Ward v. Safeco Ins. Co. of Am.

• Decision Date: 03 February 2023
• Docket Number: 21-35757
• Citation: 58 F.4th 1301
• Parties: Virginia WARD, Plaintiff-Appellant, v. SAFECO INSURANCE COMPANY OF AMERICA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

58 F.4th 1301

Virginia WARD, Plaintiff-Appellant,

v.SAFECO INSURANCE COMPANY OF AMERICA, Defendant-Appellee.

No. 21-35757

United States Court of Appeals, Ninth Circuit.

Filed February 3, 2023

ORDER CERTIFYING QUESTIONS TO THE SUPREME COURT OF MONTANA

I. Questions Certified

Pursuant to Rule 15 of the Montana Rules of Appellate Procedure, we respectfully request that the Supreme Court of Montana decide the certified questions presented below. The answers to these questions of state law will be determinative of a central issue pending in this appeal, and there is no controlling precedent in the decisions of the Montana Supreme Court. See Mont. R. App. 15(3). We acknowledge that, as the receiving court, the Montana Supreme Court may reformulate the certified questions, Mont. R. App. P. 15(6)(a)(iii), and we will accept the decision of the Montana Supreme Court.

We respectfully certify the following questions to the Montana Supreme Court:

1) Whether an anti-concurrent cause ("ACC") clause in an insurance policy applies to defeat insurance coverage despite Montana's recognition of the efficient proximate cause ("EPC") doctrine; and

2) Whether the relevant language in the general exclusions section on page 8 of the Policy in this case is an ACC clause that circumvents the application of the EPC doctrine.¹

II. Statement of Facts

Appellant is Virginia Ward ("Ms. Ward"), the owner of a rental house and property in Livingston, Montana ("Property"). Ms. Ward purchased a Landlord Protection Policy ("Policy") from Safeco Insurance Company ("Safeco") to insure the Property. In 2017, a water main line leading into the house broke, saturating the area around and under the property with water. A few months later, soft spots developed on the floor of the house. Investigation determined that the soil under the foundation had contracted as a result of the water damage, causing the foundation slab to sag.

Safeco informed Ms. Ward that the damage to the Property was not covered under the Policy based on its Earth Movement and Water Damage exclusions, which are listed as excluded perils in the Policy's ACC clause.²

The District Court granted summary judgment in favor of Safeco, finding that 1) the ACC clause barred coverage, 2) the Policy was not illusory or ambiguous, and 3) Safeco did not violate Montana's Unfair Trade Practices Act when it denied Ms. Ward coverage. Ms. Ward appealed.

III. The Need for Certification

Under Montana's EPC doctrine, "where covered and noncovered perils contribute to a loss, the peril that set in motion the chain of events leading to the loss or the predominating cause is deemed the efficient proximate cause or legal cause of loss." Kaul v. State Farm Mut. Auto. Ins. Co. , 2021 MT 67, ¶ 35, 403 Mont. 387, 482 P.3d 1196 (McKinnon, J., dissenting) (quotation omitted). See also Park Saddle Horse Co. v. Royal Indem. Co. , 81 Mont. 99, 261 P. 880, 884 (1927) (stating that "[i]n determining the cause of a loss for the purpose of fixing the insurance liability, when concurring causes of the damage appear, the proximate cause to which the loss is to be attributed is the dominant, the efficient one that sets the other causes in operation; and causes which are incidental are not proximate, though they may be nearer in time and place to the loss" (quotation omitted)).

In this case, Safeco argues that the ACC clause in the Policy overrides the normal operation of the EPC doctrine, such that there is no coverage where any excluded peril caused the loss to any extent (even if a covered peril was the efficient proximate cause of the loss). Ms. Ward, on the other hand, contends that the EPC doctrine applies notwithstanding the ACC clause in the Policy, such that coverage exists if a covered peril is the efficient proximate cause of the loss, even if other excluded perils also contributed to the cause of the loss.

The Montana Supreme Court has held that parties to an insurance contract are free to agree to exclusions that are not statutorily prohibited. See Stutzman v. Safeco Ins. Co. of Am. , 284 Mont. 372, 945 P.2d 32, 37 (1997) ("[T]here is no statutory mandate for underinsured motorist coverage in Montana ... [t]herefore, the parties may freely contract to produce exclusions or limitations on underinsured motorist coverage."). Safeco argues that Montana's legislature has not declared that Montana's public policy prohibits insurers from contracting around efficient proximate cause, and contends that Montana's insurance code does not prohibit insurers from contracting around the EPC doctrine.

In interpreting the law of states with an EPC doctrine, some courts have found that parties are free to contract around its application. See, e.g. , TNT Speed & Sport Ctr., Inc. v. Am. States Ins. Co. , 114 F.3d 731, 733 (8th Cir. 1997) (affirming district court's decision based on conclusion that "the most analogous and more persuasive cases from other states recognize that parties may contract out of application of the efficient proximate cause doctrine"). But other courts have held that parties may not do so. See, e.g. , Safeco Ins. Co. of Am. v. Hirschmann , 112 Wash.2d 621, 773 P.2d 413, 416 (1989) (explaining that Washington's efficient proximate cause rule "may not be circumvented" by exclusionary clause language). Relatedly, in some instances, these courts seem to suggest that exclusionary language similar to the wording in the Policy does not preclude application of the EPC doctrine. See, e.g. , id. at 416-17 (stating that "whenever the term ‘cause’ appears in an exclusionary clause it must be read as ‘efficient proximate cause,’ " such that "[w]hen an insured risk sets into operation a chain of causation in which the last step may be an excluded risk, the exclusion will not defeat recovery"). The Montana courts have not addressed these two issues.

The issues described in the certified questions appear to be recurring issues of law that implicate important public policy concerns under Montana law. See, e.g. , Oltz v. Safeco Ins. Co. of Am. , 306 F. Supp. 3d 1243, 1257 (D. Mont. 2018) (holding that "Montana law does not prohibit anti-concurrent causes clauses," but reasoning that "an anti-concurrent cause clause may...