Safeco Ins. Co. of America v. Hirschmann

• Decision Date: 18 May 1989
• Docket Number: No. 55638-5,55638-5
• Citation: 112 Wn.2d 621,773 P.2d 413
• Parties: SAFECO INSURANCE COMPANY OF AMERICA, Petitioner, v. Jan V. HIRSCHMANN and Evelyn F. McElmeel, Respondents.
• Court: Washington Supreme Court

Page 621

112 Wn.2d 621

773 P.2d 413

SAFECO INSURANCE COMPANY OF AMERICA, Petitioner, v. Jan V. HIRSCHMANN and Evelyn F. McElmeel, Respondents.

No. 55638-5.

Supreme Court of Washington En Banc.

May 18, 1989.

Terry Harvey, Gary A. Maehara, Bradley D. Westphal, Seattle, for petitioner.

Sylvester, Ruud, Petrie & Cruzen, John T. Petrie, Seattle, for respondents.

Richard S.L. Roddis, James L. Knoll, Douglas G. Houser, I. Franklin Hunsaker, Portland, Or., amicus curiae on behalf of petitioner State Farm Fire and Cas. Co.

Richard T. Beal, Jr., John V. Ohnstad, Jr., Seattle, amicus curiae on behalf of respondents.

SMITH, Justice.

Safeco Insurance Company of America (Safeco) petitioned this court for review of a decision of the Court of Appeals, Division I. Safeco brought an action for declaratory judgment and summary judgment against Jan V. Hirschmann and Evelyn F. McElmeel, its insureds, in the King County Superior Court based on a clause in its all-risk homeowners policy purporting to exclude damageresulting from landslides. The trial court granted judgment for Safeco. The Court of Appeals reversed and entered partial summary judgment for the insureds, finding the exclusionary language in Safeco's contract to be the functional equivalent of a clause in a policy of Public Employee's Mutual Insurance Company (Pemco) at issue in Villella v. Public Employees Mut. Ins. Co., 106 Wash.2d 806, 725 P.2d 957 (1986). We agree and affirm the decision of the Court of Appeals.

The sole issue in this case is whether the language of Safeco's exclusionary clause circumvents the "efficient proximate cause" rule of all-risk homeowners insurance coverage.

The facts in this matter are not in dispute. On January 16, 1986, severe winds of 50 miles per hour struck the Seattle area. This was followed the next day by heavy rains totaling 4.2 inches for the 24-hour period of January 18. The rainfall exceeded that of a "100-year" storm and caused a number of landslides in the greater Seattle area.

Late in the afternoon of January 18, 1986, Dr. Jan V. Hirschmann had to vacate his family home because the embankment behind it had caused the kitchen walls and windows to give way. The weight of the hillside pushed the house from its foundation. By 9:00 p.m. the second story of the house had broken down into the first floor. The house was destroyed, for a total loss estimated at $250,000.

Three adjacent residences were affected by the same landslide. The insureds' residence at 635 38th Avenue, Seattle, was built in 1920. It had stood in that location for over 65 years without significant movement of the house or its foundation. Safeco insured the house under an "all-risk" policy.

William L. Shannon, an engineer, investigated the cause of the destruction. He determined that the type of soil in the hillside behind the Hirschmann residence is very slowly permeable to water and loses strength when saturated. He stated that mechanical action of the strong winds on trees and bushes loosened the surface soil and increased infiltration of rainwater into the soil. In his opinion, the "primary cause" of the collapse of the hillside was the heavy and prolonged rainfall which saturated the ground.

In bringing this action for declaratory judgment, Safeco claimed that its "all-risk" policy did not cover the loss. The trial court granted Safeco's motion for summary judgment. The Court of Appeals, Division One, reversed, and directed the trial court to enter an order granting partial summary judgment to Hirschmann on the issue of coverage. We granted review on January 10, 1989.

This court first announced the "efficient proximate cause" rule in Graham v. Public Employees Mut. Ins. Co., 98 Wash.2d 533, 656 P.2d 1077 (1983). Subsequently, we were asked to consider whether a difference in exclusionary clause language could circumvent the rule. In Villella v. Public Employees Mut. Ins. Co., 106 Wash.2d 806, 725 P.2d 957 (1986) we answered in the negative. We are once again asked to consider whether another variation in exclusionary clause language can circumvent the rule. We again answer in the negative.

At issue is the following language in Safeco's all-risk policy, crafted by Safeco in an effort to circumvent the "efficient proximate cause" rule:

We do not cover loss caused by any of the following excluded perils, whether occurring alone or in any sequence with a covered peril:

. . . . .

2. Earth Movement, meaning:

a. earthquake; landslide; mudflow; earth sinking, rising or shifting....

(Italics ours.)

The clause, "We do not cover loss caused by ... excluded perils whether occurring alone or in any sequence with a covered peril," replaced the previous clause, "We do not cover loss resulting directly or indirectly from [listed excluded perils]."

Safeco implicitly concedes that the earlier language would have accorded coverage to Hirschmann by arguing that its newly crafted language commands a different result than that in Villella. The Court of Appeals held Safeco's clause and the clause in Villella to be "functionally similar." Safeco Ins. Co. of Am. v. Hirschmann, 52 Wash.App. 469, 475, 760 P.2d 969 (1988). Thus, the question now before this court is whether the difference in contractual language effects a different legal result. We hold that it does not.

The language of the earlier Safeco policy ("directly or indirectly") is identical to that of the Pemco policy reviewed in Villella:

We do not cover loss resulting directly or indirectly from:

. . . . .

2. Earth Movement. Meaning any loss caused by, resulting from, contributed to or aggravated by:

a. earthquake, landslide, mudflow, earth sinking, rising or shifting

Villella, 106 Wash.2d at 809, 725 P.2d 957.

In Villella the insured claimed that a negligent failure to install a proper drainage system set in motion a continuous process of soil destabilization that caused one side of the foundation of the house to drop 8 inches. Pemco countered that the house was damaged by "earth movement." We reversed and remanded the case, reciting the "efficient proximate cause" rule adopted in Graham v. Public Employees Mut. Ins. Co., 98 Wash.2d 533, 656 P.2d 1077 (1983):

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.

(Citations omitted.) Graham at 538, 656 P.2d 1077, cited in Villella, 106 Wash.2d at 815, 725 P.2d 957.

Further, in Villella, Justice Dore, writing for the court elaborated that, "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." (Italics ours.) Villella, at 815, 725 P.2d 957 citing: 5 J. Appleman, Insurance § 3083, at 311 (1970); 18 R. Anderson, Couch on Insurance § 74:711, at 1020-22 (2d ed. 1983). This is so even though there might be an excluded risk which also contributed to the loss or damage. Villella, at 816, 725 P.2d 957.

The Villella decision is dispositive of this case. Villella is not only factually parallel, but also procedurally and conceptually identical, to it.

In Villella, as in this case, the trial court granted summary judgment in favor of the insurer and denied coverage under the terms of the policy. The summary judgment was reversed by this court on appeal. In this case, Safeco obtained an order granting summary judgment in the trial court. The Court of Appeals reversed.

In Villella, as in this case, at issue was a change in language that sought to circumvent the "efficient proximate cause" rule announced in Graham. In Villella, as in this case, the insurer was attempting to avoid liability for a loss resulting from a causal chain in which the final "cause" was an excluded peril.

Further, in Villella, as in the present case, the insurer contended that the exclusionary language it crafted circumvented coverage for any loss resulting from a causal chain including any excluded peril regardless how insignificant the contribution from the excluded peril may have been. In Villella, based upon its post-Graham clause, "Pemco argue[d] that if earth movement contributed to the loss, regardless how slight in degree, coverage is precluded." (Italics ours.) Villella, at 817, 725 P.2d 957. We rejected that argument. Presented with a record containing testimony from a Safeco vice-president that in his mind the Safeco and Pemco clauses are "functionally the same," the Court of Appeals rejected the identical contention in the present case, noting that:

Safeco's purpose in modifying the exclusion is clear; the language prefacing the exclusions is an attempt to exclude from coverage losses connected with certain perils no matter how insignificant those perils may have been to the loss.

(Italics ours.) Safeco Ins. Co. of Am. v. Hirschmann, 52 Wash.App. 469, 474, 760 P.2d 969 (1988). ¹

In Villella, as in this case, the contract language had been changed by the insurer in response to the Graham decision. ² Thus, we are presented with the identical question in Villella: whether by drafting variations in exclusionary clause language an insurer may circumvent the "efficient proximate cause" rule of Graham and deny coverage when a covered peril sets in motion a causal chain the last link of which is an excluded peril. The lesson of Villella is that the rule may not be circumvented.

The "efficient proximate cause" rule was first adopted in Washington in Graham v. Public Employees Mut. Ins. Co., 98 Wash.2d 533, 656 P.2d 1077 (1983). In Graham several homeowners sought recovery for losses caused by mudflows resulting...