the verdict on the coverage issue.

A. The Two Tests: Sabella's "Moving Cause" and Partridge's "Concurrent Proximate Cause"

In Sabella v. Wisler, supra, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889, our Supreme Court considered how to determine coverage under a property insurance policy when both an excluded risk and a covered risk allegedly join together to cause a loss. A building contractor had constructed a house on uncompacted fill and negligently installed a sewer line (a risk covered by the homeowner's policy) that eventually ruptured, either because of the surrounding settling earth or because of improperly connected joints in the line. In any event, the rupture caused water to flow into the ground surrounding the plaintiffs' house; consequently the earth settled (an excluded risk), causing damage: severe cracks in the home's foundation. Sabella established that in determining coverage in such a case a court should isolate the single cause that set in motion any other "causes" or "forces" or "chain of events" that led directly to the damage. If this cause--variously termed the "moving," "efficient," "proximate," "prime," or "efficient proximate" cause (hereafter "moving cause")--is a covered risk, Sabella mandates policy coverage; if, on the other hand, the moving cause is an excluded risk, Sabella provides there shall be no coverage. Applying this test, the Sabella court concluded the broken pipe was the moving cause and hence the policy covered the loss. (Id., at pp. 31-32, 27 Cal.Rptr. 689, 377 P.2d 889.)

The Supreme Court eventually found that not all fact situations are amenable to Sabella's single moving cause analysis because in some cases it is impossible to isolate the moving cause of the damage. This is well illustrated in State Farm Mut. Aut. Ins. Co. v. Partridge, supra, 10 Cal.3d 94, 109 Cal.Rptr. 811, 514 P.2d 123, in which the court was forced to determine coverage under a homeowner's liability insurance policy that excluded coverage for injury arising out of the use of a motor vehicle. In Partridge the insured filed the trigger of his .357 magnum pistol to produce a "hair trigger action." This modification was itself a negligent act (a risk covered under the homeowner's policy) that created an exceptionally dangerous weapon. Later, while engaged in the manly sport of rabbit hunting at night in his four-wheel drive Ford Bronco, the insured brandished his gun in one hand as he drove from a paved road onto rough terrain in order to chase an escaping rabbit caught in the Bronco's headlights. This second negligent act, driving a vehicle over rough terrain with a pistol in hand ² (an excluded risk because a vehicle was involved), operated concurrently with the former negligent act (a covered risk) to produce injury: the gun discharged, severely injuring the insured's passenger. The passenger sued the insured, whose insurance company promptly sought declaratory judgment to determine, inter alia, whether the loss was covered by the homeowner's liability policy.

The Supreme Court agreed with the trial court that the two negligent acts were "independent, concurrent proximate causes" of the passenger's injuries (10 Cal.3d at p. 99, 109 Cal.Rptr. 811, 514 P.2d 123) and quoted the court's findings in this regard: "There were two separate, distinct and different acts of negligence committed by [the insured], one of which was entirely disconnected with the use of a motor vehicle [i.e., the excluded risk]." (Id., at p. 100, 109 Cal.Rptr. 811, 514 P.2d 123.)

Faced with such independent concurrent causes (id., at p. 103), the court recognized that the Sabella approach--under which the court would attempt to isolate the moving cause of the loss, i.e., the one which caused the other--simply would not work (id., at p. 104, fn. 10, 109 Cal.Rptr. 811, 514 P.2d 123): Because the two causes of the loss were independent of each other, it was impossible to determine which came first or set in motion the other. ³ Under these circumstances, the court held, "coverage under a liability insurance policy is equally available to an insured whenever an insured risk constitutes simply a concurrent proximate cause of the injuries." (Id., at pp. 104-105, 109 Cal.Rptr. 811, 514 P.2d 123; emphasis in original.)

Both parties seize on this and similar language in Partridge to advance their respective views. Defendant suggests that because the court repeatedly mentioned it was construing liability insurance coverage, its rule--i.e., the independent concurrent proximate cause analysis--should apply only to such "third party" policies, and not to "first party" property insurance coverage cases. Plaintiffs, on the other hand, suggest that coverage will be found under the Partridge rule whenever, as Partridge itself stated, a covered risk "constitutes simply a concurrent proximate cause" of the damage. Both positions are wrong.

1. Applicability of Partridge to Property Insurance Cases

Contrary to defendant's position, nothing in Partridge suggests the analysis in that decision is or should be confined to third party liability insurance cases. Partridge referred specifically to liability insurance because that was the type of policy under consideration there. As plaintiffs observe, Partridge itself cited first party accident and property insurance cases to support its holding. (10 Cal.3d at pp. 103-105, 109 Cal.Rptr. 811, 514 P.2d 123, relying on the following first party cases: Brooks v. Metropolitan Life Ins. Co. (1945) 27 Cal.2d 305, 163 P.2d 689; Sabella v. Wisler, supra, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889; Hughes v. Potomac Ins. Co. (1962) 199 Cal.App.2d 239, 18 Cal.Rptr. 650; Zimmerman v. Continental Life Ins. Co. (1929) 99 Cal.App. 723, 279 P. 464.) If anything emerges from the interchangeable citations in Partridge to first and third party cases, it is that there is no distinction between them as to coverage analysis. In any event--and despite defendant's lengthy and rather disjointed argument to the contrary--we perceive no logical reason why coverage analysis should differ merely because of the nature of the policy under consideration. ⁴

2. Partridge's "Independence" Requirement

Plaintiffs' suggestion that Partridge authorizes concurrent proximate cause analysis whenever an insured risk is simply a concurrent proximate cause of damage finds specific support in the Partridge opi...