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State Farm Insurance Co. v. Bongen (11/8/96), 925 P 2d 1042
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Notice: This opinion is subject to formal correction before
publication in the Pacific Reporter. Readers are requested to bring
errors to the attention of the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501, phone (907) 264-0607, fax (907)
264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
STATE FARM FIRE AND CASUALTY )
COMPANY, )
) Supreme Court No. S-6526
Petitioner, )
) Superior Court No.
v. ) 3KO-92-489 Civil
)
JEROME E. BONGEN and ) O P I N I O N
ELIZABETH A. BONGEN; KODIAK )
ELECTRIC ASSOC.; and CITY ) [No. 4424 - November 8, 1996]
OF KODIAK, )
)
Respondents. )
)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Dana Fabe, Judge.
Appearances: Ronald L. Bliss, Bliss &
Wilkens, Anchorage, and Susan M. Popik,
Chapman, Popik & White, San Francisco,
California, for Petitioner. Michael W.
Flanigan, Walther & Flanigan, Anchorage, for
Respondents Jerome E. Bongen and Elizabeth A.
Bongen. Michael S. Rogers, Reed McClure,
Seattle, Washington, and Thomas A. Matthews,
Matthews & Zahare, Anchorage, for Amici Curiae
United Services Automobile Association,
Government Employees Insurance Company, and
Allstate Insurance Company.
Before: Compton, Chief Justice, Rabinowitz,
Matthews, and Eastaugh, Justices. [Moore,
Justice, not participating.]
COMPTON, Chief Justice.
MATTHEWS, Justice, dissenting.
I. INTRODUCTION
A home owned by Jerome Bongen and Elizabeth Bongen was
destroyed by a mudslide. After their insurer denied coverage, the
Bongens sued. They alleged that the mudslide was caused by
construction activity carried out above their property. On cross-
motions for partial summary judgment, the superior court held that
a provision in the Bongens' insurance policy excluding from
coverage any loss resulting from earth movement, regardless of the
cause, was unenforceable. We reverse.
II. FACTS AND PROCEEDINGS
Jerome Bongen and Elizabeth Bongen owned a home on Pillar
Mountain in Kodiak. In the late 1980's, Kodiak Electric
Association (KEA) clear-cut a right-of-way above the home to
install transmission lines on City of Kodiak property. On
October 31, 1991, following heavy rains, a mudslide destroyed the
Bongen home. According to the Bongens' expert, the KEA
transmission line project "contributed to or caused damage"to the
Bongen home.
The Bongens filed a claim with their insurer, State Farm
Fire and Casualty Company (State Farm). Their policy contained the
following exclusion:
We do not insure under any coverage for any
loss which would not have occurred in the
absence of one or more of the following
excluded events. We do not insure for such
loss regardless of: (a) the cause of the
excluded event; or (b) other causes of the
loss; or (c) whether other causes acted
concurrently or in any sequence with the
excluded event to produce the loss; or (d)
whether the event occurs suddenly or
gradually, involves isolated or widespread
damage, arises from natural or external
forces, or occurs as a result of any
combination of these:
. . . .
Earth Movement, meaning the sinking, rising,
shifting, expanding or contracting of earth,
all whether combined with water or not. Earth
movement includes but is not limited to
earthquake, landslide, mudflow, sinkhole,
subsidence and erosion. Earth movement also
includes volcanic explosion or lava
flow . . . .
State Farm denied coverage based on this exclusion.
The Bongens thereafter commenced this action against
State Farm, KEA, and the City of Kodiak. State Farm moved for
partial summary judgment on the ground that the Bongens' policy
excluded coverage for mudslides. The Bongens filed a cross-motion
for partial summary judgment, which the superior court granted.
The superior court held that the "efficient proximate cause"rule
(EN1) applies to multiple causation insurance cases in Alaska, and
that public policy prohibits an insurance company from
circumventing the rule through contractual language. We granted
State Farm's petition for review of this decision.
III. DISCUSSION
A. Standard of Review
The interpretation of contract language is a question of
law, subject to de novo review. Cox v. Progressive Cas. Ins. Co.,
869 P.2d 467, 468 n.1 (Alaska 1994) (citations omitted). "This
Court interprets insurance contracts by looking to the language of
the disputed policy provisions, the language of other provisions of
the policy, and to relevant extrinsic evidence. In addition, we
also refer to case law interpreting similar provisions." Id.
B. The Earth Movement Exclusion is Enforceable.
The Bongens argue that, under the efficient proximate
cause rule, the loss of their house is covered under the insurance
policy. They claim that "the negligence of [KEA] and the City of
Kodiak in undermining the soils above the homes"is a "covered
event."
The Bongens' policy excluded from coverage any loss
resulting from earth movement, regardless of the cause of the earth
movement, and regardless of whether a non-excluded risk acted
"concurrently or in any sequence with"earth movement. The
superior court found that "both parties apparently agree that the
policy terms as written exclude coverage in the present case."
(EN2) In holding that the earth movement exclusion was
unenforceable, the superior court relied primarily on Safeco
Insurance Co. v. Hirschmann, 773 P.2d 413 (Wash. 1989).
In Hirschmann, the Supreme Court of Washington held that
an insurer is obligated to pay for damages resulting from a
combination of covered and excluded perils if the efficient
proximate cause is a covered peril, regardless of a policy
exclusion stating the contrary. Id. at 416-17. The court
criticized the insurer's attempt to circumvent the efficient
proximate cause rule, id. at 414, but did not fully explain why
such a practice is prohibited. Instead, Hirschmann relied on an
earlier Washington case, Villella v. Public Employees Mutual
Insurance Co., 725 P.2d 957 (Wash. 1986), which, in turn, relied on
California cases holding that insurers could not circumvent the
efficient proximate cause rule. Villella, 725 P.2d at 962-64. In
California, insurers are statutorily required to provide coverage
if the efficient proximate cause is an insured risk. (EN3) See
Cal. Ins. Code sec.sec. 530, 532; Howell v. State Farm Fire & Cas.
Co., 267 Cal. Rptr. 708, 712 (Cal. App. 1990). Neither Hirschmann
nor Villella notes the unique statutory provision behind the
California cases. (EN4)
Most courts addressing the validity of exclusionary
language actually or functionally identical to that found in the
Bongens' policy have held that the exclusion is enforceable. In
Alf v. State Farm Fire & Casualty Co., 850 P.2d 1272 (Utah 1993),
for example, the main waterline into the insureds' home ruptured,
causing extensive flooding and erosion. Id. at 1273. The insureds
argued that the earth movement exclusion--identical to the
exclusion in the present case--should not apply because the
efficient proximate cause of the damage was the burst waterline, a
covered risk. The court rejected their argument, holding that
under the exclusion, "coverage for damage resulting from earth
movement [is excluded], despite the fact that the cause of the
earth movement is a covered peril." Id. at 1275. The court
concluded that "the proper path to follow is to recognize the
efficient proximate cause rule only when the parties have not
chosen freely to contract out of it." Id. at 1277.
Other courts are in accord with this position. See,
e.g., Front Row Theater, Inc. v. American Mfrs. Mut. Ins. Co., 18
F.3d 1343, 1347 (6th Cir. 1994) ("When damage to an insured's
property is caused by both a covered and an excluded event,
coverage may be expressly precluded by language in the policy.");
Schroeder v. State Farm Fire & Cas. Co., 770 F. Supp. 558, 561 (D.
Nev. 1991) ("[T]he parties could, as they did, contract out of the
efficient proximate cause doctrine without violating public
policy."); Millar v. State Farm Fire & Cas. Co., 804 P.2d 822, 826
(Ariz. App. 1990); Kane v. Royal Ins. Co. of America, 768 P.2d 678,
684 (Colo. 1989) ("[T]he 'efficient moving cause' rule must yield
to the language of the insurance policy in question."); Ramirez v.
American Family Mut. Ins. Co., 652 N.E.2d 511, 514-15 (Ind. App.
1995); Kula v. State Farm Fire & Cas. Co., 628 N.Y.S.2d 988, 991
(N.Y. App. 1995); State Farm Fire & Cas. Co. v. Paulson, 756 P.2d
764, 769 (Wyo. 1988).
We favor the majority rule. It is well established that
"[t]he obligations of insurers are generally determined by the
terms of their policies." Bering Strait Sch. Dist. v. RLI Ins.
Co., 873 P.2d 1292, 1294 (Alaska 1994); see also State v.
Underwriters at Lloyds, London, 755 P.2d 396, 400 (Alaska 1988)
(quoting 6B J. Appleman, Insurance Law and Practice sec. 4254
(Buckley ed. 1979)) ("The intention of the parties as to the
coverage of a policy is determined by the words which they have
used."). We have held that where an insurer "limits the coverage
of a policy issued by it in plain language, this court recognizes
the restriction."Insurance Co. of North America v. State Farm Mut.
Auto Ins. Co., 663 P.2d 953, 955 (Alaska 1983). We can discern no
sound policy reason for preventing the enforcement of the earth
movement exclusion to which the parties in this case agreed. We
therefore align ourselves with those courts holding that an insurer
may expressly preclude coverage when damage to an insured's
property is caused by both a covered and an excluded risk. The
earth movement exclusion in the Bongens' policy is enforceable.
C. The Earth Movement Exclusion Is Not Ambiguous.
Since insurance policies are contracts of adhesion,
ambiguities are interpreted in favor of the insured. See Bering
Strait Sch. Dist., 873 P.2d at 1295. The Bongens argue that the
earth movement exclusion is ambiguous, and that a layperson would
reasonably expect the exclusion to apply only to earth movement
caused by "natural phenomena."
This same argument has been rejected by other courts
construing insurance policy language substantially the same as that
at issue here. In Village Inn Apartments v. State Farm Fire &
Casualty Co., 790 P.2d 581 (Utah App. 1990), for example, an
underground water pipe ruptured on the premises of an apartment
complex, damaging the building's foundation. The insureds sought
a declaratory judgment that the loss was covered by their insurance
policy which, like the Bongens' policy, excluded from coverage
losses resulting from earth movement "regardless of . . . the cause
of the excluded event." Id. at 582. The insureds argued that the
exclusion did not apply because earth movement referred only to
natural phenomena, and that the exclusion was ambiguous and should
be construed in their favor. Id. at 583. The court held that the
exclusion was unambiguous, and that the losses resulting from the
broken water pipe were excluded under the earth movement provision:
Since the exclusion is for earth movement loss
from any cause, we can only conclude earth
movement encompasses both natural and human
processes.
Id. Other courts construing State Farm's earth movement exclusion
have reached similar results. See Rodin v. State Farm Fire & Cas.
Co., 844 S.W.2d 537 (Mo. App. 1992); Schroeder, 770 F. Supp. at
560-61; Millar, 804 P.2d at 824-25; Kula, 628 N.Y.S.2d at 990-991;
Alf, 850 P.2d at 1275-76.
We are persuaded by the reasoning of these cases. The
Bongens' policy contains not only the "regardless of the cause"
language found determinative in Village Inn and the other cited
cases, but also a proviso excluding from coverage losses resulting
from earth movement regardless of whether the earth movement arose
"from natural or external forces." To accept the Bongens' argument
in light of this clear language would be to create an ambiguity
where none exists. See Village Inn, 790 P.2d at 583 ("A policy
term is not ambiguous. . . merely because one party assigns a
different meaning to it in accordance with his or her own
interests."). We hold that the earth movement exclusion in the
Bongens' policy is not ambiguous, and that earth movement, as that
term is used in the policy, encompasses both natural phenomena and
human processes.
Only one other court has construed policy language
identical to that at issue here. In Cox v. State Farm Fire &
Casualty Co., 459 S.E.2d 446 (Ga. App. 1995), the Georgia Court of
Appeals ruled that the language excluded only losses caused from
natural disasters. Id. at 447-48. We decline to follow Cox. To
explain why, it is necessary to first present some background
information about the earth movement exclusion.
The precise language at issue in the Bongens' policy is
a very recent addition to State Farm's standard homeowner's
insurance policy. In the mid-1980's, many insurance companies
added a "lead-in clause"to the "Losses not Insured"section of
their policies. (EN5) The lead-in clause stated:
We do not insure for loss which would not have
occurred in the absence of one or more of the
following excluded events. We do not insure
for such loss regardless of: a) the cause of
the excluded event; or b) other causes of the
loss; or c) whether other causes acted
concurrently or in any sequence with the
excluded event to produce the loss. . . .
Fierce at n.74 and accompanying text. Courts interpreting this
language have held that, when read with the earth movement
exclusion, the policy excludes coverage for losses caused by both
natural and man-made earth movement. (EN6)
Until the insurance companies added the lead-in clause,
courts often limited the earth movement exclusion to natural
disasters, due to the doctrine of ejusdem generis. (EN7) Ejusdem
generis, a doctrine which we have applied in previous cases,
essentially states that a general term, when modified by specific
terms, will be interpreted in light of those specific terms, absent
a clear indication to the contrary. (EN8) Courts interpreting the
lead-in clause have read it as providing a clear indication that
the earth movement exclusion is not intended to be limited to
losses caused by natural disasters.
State Farm has now added additional language to its lead-
in clause, which is in the Bongens' policy. The new language,
added to the end of the lead-in clause, reads:
d) whether the event occurs suddenly or
gradually, involves isolated or widespread
damage, arises from natural or external
forces, or occurs as a result of any
combination of these.
This is the language which only this court and the Cox court have
examined.
In Cox, a house was damaged by vibrations from explosions
in the vicinity of the Cox's property. Cox, 459 S.E.2d at 447.
Explosions were a covered peril, but earth movement was not. Id.
The earth movement exclusion contained the precise language
contained in the Bongens' policy. Despite the lead-in clause, the
court ruled that ejusdem generis applied, and that the exclusion
was limited to losses caused by natural disasters. Cox does not
address the first three sections of the lead-in clause, but only
interprets the "natural or external forces"language of the
addition to the lead-in clause. The court in Cox found that the
word "external"is not defined in the policy, that "external"by
its literal definition means "apart, beyond, exterior or connected
to the outside,"and that this definition did not encompass man-
made earth movements. Id. at 447-48.
We decline to follow Cox for two reasons. First, Cox
ignores the other sections of the lead-in clause, one of which
states that coverage is excluded "regardless of: a) the cause of
the excluded event. . . ." Clearly, this language encompasses
earth movement caused by either nature or humans. Second, Cox's
definition of "external"is incomplete. It is true that, standing
alone, the word "external"does not refer to anything man-made.
However, the word must be read in context ("We do not insure for
such loss regardless of . . . whether the event . . . arises from
natural or external forces. . . ."). It is apparent that, when
read in context, "external"means "external from natural forces,"
which could only mean man-made forces.
D. Application of the Earth Movement Exclusion Does Not
Defeat the Reasonable Expectations of the Parties.
The Bongens argue that application of the earth movement
exclusion would defeat their reasonable expectations of coverage.
We construe insurance contracts "so as to provide that coverage
which a layperson would have reasonably expected from a lay
interpretation of the policy terms." Serradell v. Hartford Acc. &
Indem. Co., 843 P.2d 639, 641 (Alaska 1992). However, since most
insureds develop an expectation that every loss will be covered,
the reasonable expectation doctrine "must be limited by something
more than the fervent hope usually engendered by loss." Millar,
804 P.2d at 826-27 ("If . . . all that was required to defeat the
operation of a policy exclusion under the reasonable expectation
doctrine was a provision attempting to qualify or limit the scope
of policy coverage, then every policy exclusion would be invalid as
contrary to the insured's reasonable expectation of coverage.").
In order to determine the reasonable expectations of the parties,
we look to 1) the language of the disputed policy provisions; 2)
the language of other policy provisions; 3) relevant extrinsic
evidence; and 4) case law interpreting similar provisions. Bering
Strait, 873 P.2d at 1295.
Given these four sources of guidance in interpreting the
reasonable expectations of the insureds, we conclude that the
Bongens could not have reasonably expected coverage for loss
resulting from earth movement. The lead-in clause and the earth
movement exclusion clearly exclude coverage for any loss in which
earth movement was a concurrent cause. The Bongens have not
pointed to any other provision in the policy which contradicts the
exclusion. There is no relevant extrinsic evidence indicating that
the Bongens, prior to the loss, expected coverage for a loss caused
in part by earth movement. (EN9)
Finally, the only precedent from other jurisdictions
which would find coverage in spite of the exclusionary language is
from California and Washington. As explained above, the California
rule is derived from statute, see Howell, 267 Cal. Rptr. at 712,
and Alaska has no equivalent statute. The Washington cases apply
the California rule without significant further analysis. See,
e.g., Villella, 725 P.2d at 962-64. The great majority of courts
considering the issue have held that the earth movement exclusion
is enforceable. See Discussion at sec. B, supra.
For all of these reasons, we conclude that it would not
be reasonable for the Bongens to have expected that the efficient
proximate cause rule would apply in Alaska, and that their loss
would be covered despite the earth movement exclusion.
IV. CONCLUSION
We REVERSE the superior court, and direct it to enter
partial summary judgment in State Farm's favor.MATTHEWS, Justice, dissenting.
I agree with the decision of the superior court and thus
would remand this case for a jury determination of the efficient
proximate cause of the loss of the Bongens' house.
The Bongens' claim is that land clearing and blasting by
Kodiak Electric Association caused the mudslide which destroyed
their house. As there is record support for this claim it should
be accepted as true for purposes of evaluating State Farm's motion
for partial summary judgment. Sun v. State, 830 P.2d 772, 776 n.7
(Alaska 1992).
The Bongens' policy covered all risks, except those set
forth in the policy exclusions. The policy excluded losses caused
by certain perils, one of which was earth movement. (EN1)
Concerning excluded perils, the policy provided:
We do not insure under any coverage for
any loss which would not have occurred in the
absence of one or more of the following
excluded events. We do not insure for such
loss regardless of: (a) the cause of the
excluded event; or (b) other causes of the
loss; or (c) whether other causes acted
concurrently or in any sequence with the
excluded event to produce the loss; or (d)
whether the event occurs suddenly or
gradually, involves isolated or widespread
damage, arises from natural or external
forces, or occurs as a result of a combination
of these . . . .
The question in this case is whether there is coverage in
circumstances where there are covered and excluded perils in the
chain of causation leading to a loss. In order to answer questions
such as this courts have developed the efficient proximate cause
doctrine. Under this doctrine if the efficient, or dominant, cause
of a loss is an insured peril, coverage exists even though an
excluded peril also contributes to the loss. This is widely
accepted. Appleman's Treatise on Insurance Law states the doctrine
as follows:
Where a peril specifically insured
against sets other causes in motion which, in
an unbroken sequence and connection between
the act and final loss, produces the result
for which recovery is sought, the insured
peril is regarded as the proximate cause of
the entire loss. It is not necessarily the
last act in a chain of events which is,
therefore, regarded as the proximate cause,
but the efficient or predominant cause which
sets into motion the chain of events producing
the loss. An incidental peril outside the
policy, contributing to the risk insured
against, will not defeat recovery, nor may the
insurer defend by showing that an earlier
cause brought the loss within a peril insured
against, where the insured peril was the last
step prior to loss. In other words, it has
been held that recovery may be allowed where
the insured risk was the last step in the
chain of causation set in motion by an
uninsured peril, or where the insured risk
itself set into operation a chain of causation
in which the last step may have been an
excepted risk.
5 J. Appleman, Insurance Law and Practice sec. 3083 at 309-311
(1970) (footnotes omitted).
Today's majority opinion does not specifically disagree
with the efficient proximate cause doctrine, noting merely that
this court has never adopted it. Slip Op. at 3, n.1. While this
is true, we indicated our agreement with a case which employed the
doctrine in Bering Strait School District v. RLI Insurance Co., 873
P.2d 1292, 1297 (Alaska 1994). In Bering Strait a school was
destroyed by fire. The issue was whether certain rebuilding costs
mandated by building code changes were excluded by a policy clause
excluding the insurer's responsibility for losses occasioned
"directly or indirectly"by enforcement of any ordinance or law.
We accepted the insured's argument that the ordinance or law
exclusion did not apply "where a covered event such as a fire
triggers enforcement." Id. at 1296. In accepting this extra-
literal argument we cited with approval a number of cases,
including Starczewski v. Unigard Insurance Group, 810 P.2d 58
(Wash. App. 1991). We said the following about that case:
In [Starczewski] the clause construed
excluded coverage for losses "resulting
directly or indirectly from . . . any
ordinance or law regulating the use,
construction, repair, or demolition of
property." The court suggested that this
exclusion was inconsistent with the insurance
company's promise to "repair or replace the
damaged property"and further observed that it
"would also be rendered ineffective by the
'efficient proximate cause' rule, since any
additional repair costs due to code require-
ments resulted predominately from the fire,
not from the enforcement of any ordinance or
law."
Bering Strait, 873 P.2d at 1297 (emphasis added) (citations
omitted).
Given the holding in Bering Strait and our quotation of
the language emphasized above, it seems correct to conclude that we
have impliedly accepted the efficient proximate cause doctrine.
Moreover, as noted, the efficient proximate cause doctrine is
widely accepted among American jurisdictions. There is no reason
not to accept it in Alaska.
The issue, however, in this case, is not whether the
efficient proximate cause doctrine is applicable in Alaska. It is
whether, given the application of the doctrine and given that a
covered peril is the efficient proximate cause of a loss, policy
language can negate coverage where an excluded secondary peril also
is present in the chain of causation. On this issue the courts are
divided. As the majority opinion indicates, decisions in
California and Washington deny effect to such an exclusion, whereas
authorities in a numerically greater number of jurisdictions give
effect to such exclusions. (EN2) I favor the California and
Washington approach because it is consistent with the reasonable
expectations of the insured. (EN3)
The earliest example of the approach taken by the
Washington courts is Graham v. Public Employees Mutual Insurance
Co., 656 P.2d 1077, 1081 (Wash. 1983). The policies involved in
Graham covered explosions as a peril under certain circumstances
but excluded losses resulting "directly or indirectly"from earth
movement, including mudflows. Id. at 1079. The loss in Graham
resulted from the eruption of Mt. St. Helens. The eruption
triggered flooding and mudflows which destroyed houses many miles
from the volcano. The court held that it was a jury question
whether the eruption was a covered explosion. Id. The fact that
the eruption triggered mudflows would not negate coverage if the
jury were to find that the eruption was the efficient or
predominant cause of the destruction of the houses and the mudflows
were merely "manifestations of the eruption":
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. Dickson, supra, 77
Wash.2d at 794, 466 P.2d 515; 5 J. Appleman,
supra, at 309-11; Frontis v. Milwaukee Ins.
Co., 156 Conn. 492, 242 A.2d 749, 753 (1968);
43 Am.Jur.2d, supra, at sec. 1182. . . .
The determination of proximate cause is
well established in this state. As a general
rule, the question of proximate cause is for
the jury, and it is only when the facts are
undisputed and the inferences therefrom are
plain and incapable of reasonable doubt or
difference of opinion that it may be a
question of law for the court.
In the present case, the mudflows which
destroyed the appellants' homes would not have
occurred without the eruption of Mt. St.
Helens. The eruption displaced water from
Spirit Lake, and set into motion the melting
of the snow and ice flanking the mountain. A
jury could reasonably determine the water
displacement, melting snow and ice and mud-
flows were mere manifestations of the
eruption, finding that the eruption of Mt. St.
Helens was the proximate cause of the damage
to appellants' homes. This issue is not a
question of law but a question of fact, to be
determined by the trier of facts.
Id. at 1081 (certain citations omitted). Graham was followed by
the Supreme Court of Washington in Villella v. Public Employees
Mutual Insurance Co., 725 P.2d 957, 962 (Wash. 1986) ("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"), and Safeco Insurance Co. v.
Hirschmann, 773 P.2d 413, 416 (Wash. 1989) ("Graham . . . suggests
that whenever the term 'cause' appears in an exclusionary clause it
must be read as 'efficient proximate cause.'").
The leading case in California is Sabella v. Wisler, 377
P.2d 889 (Calif. 1963). In Sabella a house built on uncompacted
fill was damaged by settling triggered by leakage from a
negligently constructed sewer line. The homeowner's policy
provided all risk coverage but excluded "loss . . . by . . .
settling . . . ." Id. at 891-92. The California Supreme Court
held that the efficient proximate cause of the loss was the broken
sewer line and thus there was policy coverage even though the
policy indicated "an intent to exclude any and all loss caused by
settling, and settling did occur herein." Id. at 895. In reaching
this conclusion the California Supreme Court relied on common law
authorities propounding the efficient cause doctrine. The court
stated:
Plaintiff Sabellas alternatively and
correctly argue, however, that defendant
National Union is liable because the rupture
of the sewer line attributable to the
negligence of a third party, rather than
settling, was the efficient proximate cause of
the loss. The policy excepted loss by
settling, and the findings of the court below
indicate that the broken sewer line emptied
waste water into the loose fill, setting in
motion the forces tending toward settlement.
As stated in 6 Couch, Insurance (1930), sec.
1466, "[I]n determining whether a loss is
within an exception in a policy, where there
is a concurrence of different causes, the
efficient cause -- the one that sets others in
motion -- is the cause to which the loss is to
be attributed, though the other causes may
follow it, and operate more immediately in
producing the disaster." The virtual absence
of subsidence damage in the prior four years
of the existence of the house here in question
clearly indicates that the broken pipe was the
predominating or moving efficient cause of the
loss. (See 6 Couch, Insurance (1930), sec.
1463, p. 5298.)
Id. Following this language the court went on to note similar
principles expressed both in earlier California cases and cases
decided in other jurisdictions:
The instant problem in proximate causa-
tion is similar in principle to that in Brooks
v. Metropolitan Life Ins. Co., 27 Cal.2d 305,
163 P.2d 689, wherein recovery was allowed on
a policy insuring against death by accidental
means where the insured, while suffering from
incurable cancer, an excluded peril, died in a
fire. It was there stated: "[R]ecovery may
be had even though a diseased or infirm
condition appears to actually contribute to
cause the death if the accident sets in
progress the chain of events leading directly
to death, or if it is the prime or moving
cause." (27 Cal.2d at 309-310, 163 P.2d at
691.) Similarly, in Hanna v. Interstate
Business Men's Accident Ass'n, 41 Cal.App.
308, 182 p. 771, recovery was allowed on a
policy covering death from external or violent
means, but limiting recovery for hernia
injuries, where a blow on the chest caused a
hernia resulting in death. The court held
that under the established rules governing
proximate causation as applied to insurance
cases, "the hernia must be regarded as the
result of the accident, and the accident
itself, and not the resultant hernia, as the
cause of the death." (41 Cal.App. at 310, 182
p. at 772; see Note 108 A.L.R. 6.) Also
relevant is Norwich Union Fire Ins. Soc. v.
Board of Commissioners (5 Cir., 1944), 141
F.2d 600, where corn in storage was insured
against loss by fire but not against loss by
deterioration. A fire destroyed the machinery
necessary to air the corn and so prevent its
deterioration, and the corn decayed from
inherent natural causes. It was held that the
fire was the proximate cause of the loss of
the corn, even though the excepted peril of
deterioration immediately caused the loss.
(141 F.2d at 602; see Edgerton & Sons, Inc. v.
Minneapolis Fire & Marine Ins. Co. (1955), 142
Conn. 669, 673-674, 116 A.2d 514 [policy
covers though excluded peril immediately
brings about damage, where the operation of
the excluded peril is caused by a peril
insured against]; Princess Garment Co. v.
Fireman's Fund Ins. Co. (6 Cir., 1940), 115
F.2d 380, 383 [recovery allowed where peril
insured against causes the action of an
excepted peril resulting in loss].)
Id. at 896 (bracketed text in original).
Only after the Sabella court had concluded that "the
broken pipe was the predominant or moving efficient cause of the
loss,"id. at 895, was any mention made of California statutory
provisions. This was in the context of an attempt by the insurer
to exonerate itself from liability not, importantly, as a basis for
establishing liability, for liability at this point in the opinion
had been determined on the basis of common law authority. I set
forth in the margin the Sabella court's discussion of the insurer's
statutory argument. (EN4) Thus while it is true that California
does have unique statutory provisions, it is not accurate to
contend that the decision to impose liability on the insurance
company in Sabella was based on those provisions rather than the
general common law.
The Sabella rule has been followed in numerous California
cases. (EN5) It has been reaffirmed by the Supreme Court of
California as reaching a result which is consistent with "the
reasonable expectations of both the insured and insurer whenever
there exists a causal or dependent relationship between covered and
excluded perils." Garvey v. State Farm Fire & Casualty Co., 770
P.2d 704, 708 (Cal 1989). (EN6)
I agree that the efficient proximate cause rule comports
with the reasonable expectations of the insured. If an insured
buys a policy seeking protection from a given peril, the insurer
issuing the policy should not be able to avoid coverage because an
excluded peril is also present in the chain of causation if the
covered peril is the dominant cause of the loss. Numerous examples
come to mind. A homeowner who acts negligently in the face of an
approaching forest fire should not lose coverage because his
negligence was a minor contributing factor to the loss of his
house. (EN7) A school district which, following a fire loss, must
rebuild a school which is different from that which was destroyed
because of the enforcement of an ordinance regulating construction
should be covered under a replacement value fire policy. (EN8) And
a homeowner who is protected from damage by construction equipment
should not lose coverage because a runaway bulldozer initiates an
avalanche which damages his house, rather than directly running
into it. (EN9) The rule of efficient proximate cause was devised
to prevent such counter-intuitive results.
In sum, I agree with the Washington and California
authorities which hold that when an insurer issues a policy
protecting against a peril, it cannot avoid coverage where the
peril is the dominant cause of the loss merely because an excluded
peril is also in the chain of causation operating on a secondary
basis. The purpose of insurance is to insure and it is reasonable
to expect coverage when an insured peril has, acting as a dominant
force, brought about a loss.
In accordance with the foregoing I would remand this case
for a determination by the trier of fact as to whether a covered
peril was the efficient proximate cause of the loss of the Bongens'
home.
ENDNOTES:
1. Some courts define the efficient proximate cause as the first,
or precipitating cause in a multiple causation case:
[W]hen a loss is sustained by a sequence or
concurrence of at least two causes, one
covered under [an insurance] policy and the
other excluded under the policy, the cause
setting the chain of events in motion is the
cause to which the loss is attributed. Thus,
if the "first"cause is covered, the loss is
covered even if an uncovered loss is involved
in the chain of events.
Schroeder v. State Farm Fire and Cas. Co., 770 F. Supp. 558, 561
(D. Nev. 1991). Other courts have defined efficient proximate
cause to mean the predominant cause, rather than the cause which is
first in time. We have not yet considered the rule in reference to
homeowners' policies, and we express no opinion as to whether it
applies in the absence of policy language to the contrary.
The superior court partially based its decision to adopt the
"efficient proximate cause"rule on this court's decision in Bering
Strait School District v. RLI Insurance Co., 873 P.2d 1292 (Alaska
1994). However, the efficient proximate cause rule was not
specifically litigated in that case, and we did not rule on the
issue. It is true that we quoted language from a Washington State
case that referred to the rule. See Id. at 1297 (quoting
Starczewski v. Unigard Ins. Group, 810 P.2d 58, 62 (Wash. App.
1991)). However, Starczewski was one of three cases cited to
support a point of law that is not predicated on the efficient
proximate cause rule. Therefore, we do not view Bering Strait as
controlling precedent for the issue at hand.
2. Jerome Bongen testified that when he was shown the earth
movement exclusion by a State Farm agent he understood it, and saw
"in black and white"that "we wouldn't be covered."
3. Alaska has no equivalent statute.
4. For an analysis critical of Hirschmann, see Lawrence Alan
Wans, Comment, Washington's Judicial Invalidation of Unambiguous
Exclusion Clauses in Multiple Causation Insurance Cases, 67 Wash.
L. Rev. 215, 231-32 (1992).
5. Richard A. Fierce, Insurance Law--Concurrent Causation:
Examination of Alternative Approaches, 1985 S. Ill. U. L.J. 527,
n.74 and accompanying text (1985); Brian Mattis, Earth Movement
Claims Under All Risk Insurance: The Rules Have Changed In
California, 31 Santa Clara L. Rev. 29, n.39-41 and accompanying
text (1990).
6. See, e.g., Kula, 628 N.Y.S.2d at 990-91; Alf, 850 P.2d at
1275-76; Village Inn, 790 P.2d at 583.
7. Several of the cases which the Bongens cite for their
contention that the earth movement exclusion is ambiguous interpret
policies which do not contain the lead-in clause, to which courts
then applied ejusdem generis in order to limit the exclusion to
losses caused by natural disasters. See, e.g., Gullet v. St. Paul
& Marine Ins. Co., 446 F.2d 1100 (7th Cir. 1971); Peach State
Uniform Serv., Inc. v. American Ins. Co., 507 F.2d 996 (5th Cir.
1975); Wisconsin Builders, Inc. v. General Ins. Co. of America, 221
N.W.2d 832 (Wis. 1974).
8. According to Black's Law Dictionary (6th ed. 1990), the term
is defined as follows:
Of the same kind, class, or nature. . . .
[W]here general words follow an enumeration of
persons or things, by words of a particular
and specific meaning, such general words are
not to be construed in their widest extent,
but are to be held as applying only to persons
or things of the same general kind or class as
those specifically mentioned. . . . The rule,
however, does not necessarily require that the
general provision be limited in its scope to
the identical things specifically mentioned.
Nor does it apply when the context manifests a
contrary intention.
(Emphasis added.)
9. Indeed, it appears as if their expectation was that such a
loss would not be covered. See footnote 2, supra.
ENDNOTES (Dissent):
1. Among other excluded perils were "Ordinance or Law, meaning
enforcement of any ordinance or law regulating the construction,
repair or demolition of a building,""Water Damage,"and "Neglect,
meaning neglect of the insured to use all reasonable means to save
and preserve property at and after the time of a loss, or when
property is endangered."
2. Most jurisdictions, however, have no ruling on this point.
See Lawrence Alan Waus, Comment, 67 Wash. L. Rev. 215, 222 (1992).
3. I note that the case featured in today's opinion, Alf v. State
Farm Fire & Cas. Co., 850 P.2d 1272 (Utah 1993), rejects the
reasonable expectations doctrine.
4. Defendant insurer attempts to establish its
nonliability by reliance upon section 532 of the
Insurance Code, which states that "If a peril is
specially excepted in a contract of insurance and there
is a loss which would not have occurred but for such
peril, such loss is thereby excepted even though the
immediate cause of the loss was a peril which was not
excepted." The insurer's argument is that since in a
factual sense the loss herein would not have occurred
"but for"the settling of the underlying earth and house,
the plaintiffs are thereby exempt from coverage for this
loss. But section 532 must be read in conjunction with
related section 530 of the Insurance Code (Pacific etc.
Co. v. Williamsburgh, supra, 158 Cal. 367, 372, 111 P.4),
and section 530 provides that "An insurer is liable for
a loss of which a peril insured against was the proximate
cause, although a peril not contemplated by the contract
may have been a remote cause of the loss; but he is not
liable for a loss of which the peril insured against was
only a remote cause." It is thus apparent that if
section 532 were construed in the manner contended for by
defendant insurer, where an excepted peril operated to
any extent in the chain of causation so that the
resulting harm would not have occurred "but for"the
excepted peril's operation, the insurer would be exempt
even though an insured peril was the proximate cause of
the loss. Such a result would be directly contrary to
the provision in section 530, in accordance with the
general rule, for liability of the insurer where the
peril insured against proximately results in the loss.
(See 6 Couch, Insurance (1930), sec. 1464.)
It would appear therefore that the specially
excepted peril alluded to in section 532 as that "but
for"which the loss would not have occurred, is the peril
proximately causing the loss (see Herron v. Smith Bros.,
Inc., 166 Cal.App. 518, 521 [1], 2 P.2d 1012), and the
peril there referred to as the "immediate cause of the
loss"is that which is immediate in time to the
occurrence of the damage.
Sabella, 377 P.2d at 896-97 (certain citations omitted).
5. See, e.g., Garvey v. State Farm Fire & Casualty Co., 770 P.2d
704 (Cal. 1989); Howell v. State Farm Fire & Casualty Co., 267 Cal.
Rptr. 708 (Cal. App. 1990); Gillis v. Sun Insurance Office Ltd., 47
Cal. Rptr. 868 (Cal. App. 1965); Sauer v. General Insurance Co., 37
Cal. Rptr. 303 (Cal. App. 1964).
6. The Garvey court explained the Gillis and Sauer cases noted
above as follows:
Indeed, for 10 years following Sabella the
Court of Appeal applied the efficient proxi-
mate cause analysis in resolving multiple-
cause property-coverage questions under all-
risk homeowner's property policies. (See,
e.g., Gillis . . . [coverage afforded under
policy insuring loss by windstorm but
excluding loss from water damage; wind,
causing gangway to fall on and sink a dock,
was deemed efficient proximate cause of loss];
Sauer . . . [coverage afforded when water
leaking from plumbing system (covered peril)
was the efficient proximate cause of
subsidence damage (excluded peril)].)
Garvey, 770 P.2d at 708-09 (bracketed text in original).
7. To use an example having some currency in view of the
disastrous 1996 Big Lake Fire.
8. To use an example taken from Bering Strait, supra.
9. To use an example similar to that used by the court in Wyatt
v. Northwestern Mutual Insurance Co., 304 F. Supp. 781, 783 (D.
Minn. 1969). The court noted that it was "difficult to distinguish
between a situation where a piece of heavy equipment breaks loose
and hits a house causing serious damage and a situation where that
equipment instead hits only an embankment next to a house but
causes the earth to move and thereby damages the house." The court
observed: "Thus it would appear that a distinction should be drawn
between an excluded event which is a cause and such an event which
is the inevitable result of another event." Id.
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