Howell v. State Farm Fire & Casualty Co.
267 Cal. Rptr. 708, 1990 Cal. App. LEXIS 543, 218 Cal. App. 3d 1446 (1990)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under California law, an insurer is liable for a loss if a peril insured against was the 'efficient proximate cause' of the loss, even if the insurance policy contains specific language excluding coverage for other contributing causes. This rule, derived from Insurance Code § 530, cannot be contractually circumvented by policy language.
Facts:
- Barbara Howell owned a 17-acre parcel of land, including her home and business, which was insured by five separate 'all risk' policies from State Farm Fire and Casualty Company.
- The property was situated on a slope prone to landslides.
- In the summer of 1985, a fire destroyed a significant amount of vegetation on the slope.
- During the subsequent winter, the property experienced unusually heavy rainfall.
- The lack of vegetation caused by the fire led to soil erosion, resulting in a major landslide on the property.
- An expert concluded that the landslide probably would not have happened if the fire had not destroyed the ground cover, noting the slope had withstood greater rainfall in previous years when the vegetation was intact.
- Howell filed claims with State Farm for the damage caused by the landslide.
- State Farm denied all claims, citing policy exclusions for losses caused by earth movement and water damage.
Procedural Posture:
- Barbara Howell filed a lawsuit against State Farm Fire and Casualty Company in the superior court (trial court) alleging breach of contract and other claims after State Farm denied her insurance claims.
- State Farm moved for summary judgment, arguing that the policy's exclusions for earth movement and water damage precluded coverage.
- The superior court granted State Farm's motion for summary judgment, ruling that the losses were not covered because of the policies' earth movement exclusion.
- Barbara Howell, as appellant, appealed the summary judgment to the California Court of Appeal.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an 'all risk' property insurance policy's exclusion for certain perils, such as earth movement and water damage, bar recovery when a covered peril, such as fire, is the efficient proximate cause of the loss?
Opinions:
Majority - White, P. J.
No, the policy's exclusions for earth movement and water damage do not bar recovery if a covered peril was the efficient proximate cause of the loss. California Insurance Code § 530 mandates that an insurer is liable for a loss when a peril insured against is the proximate cause. The California Supreme Court in Sabella v. Wisler interpreted this to mean the 'efficient proximate cause'—the one that sets the others in motion. To allow an insurer to contractually exclude coverage when a covered peril is the efficient proximate cause would render section 530 meaningless and would be directly contrary to the holding in Sabella. This principle has been consistently upheld in subsequent cases like Sauer, Gillis, and Premier, and was recently reaffirmed for first-party property insurance in Garvey v. State Farm. Therefore, the exclusionary language in State Farm's policies is unenforceable to the extent it conflicts with this statutory and judicial rule. A triable issue of fact exists as to whether the fire was the efficient proximate cause of the landslide.
Concurring - Barry-Deal, J.
No, the insurer may not escape liability in this case, but the reasoning is based on principles of contract interpretation and the reasonable expectations of the parties, not on the premise that Insurance Code § 530 is a mandatory, non-waivable public policy. The exclusion creates an inherent inconsistency by purporting to cover a peril (fire) while simultaneously excluding coverage if that peril sets in motion a chain of events involving an excluded peril (landslide). To enforce such an exclusion would defeat the very purpose of the insurance and violate the reasonable expectation of the insured that a loss proximately caused by a covered peril will be covered. Courts have consistently refused to sanction policy interpretations that would make the insurance meaningless. Therefore, where an insurer insures against the direct results of a peril, it cannot rely on the concurrence of a remote, excluded cause to deny coverage.
Analysis:
This decision solidifies the 'efficient proximate cause' doctrine as a mandatory rule in California first-party property insurance cases, rendering 'anti-concurrent causation' clauses unenforceable. The court established that Insurance Code § 530 is not merely a rule of construction but a statutory mandate that insurers cannot contract around. This significantly limits an insurer's ability to draft exclusions that deny coverage when a loss is set in motion by a covered peril, even if an excluded peril contributes to the final outcome. The ruling provides greater protection for policyholders and creates a clear, predictable standard for determining coverage in complex, multi-cause loss scenarios.
