Palub v. Hartford Underwriters Ins. Co.

• Decision Date: 27 September 2001
• Docket Number: No. B145278.,B145278.
• Citation: 112 Cal.Rptr.2d 270,92 Cal.App.4th 645
• Court: California Court of Appeals Court of Appeals
• Parties: Rita PALUB et al., Plaintiffs and Appellants, v. HARTFORD UNDERWRITERS INSURANCE COMPANY et al., Defendants and Respondents.

112 Cal.Rptr.2d 270

92 Cal.App.4th 645

Rita PALUB et al., Plaintiffs and Appellants, v. HARTFORD UNDERWRITERS INSURANCE COMPANY et al., Defendants and Respondents.

No. B145278.

Court of Appeal, Second District, Division 5.

September 27, 2001.

Certified for Partial Publication.^*

Review Denied Dec. 12, 2001.

Steven W. Murray, Encino, for Plaintiffs and Appellants.

Ropers, Majeski, Kohn & Bentley and Kevin G. McCurdy, San Jose, for Defendants and Respondents.

ARMSTRONG, J.

Appellants Rita and Virgil Palub bought a Hartford all-risk homeowners' policy that included property and liability insurance. In 1998, their home was badly damaged. To quote their complaint, their home "was destroyed, rendered uninhabitable, and collapsed as a result of a slope failure above and behind their property." Appellants sought coverage, alleging that their property damage was caused by three covered perils: third party negligence, weather conditions alone, and/or collapse. Hartford denied coverage. Appellants sued, bringing causes of action for breach of contract, breach of the covenant of good faith and fair dealing, and other causes of action. Hartford's motion for judgment on the pleadings was granted with leave to amend. Appellants chose not to amend and the case was dismissed.

The essential question before the trial court, and before us on this appeal, is whether appellants' complaint sufficiently alleged that they suffered covered losses. Since the scope of coverage under an all risk homeowner's policy includes all risks except those specifically excluded by the policy (State Farm Fire & Cas. v. Von Der Lieth (1991) 54 Cal.3d 1123, 1131, 2 Cal. Rptr.2d 183, 820 P.2d 285) we are for the most part concerned with exclusions. After a de novo review (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 198, 51 Cal. Rptr.2d 622) we find that appellants did not state a cause of action for loss caused by collapse, since collapse was not a cause of loss. We further agree with Hartford that the policy excludes coverage for loss caused by third party negligence. However, we agree with appellants that the policy covers loss caused by weather conditions and that the policy provision which seeks to exclude loss caused by weather in combination with an uncovered cause of loss violates Insurance Code section 530.¹ (Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal.3d 395, 403, 257 Cal.Rptr. 292, 770 P.2d 704.) We thus reverse the dismissal.²

In the unpublished portions of this opinion, we discuss appellants' causes of action based on breach of the liability coverage portions of the policy, as well appellants' other causes of action.

APPELLANTS' EARLIER MOTION FOR SUMMARY ADJUDICATION^**

DISCUSSION

Appellants' complaint alleged that their home was damaged "as a result of a slope failure above and behind their property which fell down on them," and that "the efficient proximate causes of the slope failure were (a) third party negligence, (b) weather conditions alone; and/or (c) collapse," all of which appellants alleged were covered perils.⁵ We consider each alleged cause, beginning with the one of most interest, weather conditions.

Weather Conditions

We first address Hartford's argument that appellants did not state any cause of action based on coverage for loss caused by weather conditions, because the complaint alleges that weather conditions were the proximate cause of the slope failure, not that weather conditions were the proximate cause of the damage to their house. We agree that appellants' pleading and proof burden concerns the proximate cause of damage to their home, not the slope, since the policy covers structures not land. However, on review of a grant of judgment on the pleadings, we give the complaint a reasonable interpretation by reading it as a whole and all of its parts in their context. (Lance Camper Manufacturing Corp. v. Republic Indemnity Co., supra, 44 Cal.App.4th at p. 198, 51 Cal. Rptr.2d 622.) On such a reading, the import of the complaint is clear: appellants alleged that weather conditions were the efficient proximate cause of their loss, because weather caused the slope to fail.

This brings us to the central question. Under California law, where a loss occurs through a concurrence of covered perils and perils that are not covered, the insurer is liable if a covered peril is the efficient proximate cause, also described as the predominating cause, of the loss.⁶ (Garvey v. State Farm Fire & Casualty Co., supra, 48 Cal.3d at p. 403, 257 Cal. Rptr. 292, 770 P.2d 704.) Both parties cite this rule and agree that earth movement is an excluded peril. They disagree on another question: is loss caused by weather excluded by this policy?

In a section titled "Exclusions," the policy provides that "We do not insure against loss to property ... caused by any of the following .... [¶] (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."

On a careful reading of this clause, it is apparent that despite the title of the section, weather conditions are not an excluded cause of loss. To the contrary, under the terms of the purported exclusion, loss caused by weather conditions is covered, so that Hartford would be clearly obligated to pay if appellants' house had been damaged by rain or wind. What the "exclusion" seeks to do is to exclude loss caused by a combination of weather conditions and an excluded cause of loss such as earth movement. To the extent that the "exclusion" would exclude loss proximately caused by weather conditions, it violates Insurance Code section 530 and the long-standing principle that a property insurer is liable whenever a covered risk is the proximate cause of a loss, and is unenforceable.

Howell v. State Farm Fire & Casualty Co. (1990) 218 Cal.App.3d 1446, 1453-1454, 267 Cal.Rptr. 708 is on point. In that case, which reached the Court of Appeal after summary judgment, the insureds' property was located on a slope. Fire destroyed the vegetation, the slope failed after heavy rains, and the insured's home and rental property were damaged. State Farm denied coverage based on a policy exclusion for loss which would not have occurred in the absence of earth movement, water damage, and other excluded perils. The policy specified that the loss was excluded regardless of the cause of the excluded event, other causes of loss, or whether the other causes acted concurrently or in any sequence with the excluded event.

The Court of Appeal succinctly stated the issue and its holding: "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. Consequently, the policy exclusions at issue in this case are not enforceable to the extent they conflict with California law." (Howell v. State Farm Fire & Casualty Co., supra, 218 Cal. App.3d at p. 1452, 267 Cal.Rptr. 708.) The Court also determined that on the facts before it, there was a triable issue on whether fire, a covered peril, was the efficient proximate cause of the insured's loss.

Like the insurer in Howell, Hartford has attempted to exclude coverage for losses for which the efficient proximate cause is a covered peril, weather conditions. As in Howell, the attempt must be unavailing.

We are aware that in Findlay v. United Pacific Ins. Co. (Wash. 1996) 129 Wash.2d 368, 917 P.2d 116, 119, the Supreme Court of Washington ruled that a weather conditions clause like the one before us here did not violate that state's proximate cause rule. In Findlay, the insureds' home was damaged when the slope behind it failed. The parties agreed that the efficient proximate cause of the loss was wind and rain. The Court based its ruling on a finding that loss caused by weather conditions was excluded from the policy, stating that "the policy excludes loss caused by weather conditions, but then adds back or restores coverage for losses caused by weather which does not occur in concert with one of the policy's other stated exclusions." (Id. at p. 379, 917 P.2d 116.)

We simply do not agree with that reading of the weather conditions clause, which in our view elevates form over substance. As we read the clause, the policy covers loss caused by weather conditions and restricts coverage only where an excluded cause contributes to the loss. The fact that the insurer which drafted the clause chose to couch it as an exclusion does not make it one. The Findlay court was impressed with the language of the insurance policy, which in its view expressed the "clear intent of the parties" that landslides would not be covered. (Findlay v. United Pacific Ins. Co., supra, 129 Wash.2d at pp. 379-380, 917 P.2d 116.) We do not see clear evidence of intent in this policy's convoluted language. Further "even clear and unambiguous language is insufficient to alter the deeply entrenched proximate cause analysis." (Howell v. State Farm Fire & Casualty Co., supra, 218 Cal.App.3d at p. 1456, fn. 5, 267 Cal.Rptr. 708.)

Appellants thus sufficiently stated a cause of action for breach of the insurance policy....