Title: Fourth St. Place v. Travelers Indem. Co.

State: nevada

Issuer: Nevada Supreme Court

Document:

427 Nev, Advance Opinion BL
IN THE SUPREME COURT OF THE STATE OF NEVADA.

 
   
       
 

FOURTH STREET PLACE, LLC, A No. 54415,

NEVADA LIMITED LIABILITY

COMPANY,

Appellant, FILED
vs

‘THE TRAVELERS INDEMNITY ec 29 2011

COMPANY, A CONNECTICUT

CORPORATION, Gs

 
 

Respondent.

 
 
   
   
    
 
 
  
   
 
 
 
 
 

Appeal from a district court summary judgment in an
insurance coverage action. Eighth Judicial District Court, Clark County;
Jessie Elizabeth Walsh, Judge.

Affirmed.
‘The Cobeaga Law Firm and J. Mitchell Cobeaga, Las Vegas; Deaner,
Malan, Larsen & Ciulla and Brent Larsen, Las Vegas,
for Appellant.

Snell & Wilmer, LLP, and Amy Samberg, Las Vegas,
for Respondent.

BEFORE DOUGLAS, HARDESTY and PARRAGUIRRE, Jd.
OPINION
By the Court, DOUGLAS, J
In this appeal, we review a district court summary judgment

in favor of the insurer in an insurance coverage action. We conclude that

the policy at issue does not provide coverage because the damage

W399

 

 
or

sustained did not result from a covered cause of loss. Further, while we
adopt the doctrine of efficient proximate cause, we conclude that it does
not apply in this case. ‘Therefore, we affirm.
FACTS AND PROCEDURAL HISTORY

Appellant Fourth Street Place, LLC, owns an office building
(the Building) located in Las Vegas, Nevada, and leases professional office
space to various tenants. Fourth Street purchased an “all-risks” insurance
policy (the Policy) for the Building from respondent The Travelers
Indemnity Company for the period of March 19, 2004, to March 19, 2006.

An “all-risks” policy covers any and all rish

 

except those explicitly limited
or excluded by the terms of the policy. The Policy provided, in per

 

ent

part, provisions as to “Covered Causes of Lot

 

limitations regarding rain
damage, and exclusions pertaining to faulty workmanship.

Fourth Street hired a general contractor to supervise the
repair and renovation of the Building in November 2004, The general
contractor subcontracted with Above It All Roofing to repair the roof. On
Saturday, November 20, 2004, Above It All removed the waterproof
membrane on the roof of the Building and prepared to replace the
membrane the following week. That evening, Las Vegas received
substantial rainfall that continued through the weekend. On Sunday,
November 21, 2004, Above It All returned to cover the exposed portions of
the roof with tarps to protect the Building, but wind later blew away the
tarps, leaving the Building exposed to the rain.! The Building suffered

\Rourth Street and Above It All claim to have put the tarps on the
roof on Sunday, November 21, 2004. On Monday morning, none of the
tarps could be found or verified. ‘The district court never made a finding of
fact on this issue, For summary judgment purposes, however, the parties

continued on next page .

 

 

 

 
18

significant water damage to the ceilings, drywall, doors, windows,
cabinetry, electrical and HVAC systems, carpeting, and other flooring. A
majority of the Building’s tenants immediately vacated because the
Building was uninhabitable.

‘The Monday after the storm, Fourth Street submitted an oral
notice of claim to Traveler

 

about the rain damage to the Building.
‘Travelers inspected the Building and corresponded with several
individuals from Fourth Street about the damage. On December 14, 2004,
‘Travelers sent a letter to Fourth Street denying its claim after concluding
that the damage to the Building did not result from a covered cause of

loss. Thereafter, Fourth Street petitioned Travelers by letter to reconsider

 

8s denial of coverage. Travelers agreed to reconsider and referred the
‘matter to its in-house coverage counsel. On March 15, 2005, Travelers
reaffirmed by letter that it was denying coverage.

Seeking damages and declaratory relief, Fourth Street sued
Travelers, among others, based on allegations that Travelers breached the
insurance policy and denied coverage in bad faith. Travelers filed a
motion for summary judgment, arguing that the damage to the Building
did not result from a “Covered Cause of Loss.” Travelers noted that the
Policy specifically precluded coverage for damage resulting from rain
unless the Building's roof or walls were first damaged by wind or hail.
‘Travelers argued that because the Building's roof or walls were not
damaged by wind or hail before it sustained rain damage, there was no

continued

stipulated that the issue of the Policy's construction could be resolved as a
matter of law.

 
coverage for damage to the Building, its contents, or resulting lost
business income as a matter of law. Additionally, Travelers argued that
because its denial of coverage was reasonable and there was no knowledge
or reckless disregard of the lack of a reasonable basis for denying
coverage, it was also entitled to summary judgment on the issue of bad
faith.

Fourth Street opposed the motion and filed a countermotion
for partial summary judgment on the issue of its entitlement to coverage.
Fourth Street argued that the rain limitation should not preclude coverage
because the tarps that Above It All used to temporarily cover the Building
should be considered part of the roof; thus, when the wind blew away the
tarps, the Building sustained actual damage to its roof by wind. Fourth
Street also asked the court to apply the doctrine of efficient proximate
cause, a rule that applies to find coverage if the “efficient proximate cause”
of the damage at issue is a covered cause of loss under the Policy, even if,
an excluded cause of loss is a more immediate cause in the chain of

causation. It argued that the efficient proximate cause of loss was Above

 

It All's failure to prevent rain from entering the Building while it

renovated the roof, which, Fourth Street contended, was a covered cause of

 

loss under the Policy. Fourth Strect also preemptively argued that the
Policy's “faulty workmanship” exclusion should not apply because the term

should be construed in its

 

“workmanship” is ambiguous and, therefore,

favor to only mean a flawed product.
‘Travelers responded by arguing that the doctrine of efficient

proximate cause only applies when there are multiple causes of loss and at

least one is a covered cause of loss; however, Travelers contends that is not

the case here because Above It All's failure to properly cover the exposed

 

 
nee

 

portions of the roof was not a covered cause of loss; it was excluded by the
“faulty workmanship” exclusion. It additionally argued that the Policy
made it clear that lost business income is covered only after there has
been covered damage to insured property that results in a covered cause of
loss.

After hearing oral argument, the district court entered its
findings of fact, conclusions of law, and judgment granting Travelers’
motion for summary judgment and denying Fourth Street's
countermotion. It concluded that the Policy unambiguously excluded from
coverage for the damage sustained to the Building. Specifically, it found:
(1) the rain damage did not result from a “Covered Cause of Loss” because
the Building did not first sustain actual damage to its roof or walls by

wind or hail, as required by the Policy for cove

 

ge of damage caused by
rain; (2) Fourth Street's lost business income was not covered because it

required a covered cause of loss, and there wi

 

none; (3) the “faulty

workmanship” exclusion excluded coverage unless the faulty workmanship

 

resulted in a covered cause of loss, and there was none; (4) the doctrine of
efficient proximate cause did not apply because neither cause of loss—
Above It All's faulty workmanship and the rain—was a covered cause of
ind (5) Travelers did not deny Fourth Street's claim in bad faith.
Fourth Street filed a motion to amend both the findings of fact,

lo

 

and the judgment. The district court granted the motion to amend the

"We note that at the time the district court considered the motion,
while the doctrine of efficient proximate cause was recognized in the
majority of jurisdictions, it had not been adopted in Nevad:

 

 
findings of fact and denied the motion to amend the judgment. Fourth
Street timely filed this appeal.
DISCUSSION

‘This court reviews de novo a district court summary judgment
and construction of a contract, without deference to the findings of the
lower court. Wood v, Safeway, Inc, 121 Nev. 724, 729, 121 P.3d 1026,
1029 (2005); Farmers Ins. Exch. v. Neal, 119 Nev. 62, 64, 64 P.3d 472, 473.
(2003), Summary judgment is proper when, viewing the evidence in the
light most favorable to the nonmoving party, there is no genuine issue of
‘material fact and the moving party is entitled to judgment as a matter of
law. Continental Ins, Co, v, Murphy, 120 Nev. 506, 508, 96 P.3d 747, 749
(2004). An issue of material fact is genuine when the evidence is such that
a rational jury could return a verdict in favor of the nonmoving party.
Wood, 121 Nov. at 731, 121 P.3d at 1031,

On appeal, Fourth Street argues that the damage it sustained
was caused by Above It All's failure to prevent rain from entering the
Building while it renovated the roof. It contends that (1) the Policy’s rain
limitation did not apply because (a) temporary devices such as tarps are
part of a building or structure; thus, when the wind blew away the tarps,
the Building sustained actual damage to its roof by wind; and/or (b) the
Policy provides coverage for repairs to the Building, and that this creates
an exception to the rain limitation; (2) the Policy's exclusion for “faulty

8The amended findings of fact clarified the following: the roof was
being repaired not replaced, Fourth Street did not have time to file a
formal claim or proof of loss before Travelers denied coverage, and Fourth
Street also sought coverage for incidental costs,

 

 
workmanship" did not exclude work that was currently in progress; and
(8) even if the rain limitation applied, Above It All's failure to prevent rain
from entering the Building—which Fourth Street argues was a covered
cause of loss—was the efficient proximate cause of the damage, thus, all of
its losses were caused by a covered cause of loss.

‘To determine whether the district court was correct in finding
that the Policy excluded coverage for the damage sustained by Fourth
Street, we (1) determine if the cause of the damage was a covered cause of
lo

 

or if it was explicitly limited or excluded by the Policy, and (2)
consider the adoption and applicability of the doctrine of efficient
proximate cause in Nevada.
Coverage under the Policy

To determine if the damage to the Building resulted from a
covered cause of loss, we look to the language of the Policy. An insurance
policy should “be read as a whole,” and its “language should be analyzed

 

from the perspective of one untrained in law or in the insurance busine:

Policy terms should be viewed in their plain, ordinary and popular

‘Fourth Street also argues that the Policy provides coverage for lost
business income whether or not there is a covered cause of loss. We
disagree. The Policy specifies that a covered cause of loss is a prerequisite
for lost business income coverage. Having determined that there is no
covered cause of loss and that the doctrine of efficient proximate cause
does not apply, we conclude that the district court did not err when it
concluded that the Policy did not provide coverage for lost business income
and that summary judgment was properly granted on this issue.

Fourth Street also asserted a bad faith claim against Travelers.
However, having concluded that the district court did not err in finding
that the Policy excluded coverage for the damage sustained to the
Building, we need not reach the issue of bad faith.

 
 

connotations.” Am, Excess Ins. Co. v. MGM, 102 Nev. 601, 604, 729 P.24
1352, 1364 (1986). If term in an insurance policy is ambiguous, it will be
construed against the insurer, because the insurer was the drafter of the
policy. Powell v. Liberty Mutual Fire Ins. Co, 127 Nev. __, _, 252 P.3d
668, 672 (2011). Whether a term is ambiguous depends “on whether it
creates reasonable expectations of coverage as drafted.” Id. at _, 252
P.3d at 672 (quoting United Nat'l Ins. Co, v. Frontier Ins, Co,, 120 Nev.
678, 684, 99 P.3d 1153, 1157 (2004), ‘Thus, “a court should interpret an
insurance policy to ‘effectuate the reasonable expectations of the insured.”
Id, at __, 252 P.8d at 672 (quoting National Union Fire Ins. v. Reno's
Exec. Air, 100 Nev. 360, 865, 682 P.2d 1380, 1883 (1984)). To determine
whether a term is ambiguous, it should not be viewed standing alone, but
rather in conjunction with the policy as a whole “in order to give a
reasonable and harmonious meaning and effect to all its provisions.”
National Union Fire, 100 Nev. at 364, 682 P.2d at 1383.

‘The section of the Policy entitled “Coverage” provides, “We will

 

pay for direct physical loss of or damage to Covered Property . . . caused by
or resulting from a Covered Cause of Loss.” The Policy defines “Covered
Causes of Loss” as “RISKS OF DIRECT PHYSICAL LOSS” unless the loss

falls within the “Limitations” or “Exclusions” sections of the Policy.

 

We conclude that the Policy at issue does not provide coverage
because the damage sustained by Fourth Street did not result from a
covered cause of loss. Specifically, (1) the “Limitations” section of the
Policy precludes coverage because the Building’s roof did not sustain
damage by wind before it was damaged by rain, and (2) the “Exclusions”

section of the Policy precludes coverage for damage because Above It All's

 

 
failure to prevent damage during the roof repair process is excluded by the
“faulty workmanship” provision.
Limitations

‘The “Limitations” section of the Policy state

 

a, We will not pay for loss of or damage to:

(1) The “interior of any building or structure” or to
personal property in the building or structure,
caused by rain, snow, sleet or ie whether driven
by wind or not, unles

(Emphases added.)

Fourth Street argues that this “rain limitation” does not
preclude coverage under the facts of this case. It contends that temporary
devices such as tarps are part of a building or structure; thus, when the
wind blew away the tarps, the Building sustained actual damage to its
roof by wind, and the rain limitation does not apply.’ Fourth Street

®Fourth Street bases this argument on the New Jersey Superior
Court Appellate Division's interpretation of similar policy language.
‘Victory Peach Group, Ine, v. Greater New York Mutual Insurance Co., 707
A.2d 1383 (N.J. Super. Ct. App. Div. 1998). In Victory Peach, a building
owner nailed tarps down to protect the building's interior from rain
damage while the roof was being repaired, Id, at 1884. Subsequently,
wind blew the tarps off of the roof and rain entered the building, damaging
the building's interior and its contents. Id, The court rejected the
insurer's argument that the rain limitation in the policy excluded the
damages from coverage because the damage was not to the roof itself, but
to the temporary covering. Id, at 1386. However, Victory Peach is
distinguishable because the policy in that case included specific coverage
for incomplete repairs ("[ajdditions under construction, alterations and
repairs’), id, at 1384, which the Policy at issue hore does not contain.

 
alternately asserts that the Policy provides coverage for repairs to the
Building, and that this creates an exception to the rain limitation.
‘Travelers counters that caselaw in Nevada holds that permanent devices,
not temporary devices, constitute part of a building or structure. See Ace
Prop. & Cas, Ins, Co, v. Vegas VP, No. 2:07-CV-00421-BES-PAL, 2008 WL.
2001760 (D. Nev. May 7, 2008), aff'd, 849 Fed. Appx. 232 (9th Cir. 2009),
Whether the Building first sustained actual damage to its roof
To addross Fourth Street's argument that the Policy's rain
limitation does not apply because the Building sustained wind damage to
its roof before it was damaged by rain, we must first determine the
definition of “roof” in the absence of any controlling Nevada caselaw or a
specific definition in the Policy. “Roof” is defined as “the external upper
Webster's New Universal
Unabridged Dictionary 1670 (1996). However, this definition does not

address whether a temporary covering such as a tarp constitutes a roof,

 

covering of a house or other building.’

‘The Oregon Supreme Court recently addressed a similar
permanent/temporary dispute in Dewsnup v, Farmers Insurance Co,, 239
P.3d 493 (Or. 2010). In Dewsnup, the insured homeowner removed from
the roof wood shingles that were in need of repair, leaving the plywood
sublayer. Id, at 494. During the repair, the insured replaced the shingles
with a layer of polyethylene plastic that was secured to the wood sublayer
with a system of staples, roof tacks, and wooden bats. Id, According to
expert testimony, the plastic was sufficient to protect the home for one to
two years under normal circumstances if necessary. Id, However, winds
tore the plastic off of the roof and rain entered the home through joints in
the plywood sublayer. Id. at 494-95. ‘The insurance company denied
coverage under a rain limitation similar to the limitation in the Policy at
issue in this appeal. Id. at 495-96. Because the policy did not define “roof”

10

 
explicitly, the parties contested whether the temporary plastic covering
constituted a roof, Id, at 496-97. Rejecting the insurer's contention that a
roof must be permanent, the Oregon Supreme Court adopted a functional
definition of roof, stating that “a roof should be sufficiently durable to
meet its intended purpose: to cover and protect a building against
weather-related risks that reasonably may be anticipated.” Id, at 499.

We find the definition of “roof” set forth in Dewsnup helpful in
resolving this matter. Here, Above It All removed the waterproof
membrane of the roof, intending to replace it the following week.
However, unlike the insured in Dewsnup, who replaced his permanent
roof with a temporary protective covering during repairs, Above It All
failed to replace the waterproof membrane with anything. Only after it
began to rain did Above It All return to cover the exposed portions of the
roof with tarps; however, significant damage had already occurred.
Because it is undisputed that the tarps were placed over the Building only
after the rain began, we cannot find that they were planned

 

replacement for the waterproof membrane, sufficiently durable to protect
the Building from reasonably anticipated weather-related risks.

We therefore conclude that the tarps used to cover the areas of
the Building’s roof exposed by removal of the waterproof membrane did
not constitute a “roof” for purposes of the Policy's rain limitation. Even if
we were to conclude that the tarps comprised a roof, the roof did not
sustain wind damage before the interior rain damage occurred.

Whether repairs and alterations were covered in the Policy

‘To address Fourth Street's argument that the Policy covers
repairs and alterations, providing an exception to the rain limitation, we
must again look to the language of the Policy. As we interpret an
insurance policy as a whole, Am, Excess Ins, Co, v. MGM, 102 Nev. at 604,

rt

 
729 P.2d at 1354, we apply the rule of noscitur a sociis, which instructs us
to ascertain the meaning of terms in the Policy by referencing the terms
with which they are associated. See Orr Ditch Co, v, Dist. Ct., 64 Nev.
138, 146, 178 P.2d 558, 562 (1947).

‘The Policy at issue includes alterations, repairs, and

“{mJaterials ... and temporary structures

 

used for making... . repairs
to the building or structure” within its “Covered Property” section.
However, the other items listed in this section are complete or whole items
such as “{cJompleted additions,” “[fjixtures,” and “[plermanently
attached ... equipment,” not unfinished items or items that are
currently under construction or repair. Viewed in context with its
surrounding terms, the inclusion of “{ajlterations and repairs to the
building or structure” within the same section as complete or whole items
indicates that repairs and alterations to the Building only gain Policy
coverage once they are complete, Moreover, even if incomplete repairs
were covered by the Policy, this would not provide an exception to the

 

requirement that the Building first in actual damage to its roof or
walls by wind or hail before Fourth Street may recover for interior damage
caused by rain.

Accordingly, we conclude that the district court did not err
when it determined that the rain limitation applied and the damage to the
Building caused by the rain did not result from a covered cause of loss.

However, in light of Fourth Street's argument that the
efficient proximate cause of the damage was Above It All's failure to

prevent rain damage, we must also determine whether Above It All's

faulty workmanship was a covered cause of loss,

 

 
Exclusions
‘The “Exclusions” section of the Policy at issue states that

‘Travelers will not pay for lo

 

or damage caused by or resulting from
faulty workmanship, unless that faulty workmanship results in a covered
‘cause of loss, The term “workmanship” is not defined in the Policy.

Fourth Street argues that this faulty workmanship exclusion
is ambiguous because it could be interpreted to encompass either damage
caused by or resulting from a flawed product or damage caused by or
resulting from a flawed process, or both. Because Fourth Street contends

that the damage sustained by the Building resulted from Above It All's

 

failure to adequately cover the exposed portions of the roof (a flawed
process), Fourth Street urges that this ambiguity must be resolved in its
favor to only exclude from coverage damages caused by or resulting from a
flawed finished product. We disagree.

Fourth Street relies on Allstate Ins. Co, v. Smith, 929 F.2d 447
(th Cir. 1991), wherein the Ninth Circuit Court of Appeals interpreted a
similarly worded faulty workmanship provision. The Allstate court found
this provision ambiguous because it was susceptible to at least two
different interpretations: to include a flawed product or a flawed process.
Id, at 449. As such, the court interpreted the “faulty workmanship”
exclusion in a light most favorable to the insured, and concluded that the
exclusion only applied to damage resulting from a flawed product. Id, at
450.

Initially, we note that the language of the Policy at issue is
different than the language of the policy in Allstate and that a policy's
meaning should be interpreted according to its particular circumstances.
Id, at 450. However, to the extent that Allstate stands for the proposition
that a policy term may only have one meaning, we disagree.

 

0 18
pete nner pec yas nego SE etme
 

‘Workmanship” is eueceptible to two meanings

“Workmanship” is defined as both “the quality or mode of
execution, as of a thing made” (a process) and “the product or result of
labor and skill; work executed” (a product). Webster's New Universal
Unabridged Dictionary 2189 (1996). Thus, the plain and ordinary

meaning of the term “workmanship” encompass

 

the quality of the
process utilized to achieve the finished product and the quality of the
finished product itself, Standing alone, the term “workmanship” is
susceptible to either the product or process meaning, or both.

Within the context of an insurance policy, workmanship has
been interpreted by other courts to mean a product, a process, or both.
See Allstate, 929 F.2d at 450 (interpreting “faulty workmanship” to mean
a flawed product); Kroll Constr, Co, v. Great Am, Ins, Co,, 594 F. Supp.
304, 307-08 (N.D. Ga, 1984) (interpreting “faulty workmanship” to mean a
flawed process and noting this was its “plain, ordinary meaning” and the
insured’s attempt to find that term ambiguous so as to justify a liberal
construction in its favor was a “strain”); Schultz v, Erie Ins. Group, 754
N.E.2d 971, 976-77 (Ind. Ct. App. 2001) (rejecting Allstate’s analysis and
interpreting “faulty workmanship” to mean either a flawed product or a
flawed process). We conclude that the language of the Policy at issue
indicates that “workmanship” refers to both products and processes.

The term “workmanshi 8808

Because an insurance policy must be interpreted in its

 

  

entirety, the meaning of terms within an insurance policy should be
ascertained by reference to the terms with which they are associated. See
Am, Excess Ins. Co., 102 Nev. at 604, 729 P.2d at 1854; Orr Ditch Co., 64
Nev. at 146, 178 P.2d at 662. Thus, the “faulty workmanship” exclusion at
issue here must be interpreted within the context of the Poliey as a whole

4

 
and by reference to its surrounding terms. Here, the “faulty
workmanship” term appears within a subsection of the Policy that lists
items which are both processes, e.g. “[pllanning,” and products, e.g.,
“{mlaterials used in repair.” This indicates that the insurer intended this
subsection to exclude from coverage damage caused by both a flawed
process and a flawed product. Further, the term “workmanship” appears
in the Policy’s exclusion clause between the words “[pjlanning” and
“{mlaintenance,” which indicates that it is intended to refer to part of the
building process, See Schultz, 754 N.E.2d at 976-77 (‘Read in context,
‘workmanship,’ falling between planning and maintenance, at the very
least signifies a component of the building process leading up to a finished
product”)

 

Addi
refer to a product, this would render another clause included within this
same subsection meaningless. Cf, Allstate, 929 F.2d at 450 Gustifying its
interpretation of similar terminology in an insurance policy by noting that

mally, if we were to interpret “workmanship” to only

the alternative would cause other language within the policy to be
“seemingly rendered meaningless"). This same “Exclusions” section also
provides that the Policy does not cover loss or damage resulting from
“Faulty, inadequate, or defective... (3) Materials used in repair,
construction, renovation or remodeling.” If we were to interpret “faulty
workmanship" only to refer to a flawed product, it would not be necessary
to have a separate clause in the Policy to exclude faulty materials, because
any loss or damage caused by or resulting from faulty, inadequate, or
defective materials would necessarily be included within any loss or

damage caused by or resulting from the faulty, inadequate, or defective
final product.

 

 
We conclude that when the Policy at issue is read as a whole,
the term “workmanship” is not ambiguous, but rather, it is a broad term
because it refers to both a process and a finished product and that the
Policy's “faulty workmanship” exclusion excludes from coverage damage
caused by both a faulty process and a faulty finished product. The term
“workmanship” standing alone may be ambiguous; however, when read in
conjunction with its surrounding terms, we find that ascribing both a
process and a product definition to “workmanship” best effectuates the
reasonable expectations of the insured. Interpreting this exclusion in this
manner is also in harmony with the concept of an all-risk policy.
Generally, all-risk policies insure risks that are not normally
contemplated and provide recovery for losses of a fortuitous nature. See
Victory Peach Group, Inc. v. Greater Now York Mutual Insurance Co,, 707
A.2d 1383, 1385 & n.1 (N.J. Super. Ct. App. Div. 1998) (defining fortuitous
losses as those that are dependent upon chance). Construction and
remodeling are contemplated and planned; thus any losses resulting from
them are not of the type that are generally covered by all-risk policies.
Therefore, we conclude that the district court did not err when it
determined that the workmanship exclusion was not ambiguous.

We further conclude that Above It All's faulty workmanship
did not result in a covered cause of loss. The result of Above It All
exposing portions of the Building's roof during repairs and then leaving for
the night without covering the exposed portions was that the Building
sustained rainwater damage. As previously discussed, because the
Building did not “first sustain[ ] actual damage to the roof... . by wind or
hail,” the rain that caused this damage was not a covered cause of loss
under the Policy.

16

 
ee

‘Thus, we conclude that notwithstanding the Policy's rain
limitation, which excludes from coverage the damage caused by rain, the
damages sustained by the Building are also excluded from coverage based
on Above It All's faulty workmanship in repairing the roof.

‘The doctrine of efficient proximate cause

Fourth Street asks this court to reverse the district court's

summary judgment based on the adoption of efficient proximate cause,

which has not yet been adopted in Nevada. It contends that Above It Alls

 

alleged failure to properly cover the partially repaired roof set in motion
the chain of events that ultimately damaged the Building. Fourth Street
argues that even if the rain limitation applies, Above It All's failure to

take adequate protective measures was the efficient proximate cause of

 

the damage; therefore, the damage it sustained resulted from a covered
cause of loss.6

The doctrine of efficient proximate cause developed in
California and has been adopted by a majority of jurisdictions. Pioneer

In support of its position that applying the efficient proximate
cause doctrine would result in a determination that its water damage
resulted from a covered cause of loss, Fourth Street relies on a line of cases
that have concluded that insureds’ losses were covered despite their
policies’ rain limitations when the proximate cause of each of their losses
was faulty workmanship, which was not excluded by their policies. See
Allstate, 929 F.2d at 450-51; Tento Intern., Inc. v, State Farm Fire and
Cas., 222 F.3d 660, 663-64 (9th Cir. 2000); Century Theaters, Inc. v.
‘Travelers Property Cas, Co. of America, No. C-05-3146 JCS, 2006 WL
708667, at *7-9 (N.D. Cal. March 20, 2006). However, these cases are
distinguishable because, as discussed previously, we have determined that
Above It All's faulty workmanship is not a covered cause of loss under this,
Policy.

7

 

 
Chlor Alkali v. National Union Fire Ins. Co., 863 F. Supp. 1226, 1230 (D.
Nev. 1994). Although this court has not yet adopted the doctrine of
efficient proximate cause, the Nevada federal district court has addressed
it, Id. at 1230-32. Under the doctrine of efficient proximate cause, 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. Id,
Generally, this determination is left to the trier of fact, but when the facts
are settled or undisputed, the determination is for the court as a matter of
law. Id, at 1231-32. The court then evaluates the coverage of an
insurance policy based on the determined efficient proximate cause of the
loss. Id, at 1230.

Here, however, neither cause of loss (the rain and Above It
All's faulty workmanship) is a covered cause of loss, Because having both
covered and noncovered cause of loss is a prerequisite to applying the
doctrine of efficient proximate cause, the doctrine provides no relief here,
Therefore, the district court did not err in concluding that the doctrine of
efficient proximate cause did not apply in this case,

Even though we have found that the doctrine of efficient
proximate cause will not provide relief under the facts of this case, we take
this opportunity to join with the majority of jurisdictions and adopt the
doctrine of efficient proximate cause in Nevada, We agree with the
reasoning set forth by our sister state of California in our adoption of this
doctrine. The Supreme Court of California explained that this doctrine
prevents the absurd result that would occur if coverage was denied “even

though an insured peril ‘proximately’ caused the loss simply because a

 

8 18
subsequent, excepted peril was also part of the chain of causation.”
Garvey v, State Farm Fire and Cas. Co,, 770 P.2d 704, 707 (Cal. 1989).
Accordingly, we affirm the district court’s summary judgment.

 

Parraguirre