Julian v. Hartford Underwriters Ins. Co.

• Decision Date: 05 May 2005
• Docket Number: No. S109735.,S109735.
• Citation: 35 Cal.4th 747,110 P.3d 903,27 Cal.Rptr.3d 648
• Court: California Supreme Court
• Parties: Frank JULIAN et al., Plaintiffs and Appellants, v. HARTFORD UNDERWRITERS INSURANCE COMPANY, Defendant and Respondent.

27 Cal.Rptr.3d 648

35 Cal.4th 747

110 P.3d 903

Frank JULIAN et al., Plaintiffs and Appellants, v. HARTFORD UNDERWRITERS INSURANCE COMPANY, Defendant and Respondent.

No. S109735.

Supreme Court of California.

May 5, 2005.

As Modified May 5, 2005.

The Law Offices of Kim H. Pearman, Pearman Law Corporation, Kim H. Pearman, Robert L. Pearman and Kenneth R. Nahigian, Van Nuys, for Plaintiffs and Appellants.

Chipman Miles & Associates, Chipman Miles, Brian B. Miles, Joel M. Westbrook, Walnut Creek; and Amy Bach, Mill Valley, for United Policyholders, as Amicus Curiae on behalf of Plaintiffs and Appellants.

Gary M. Cohen, Jerry L. Whitfield and Risa Salat-Kolm, San Francisco, for California Department of Insurance, as Amicus Curiae on behalf of Plaintiffs and Appellants.

Ropers, Majeski, Kohn & Bentley, Todd A. Roberts, Kevin G. McCurdy and Crystal N. Thomas, Redwood City, for Defendant and Respondent.

Willoughby, Stuart & Bening, Ronald J. Cook and Bruce M. MacLeod, San Jose, for California State Automobile Association Inter-Insurance Bureau, as Amicus Curiae on behalf of Defendant and Respondent.

Capman, Popik & White and Susan M. Popik, San Francisco, for Personal Insurance Federation of California, as Amicus Curiae on behalf of Defendant and Respondent.

MORENO, J.

California Insurance Code section 530¹ provides that "[a]n 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." We have construed section 530 as incorporating into California law the efficient proximate cause doctrine, an interpretive rule for first party insurance. (Sabella v. Wisler (1963) 59 Cal.2d 21, 31-33, 27 Cal.Rptr. 689, 377 P.2d 889 (Sabella).) Pursuant to the efficient proximate cause doctrine, "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," but "the loss is not covered if the covered risk was only a remote cause of the loss, or the excluded risk was the efficient proximate, or predominate cause." (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.)

This case calls on us to decide whether an insurer may, consistent with section 530 and the efficient proximate cause doctrine, deny coverage for a loss resulting from a rain-induced landslide by invoking, among other exclusions within a form policy, a provision that excludes coverage for losses caused by weather conditions that "contribute in any way with" an excluded cause or event such as a landslide. It is undisputed that losses proximately caused by weather conditions that do not "contribute in any way with" another excluded cause or event are covered under the policy.

Plaintiffs contend that section 530 and the efficient proximate cause doctrine prohibit their insurer from invoking this exclusion where the weather condition of rain causes a landslide. We reject this argument as an improper conflation of the covered peril of weather conditions alone with the distinct, excluded peril of a weather condition (rain) that induces a landslide, and hold that the insurer may, consistent with section 530 and the efficient proximate cause doctrine, rely on the exclusion to deny coverage for losses proximately caused by the latter peril. Accordingly, we affirm the judgment in favor of the insurer.

FACTUAL AND PROCEDURAL BACKGROUND

On February 13, 1998, following heavy rains, a slope failed above the West Hills, California home of Frank and Carole Julian. The slope failure led to a landslide. This landslide caused a tree to crash into the Julians' house. Soon thereafter, the Julians presented a claim for the resulting damage to their insurer, Hartford Underwriters Insurance Company (Hartford). The Julians had a standard form homeowners insurance policy with Hartford. This "open peril" policy² provided in relevant part, "We [Hartford] insure against risks of direct physical loss to property described in Coverage A [dwelling] and B [other structures] unless the loss is: [¶] 1. excluded under Section I— Exclusions; or [¶] 2. caused by" one of several specifically named perils. The policy also stated, "any ensuing loss to property ... not excluded or excepted in this policy is covered." The exclusions relevant to this appeal provided as follows:

"SECTION I—EXCLUSIONS

"1. We do 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: ....

"b. Earth Movement, meaning earthquake including land shock waves or tremors before, during or after a volcanic eruption; landslide; mudflow; earth sinking, rising or shifting....

"c. Water Damage....

"2. We do not insure against loss to property described in Coverages A and B caused by any of the following. However, any ensuing loss to property described in Coverages A and B not excluded or excepted in this policy is covered.

"a. Weather conditions. However, this exclusion only applies if weather conditions contribute in any way with a cause or event excluded in paragraph 1. above to produce the loss...."

We will refer to the last clause excerpted above as the "weather conditions clause." Other provisions within the Julians' policy and its amendatory endorsement excluded coverage for losses caused by, among other perils, certain types of freezing, wear and tear, neglect, and acts, errors or omissions in design or construction.

Hartford investigated the Julians' claim. An engineer retained by Hartford concluded that a landslide, triggered by heavy rainfall, brought about the damage to the Julians' house. The engineer surmised that "[w]ater is always the catalyst that causes these types of [slope] failures." Hartford also allowed for the possibility that third party negligence may have played a part in the Julians' loss. Hartford denied coverage for all but a minor part of the damage suffered by the Julians, pointing to the exclusions in the Julians' policy for acts, errors or omissions in design and construction, earth movement, and weather conditions that "contribute in any way with" another excluded cause or event, in this case a landslide, to produce a loss. Regarding the weather conditions clause, the letter Hartford sent to the Julians advising them that coverage had been denied stated, "If it were determined that the damage to your house was caused mainly by prolonged heavy rains — that is, the `cumulative effect of the recent storms' cited in the engineer's report — the `weather conditions' exclusion would apply...."

The Julians brought suit against Hartford, charging the insurer with breach of contract, breach of the covenant of good faith and fair dealing, and intentional infliction of emotional distress. The Julians alleged that the efficient proximate cause of their loss had been third party negligence, weather conditions alone "consisting of sustained rainfall," or collapse not due to flood, and that the policy did not effectively exclude any of these risks. Hartford subsequently moved for summary judgment on the ground that the Julians' policy excluded each of the perils that Hartford identified as the possible efficient proximate causes of the loss — earth movement, third party negligence, and weather conditions that "contribute in any way with" another excluded cause or event, in this case a landslide. In support of its motion for summary judgment, Hartford supplied a declaration from its engineer opining that "the proximate cause of the damage to the Julians' residence and property was a landslide, brought on by heavy rainfall associated with El Nino [sic] conditions. The total water necessary for the failure to occur was a result of the cumulative effects of the storms generated by El Nino [sic]." In opposing Hartford's motion, the Julians pointed to the engineer's opinion that rain had induced the landslide, and proffered a declaration from a geologist who opined that negligent lot design and construction, a risk that the Julians claimed was not properly excluded under the policy, had "contributed to" the Julians' loss. The Julians offered no evidence that weather conditions had caused their loss in any way apart from rain's role in triggering the landslide that caused the tree to fall onto their home. The trial court agreed with Hartford that the policy excluded each of the possible efficient proximate causes of the loss, and granted Hartford summary judgment. Upon the Julians' appeal, the Court of Appeal affirmed. In addition to rejecting the Julians' argument that the policy did not properly exclude the peril of third party negligence, an issue we do not address, the Court of Appeal determined that the weather conditions clause did not violate section 530 or the efficient proximate cause doctrine because, in the Court of Appeal's view, the clause plainly excluded weather conditions, and the limited grant of coverage for losses caused by weather conditions that did not "contribute in any way with" another excluded cause or event did not render the clause invalid or turn it into a coverage provision for all losses caused by weather conditions. In so holding, the Court of Appeal parted ways with another division of the same appellate district, which a year earlier in Palub v. Hartford Underwriters Ins. Co. (2001) 92 Cal.App.4th 645, 648, 112 Cal. Rptr.2d 270 (Palub)³ had determined that the weather conditions clause violated section 530 and the efficient proximate cause doctrine. We granted review to resolve this dispute over the validity of the weather conditions clause.

DISCUSSION

The efficient proximate cause doctrine "is neither a California invention nor novel." (Wuerfel & Koop, "...