Howell v. State Farm Fire & Casualty Co.

Decision Date22 March 1990
Docket NumberNo. A044405,A044405
Citation218 Cal.App.3d 1446,267 Cal.Rptr. 708
CourtCalifornia Court of Appeals Court of Appeals
PartiesBarbara HOWELL, Plaintiff and Appellant, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant and Respondent.

Ellen Lake, Miles & Brummitt, Randall C. Brummitt, Chipman Miles, Oakland, for plaintiff and appellant.

Rogers, Joseph, O'Donnell & Quinn, Nance F. Becker, Suzanne M. Mellard, Susan M. Popik, Joseph Sandoval, San Francisco, for defendant and respondent.

WHITE, Presiding Justice.

Plaintiff Barbara Howell appeals after the trial court granted State Farm Fire and Casualty Company's motion for summary judgment in an action for damages arising from State Farm's refusal to compensate Ms. Howell for landslide damage to her real property. We reverse.

This case presents two primary issues for our consideration. First, we must decide whether an insurer providing coverage under an "all risk" property insurance policy may contractually exclude coverage when an insured peril is the "efficient proximate cause" of a loss. We conclude that an insurer may not contractually limit its liability in this manner. Secondly, we must determine whether there is a triable issue of fact that the "efficient proximate cause" of the loss in this case was a covered peril (namely, fire). Since we conclude there is a triable issue of fact concerning this issue, we reverse the summary judgment.

FACTS

Summary judgment is proper only if there is no triable issue of fact and, as a matter of law, the moving party is entitled to judgment. (Code Civ.Proc., § 437c.) "In reviewing a summary judgment, we are limited to the facts shown in the affidavits and those admitted and uncontested in the pleadings. We determine only whether the facts so shown give rise to a triable issue of fact. [In making this determination] the moving party's papers are strictly construed, while those of the opposing party are liberally construed." (Steele v. Totah (1986) 180 Cal.App.3d 545, 549, 225 Cal.Rptr. 635; see also Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107, 252 Cal.Rptr. 122, 762 P.2d 46.) Viewed in light of these rules, the record discloses the following facts:

Plaintiff and appellant Barbara Howell is the owner of a 17-acre parcel of land in Lafayette, California, which is the site of her home, three rental units, and a commercial dog kennel. At the time of the events pertinent to this appeal, State Farm insured Ms. Howell's property through five separate policies: a homeowners policy for the residence, three identical rental dwelling policies for the rental units, and a commercial policy for the kennel.

The Howell property is located on a slope which is subject to landslides. In the summer of 1985, a fire destroyed much of the vegetation on the slope, and, during the following winter, unusually heavy rains drenched the property. Because of the loss of vegetation, the soils on the denuded slope could not withstand the severe rainfall and a major landslide occurred. According to appellant's expert, the landslide probably would not have happened had the ground cover been intact. Specifically, the expert's report concluded: "Although water was the slide's actuating mechanism, resistance to failure was severely impaired by destruction of the area's natural biotechnical slope protection. On 6/28/85 the slope that failed was devastated by a fire. The destruction of the vegetation and rooting at the surface caused a[n] adverse modification to the hydrologic regime in the soil.... [p] In my opinion, if the vegetation had not been destroyed by the fire, the slope failure ... probably would not have occurred." This conclusion was based in part on the fact that no slides had occurred when the vegetation was in place even though there had been greater amounts of rainfall in past years.

Shortly after the landslide occurred, Ms. Howell filed a claim for slide damage under each of her five State Farm policies. In a series of five letters written in the spring of 1986, State Farm denied Ms. Howell's claims. Each letter stated that the loss was not covered because it was caused by perils (earth movement and water damage) which had been specifically excluded under the policies.

In particular, the homeowners and rental policies each provided coverage against "accidental direct physical loss" to the "dwelling" and "other structures on the residence premises, separated from the dwelling by clear space...." The exclusions section of the homeowners policy provided in pertinent part: "We do not insure under any coverage for loss (including collapse of an insured building or part of a building) which would not have occurred in the absence of one or more 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 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 this section. 1

The exclusion provision of the rental dwelling policies is functionally identical to the homeowners exclusion quoted above, except for a slightly different definition of "Earth Movement." 2

The commercial policy provided coverage for "building(s) or structure(s)" against "direct physical loss unless the loss is excluded...." The exclusions section provided in pertinent part: "This policy does not insure against loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.... [p] C. Loss caused by, resulting from, contributed to or aggravated by any of the following: [p] 1. earth movement ... [218 Cal.App.3d 1451] [p] 2. flood, [or] surface water ... [p] 4. water below the surface of the ground...." 3 After State Farm denied her claims, Ms. Howell filed the instant action for damages. She alleged causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, intentional and negligent misrepresentation, violation of Insurance Code sections 790.2 and 790.3, and breach of fiduciary duty.

State Farm's answer generally denied the complaint's allegations and advanced several affirmative defenses, including the policies' exclusion for earth movement and water damage. As an additional affirmative defense, State Farm contended that it was "informed and believes ... that there has been no physical loss to any property covered under the policy."

Subsequently, State Farm filed a motion for summary judgment, contending that Ms. Howell's policies did not cover her losses because (1) the policies excluded losses resulting from earth movement and water damage; and (2) the policies provided coverage only for physical loss to buildings and structures and the only damage had been to Ms. Howell's land.

In opposition, Ms. Howell argued that the 1985 fire was the efficient proximate cause of her loss since it had permitted the landslide to occur. Consequently, under Insurance Code section 530 and California case law, the earth movement and water damage exclusions did not bar recovery under the policies. In response to State Farm's claim that there was no damage to insured property, Ms. Howell contended that there was damage to insured structures and, additionally, State Farm had waived the right to assert the absence of such damage when it failed to raise it in the letters denying coverage.

The superior court granted State Farm's motion, reasoning that Ms. Howell's losses were not covered because of the policies' earth movement exclusion. The court expressly declined to decide whether there had been any damage to insured property.

This timely appeal followed.

DISCUSSION
A. California Law Requires a Property Insurer to Provide Coverage When an Insured Peril is the Efficient Proximate Cause of a Loss.

State Farm contends that the exclusions contained in its policies preclude recovery by the plaintiff because the loss would not have occurred "but for" an excluded peril (earth movement). Stated simply, the important question presented by this case is whether a property insurer may contractually exclude coverage when a covered peril is the efficient proximate cause of the loss, but an excluded peril has contributed or was necessary to the loss. We conclude that a property insurer may not limit its liability in this manner, since the statutory and judicial law of this state make the insurer liable whenever a covered peril is the "efficient proximate cause" of the loss, regardless of other contributing causes. 4 Consequently, the policy exclusions at issue in this case are not enforceable to the extent they conflict with California law.

Our analysis of this issue begins with Insurance Code sections 530 and 532. These apparently contradictory sections state: "An 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." (Ins.Code, § 530.)

"If a peril is specially excepted in a contract of insurance and there is a loss which would not have occurred but for such peril, such loss is thereby excepted even though the immediate cause of the loss was a peril which was not excepted." (Ins.Code, § 532.)

The apparent conflict between these two sections was resolved by the Supreme Court in Sabella v. Wisler (1963) 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889. There the insureds' home was damaged when water escaping from a negligently installed sewer pipe caused the home's foundation to settle. The insureds' policy covered damage caused by negligence but excluded loss caused by settlement. (Id., at pp. 23-27, 27 Cal.Rptr. 689, 377 P.2d 889....

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