Weather Exception To Landslide Exclusion Does Not Create Coverage

By Peter J. Burfening, Jr., Esq.

It is well settled law that an insurer owes policy benefits to an insured if the "efficient proximate cause" of the insured's loss is a covered peril, even when other excluded perils contribute to the loss. (Ins. Code, Section 530.) The efficient proximate cause of a loss is the "predominating cause" of a loss. If more than one peril contributes to a loss, the question of which is the efficient proximate cause is a factual matter for the jury to resolve. But, when all the perils contributing to the loss, in other words, all the possible efficient proximate causes, are excluded under the insured's policy, judgement for the insurer can be entered as a matter of law.

In Julian, the Julians purchased an all risk homeowners insurance policy from Hartford. The Julians' policy covered the dwelling and other structures on the resident premises. The policy stated: "We insure against the risks of direct physical loss to property described in Coverage A and B unless the loss is: 1. Excluded under Section 1 - Exclusions …" Under Section 1 - Exclusions, the policy provided:" 1. We do not insure against loss, directly or indirectly, by any of the following …: B. Earth movement, [including] … land slide …" The same exclusion section also stated: "2. We do not insure against loss to property described in Coverage A and B caused by and of the following: "…A. Weather Conditions. However this exclusion only applies if weather conditions contribute in any way to the cause or event excluded in Paragraph 1 [including earth movements] to produced the loss …"

On February 13, 1998 the Julians' home was partially destroyed and collapsed as the result of a slope failure above and behind their property. They submitted a claim for policy benefits to Hartford, which investigated the loss. The engineers retained by Hartford found the cause of the loss was a landslide triggered by heavy rainfall in the El Niño storms. They also concluded sub-standard work of a developer might have contributed to the slope failure. Because Hartford determined that the policy excluded the perils of landslide, weather conditions and third party negligence, they denied the Julians' claim.

The Julians sued Hartford for breach of contract and related tort. The Julians allege that the efficient proximate cause of damage to their home was either third party negligence, weather conditions alone or collapse due to flood. Hartford moved for summary judgment, arguing that the Julians were not entitled to benefits because their policy included exclusions for landslides, weather conditions and third party negligence.

The court granted Hartford's motion and the appeals court affirmed the decision. In affirming the decision of the trial court, the appeals court looked to the doctrine of efficient proximate cause. Under an "all risk" homeowners insurance policy, all risks are covered except those specifically excluded by the policy. The insurer owes policy benefits to the insured if the efficient proximate cause of the loss is a covered peril. Even when other specifically excluded perils contribute to the loss the insurer does not owe benefits when an excluded peril is the efficient proximate cause of the loss. Generally, the cause of the loss is a factual question. However, "[e]ven where the parties may disagree over the factual question of proximate cause, summary judgment is still proper where all the alleged causes of the loss are excluded under the policy." (Brodkin v. State Farm Fire & Casualty Co. (1989) 217 Cal.App.3d 210, 217.)

The court held that it was undisputed that one of the causes contributing to the Julians' loss was landslide, and that the Julians' policy contained an exclusion for earth movement including landslide. Furthermore, it was undisputed that another of the causes contributing to the Julians' loss was weather conditions in the form of heavy rainfall. The court held that the Julians' policy also contained a provision in the exclusion section excluding earth movement caused by weather conditions. Hartford asserted that the weather conditions provision was an exclusion that restores coverage to the insured under certain circumstances and argued the efficient proximate cause doctrine does not mandate coverage because both contributing perils - landslide and weather conditions - are excluded under the policy. According to the Hartford, it was free to exclude a category of peril from its policy and restore coverage in certain circumstances without transforming an exclusion into a coverage provision. The court agreed stating "that a property insurer may exclude a category of peril from coverage under its policy." The court further held that in the property insurance context, the insurer and insured can tailor the policy according to the selection of insured and excluded risks and, in the process, determine the corresponding premiums to meet the economic needs of the insured. Moreover, an insurer can exclude a specific category of peril and then restore a certain amount of coverage through an exception through the exclusion. In such circumstances, the exclusion does not operate as a grant of coverage. The exception to the exclusion merely "serves to 'reinstate coverage' where it would not otherwise exist."

Based on these principles, the court held that the weather condition provision in the Julians' policy was properly categorized as an exclusion, not as a coverage provision. Hartford was free to deem weather conditions as a category of peril excluded by the policy. Hartford made its decision to do so clear and unambiguous by listing weather conditions as an excluded peril in the exclusion section of its policy. Hartford was also free to restore a certain amount of coverage to the insured when the circumstances under the exception to the weather condition exclusion was satisfied. The fact that the exclusion contained an exception does not transform it into a coverage provision. As an exclusion, the weather condition provision cannot serve as a grant of coverage permitting the Julians to recover on their claim under the efficient proximate cause doctrine.