Sunbreaker Condominium Ass'n v. Travelers Ins. Co.

• Citation: 79 Wn.App. 368,901 P.2d 1079
• Decision Date: 18 September 1995
• Docket Number: No. 35737-9-1,35737-9-1
• Court: Washington Court of Appeals
• Parties: SUNBREAKER CONDOMINIUM ASSOCIATION, a non-profit Washington corporation, Respondent, v. TRAVELERS INSURANCE COMPANY, a foreign corporation, Appellant, and Allstate Insurance Company, Defendant.

Page 368

79 Wn.App. 368

901 P.2d 1079

SUNBREAKER CONDOMINIUM ASSOCIATION, a non-profit Washington

corporation, Respondent, v. TRAVELERS INSURANCE COMPANY, a foreign corporation, Appellant, and Allstate Insurance Company, Defendant.

No. 35737-9-1.

Court of Appeals of Washington,

Division 1.

Sept. 18, 1995.

Russell Charles Love, Thorsrud Cane & Paulich, Seattle, for appellants

Dale Lawrence Kingman, Michael Edward Ricketts, Peery Hiscock Pierson & Ryder, Seattle, for respondents.

WEBSTER, Judge.

In this case, wind-driven rain penetrated the southern wall of a condominium building, causing dry rot. The owner, Sunbreaker Condominium Association, sued its insurer, The Travelers Insurance Company. Sunbreaker contends that its all risk insurance policy covers loss from wind-driven rain. Relying on the efficient proximate cause rule, Sunbreaker argues that the insurer is liable despite the policy's dry rot exclusion. The Travelers contends that the policy characterizes dry rot and rain as a single, excluded peril.

The trial court entered summary

judgment for Sunbreaker. We agree with the trial court that the policy characterizes rain and dry rot as distinct perils. We reverse, however, because there is an issue of material fact as to the efficient proximate cause of Sunbreaker's loss.

FACTS

The Sunbreaker Condominium is a four-story, 12-unit building immediately adjacent to Lake Washington in the Leschi district of Seattle, Washington. It was built of wood, plywood nailed to wood studs, in 1980. Although the building paper stapled to the plywood met minimum standards, it was better suited for drier climates. Workers applied stucco on top of the building paper. Although the stucco cracked over time, the amount of cracking was within a normal range.

Rain water began penetrating the stucco within 30 days of construction completion. The building paper rapidly deteriorated. Water penetrated the plywood and the studs. The wood decayed over time as it retained a moisture content greater than 20 percent. Decay started, at least in localized areas, within 2 or 3 years of construction.

In 1991, the Sunbreaker Condominium Association [Sunbreaker] discovered extensive dry rot in the building's south facing wall. Sunbreaker made a claim to the insurer under its all risk insurance policy. The policy covers direct physical loss of or damage to the condominium unless excluded. ¹ The policy excludes loss or damage caused by or resulting from corrosion, fungus, decay, or deterioration [hereafter fungus exclusion]. ² Dry rot is a rapid decay of wood due to fungi. Webster's New Twentieth Century Dictionary 561 (2d ed. 1977). The fungus exclusion does not apply to loss or damage by "specified causes of loss," a The Travelers denied Sunbreaker's claim and Sunbreaker filed suit. The parties filed cross motions for summary judgment, agreeing on the sequence of events: "dry rot began when wind-blown rain entered several components of the wall system of the south building wall". Sunbreaker contended that the policy covered the loss because wind-driven rain, a covered peril, efficiently caused its loss. The insurer contended that dry rot and rain were not distinct, and that the policy excluded dry rot. The Travelers also relied on the policy's exclusions for faulty construction and repeated seepage. The trial court entered summary judgment in favor of Sunbreaker.

                term that includes windstorm or hail, or water damage. 3  The policy also excludes repeated seepage or leakage of water, and faulty or defective construction. 4  Weather conditions are excluded if they contribute to loss or damage caused by earth movement, flood, or other event described in paragraph B.1. of the exclusions. 5
                

DISCUSSION

I. Standard Of Review

The first issue is whether the trial court properly denied the insurer's motion to strike portions of an expert's declarations. In the course of summary judgment proceedings, the trial court must frequently make evidentiary decisions. The trial court's summary judgment order should reflect these decisions. CR 56(h) (designating documents considered by the trial court); RAP 9.12. The standard of review for trial court evidentiary decisions, including those made in the course of summary judgment proceedings, is abuse of discretion. Christophersen v. Allied-Signal Corp., 939 F.2d 1106, 1109 (5th Cir.1991) cert. denied, 503 U.S. 912, 112 S.Ct. 1280, 117 L.Ed.2d 506 (1992).

Our review of the trial court's evidentiary decision will define the scope of the record. We then review the summary judgment order de novo. Ernst Home Center, Inc. v. United Food and Comm'l Workers Int'l Union, Local 1001, 77 Wash.App. 33, 40, 888 P.2d 1196 (1995).

II. Motion To Strike Portions Of Expert's Declarations

The Travelers moved for summary judgment, contending that Sunbreaker's loss resulted from "routine rainfall" seeping though cracks and openings in the south wall, causing dry rot. Joseph Bozick, Sunbreaker's expert, submitted a declaration countering the "routine rain" description. Bozick described the general effects of a November 1990 storm with which Bozick was "personally familiar."

This storm led to flooding in the Stanwood area, caused the old Mercer Island floating bridge to sink, and would have affected the Sunbreaker building, which is very near the bridge. Such a storm, and other instances of high wind and rains which have occurred since the building was built, cannot be termed "routine"....

Bozick's Second Supplemental Declaration described a January 1986 storm with which he was "familiar" and "which again involved high winds and heavy rain and caused damage in the vicinity of the Sunbreaker building." It concluded: "Such a storm as occurred both in 1986 and 1990 would have had a dramatic effect on the Sunbreaker building, and would have caused significant amounts of rain water to penetrate the exterior walls and lead to dry rot damage". ⁶ The insurer contends that the trial court should have stricken Bozick's testimony because he does not have personal knowledge of the 1986 and 1990 storms and their effect on the Sunbreaker Condominium. ER 602, CR 56(e).

The personal knowledge requirement contained in ER 602 is subject to ER 703 relating to expert witness opinion testimony. ER 602. Expert opinion may rely on hearsay. Cornejo v. State, 57 Wash.App. 314, 326, 788 P.2d 554 (1990). Therefore, even if Bozick did not personally experience the 1986 and 1990 storms, he may rely on information relating to those storms in forming his opinion about existing damage at the Sunbreaker Condominium. The Travelers also contends that Bozick failed to indicate that either storm included southerly winds which would have driven rain into Sunbreaker's south wall. Bozick's alleged lack of specificity reflects on the declaration's probative value, not its admissibility. The trial court did not abuse its discretion by refusing to strike Bozick's testimony.

III. Coverage and Causation

An insurer is liable under a contract for insurance when a covered peril causes a loss. The court must first determine the scope of the policy's coverage. Cf. Graham v. PEMCO, 98 Wash.2d 533, 540, 656 P.2d 1077 (1983) (Brachtenbach, J., dissenting) (the court's initial task is to identify fully the terms of the contract). The court determines coverage by characterizing the perils contributing to the loss, and determining which perils the policy covers and which it excludes. Kish v. Insurance Co. of North America, 125 Wash.2d 164, 170, 883 P.2d 308 (1994). The scope of the policy's coverage is, however, distinct from the issue of causation.

Insurance contracts frequently incorporate causation principles. The Travelers policy covers "direct physical loss ... caused by or resulting from a Covered Cause of Loss" but excludes "loss or damage caused by or resulting from" a variety of events. ⁷ The efficient proximate cause rule is a rule of contract construction. ⁸ The rule requires courts to apply insurance contract causation language with reference to the efficient proximate cause of the loss, rather than its immediate, physical cause. Graham v. PEMCO, 98 Wash.2d at 538, 656 P.2d 1077. The rule effectively imposes liability on an insurer for a loss efficiently caused by a covered peril, even though other, excluded perils contributed to the loss. Safeco Ins. Co. of Am. v. Hirschmann, 52 Wash.App. 469, 475, 760 P.2d 969 (1988), aff'd, 112 Wash.2d 621, 773 P.2d 413 (1989).

The efficient proximate cause rule applies only where two or more distinct perils operate to cause a loss, and the policy covers one or more, but not all. Kish, 125 Wash.2d at 170, 883 P.2d 308. The rule does not apply when a single peril causes a loss, in which case the insurer's liability depends on whether the policy excludes or covers the peril. McDonald v. State Farm Fire and Cas. Co., 119 Wash.2d 724, 735-36, 837 P.2d 1000 (1992). Thus, we will first characterize the perils and determine the policy's scope of coverage. Because we find that one peril which contributed to causation is covered, while three others are excluded, we will subsequently address causation.

A. Characterization Of Perils As Single Or Distinct

In this case, the insurer contends that the policy characterizes wind-driven rain and dry rot as a single peril excluded from coverage. Kish v. Insurance Co. of North America is the only Washington Supreme Court case analyzing whether two forces are a single peril or distinct perils. 125 Wash.2d at 172, 883 P.2d 308. In Kish, the policies excluded loss resulting directly or indirectly from water damage. The definition of water damage included "flood," but "flood" was undefined. The jury determined that rain was the efficient proximate cause of the loss. The Supreme Court reversed, holding rain and flood to be a single, excluded peril as a matter of law. Kish, at 173, 883 P.2d 308.

As Kish recognized, the characterization of perils is a question of contract. Kish, at 170, ...