Opinion ID: 1239373
Heading Depth: 1
Heading Rank: 8

Heading: Whether the Plaintiffs Suffered a Direct Physical Loss To Their Property

Text: As indicated previously, the Allstate policy provides coverage for any sudden and accidental loss to the property, while the State Farm policy insure[s] for accidental direct physical loss to the property[.] Defendants Allstate and State Farm do not dispute the fact that the plaintiffs' losses were sudden and accidental. Instead, the defendants argue that as a matter of law the insurance carriers cannot be held responsible for the total loss of the plaintiffs' property. The defendants essentially contend that while their policies might cover the actual physical damage to the Murray and Withrow homes, the policies do not cover any losses occasioned by the potential damage that could be caused by future rockfalls. The appellants cite us to only one case in support of their argument, Hoffman v. State Farm Fire & Cas. Co., 16 Cal.App.4th 184, 19 Cal.Rptr.2d 809 (2nd Dist.1993), and we believe that case is factually and legally inapplicable here. In Hoffman, the court held that policyholders were not entitled to recover under an all-risk homeowner's policy when the damage became apparent over a year after the policyholders sold their home, canceled the policy and moved out. The policyholders contended that, a year after they moved out of their home, they discovered an entire region surrounding their former home was subjected to a massive, slow-moving landslide, and that their former home suffered some structural damage. The policyholders contended that they were entitled to recover for the damage to their former home, and to recover for the just discovered diminished market value of the property when it was sold. The court stated, in dicta, that [d]iminution in market value is not a covered peril. In fact, insuring land values is illegal in California, and doing so is a felony misdemeanor. 16 Cal.App.4th at 190, 19 Cal.Rptr.2d at 812 (citations omitted). Hoffman fails to mention four other California cases where the courts held policyholders could recover for losses to their homes other than tangible physical damage caused by landslides. See Strickland v. Federal Ins. Co., 200 Cal.App.3d 792, 246 Cal. Rptr. 345 (2nd Dist.1988); Snapp v. State Farm Fire & Cas. Co., 206 Cal.App.2d 827, 24 Cal.Rptr. 44 (2nd Dist.1962); Hughes v. Potomac Ins. Co., 199 Cal.App.2d 239, 18 Cal.Rptr. 650 (1st Dist.1962); and Pfeiffer v. General Ins. Corp., 185 F.Supp. 605 (N.D.Cal.1960). In each case, the cosmetic damage to the policyholders' homes was relatively minor, while the cost of making the home inhabitable usually exceeded the policy limits. In each case, the insurance company refused coverage, and in each case the court held the insurance company liable for the total cost of making the property liveable. For instance, in Hughes, supra, the policyholders awoke one morning to discover 30 feet of their backyard had washed into a creek, leaving their home standing on the edge of a newly-formed 30-foot cliff. The landslide deprived the house of subjacent and lateral support essential to the stability of the house. An insurance adjuster concluded that the house sustained only $50.00 in damage, but that the cost of a retaining wall and fill to support the dwelling was $19,000.00. The insurance carrier denied coverage contending its policy only insured the physical damage to the dwelling. The court rejected this argument and found the appellant insurance carrier liable for the entire loss to the use of the property. The court stated: To accept appellant's interpretation of its policy would be to conclude that a building which has been overturned or which has been placed in such a position as to overhang a steep cliff has not been damaged so long as its paint remains intact and its walls still adhere to one another. Despite the fact that a dwelling building might be rendered completely useless to its owners, appellant would deny that any loss or damage had occurred unless some tangible injury to the physical structure itself could be detected. Common sense requires that a policy should not be so interpreted in the absence of a provision specifically limiting coverage in this manner. Respondents correctly point out that a dwelling or dwelling building connotes a place fit for occupancy, a safe place in which to dwell or live. It goes without question that respondents' dwelling building suffered real and severe damage when the soil beneath it slid away and left it overhanging a 30-foot cliff. Until such damage was repaired and the land beneath the building stabilized, the structure could scarcely be considered a dwelling building in the sense that rational persons would be content to reside there. 199 Cal.App.2d at 248-49, 18 Cal.Rptr. at 655. We believe similar reasoning is applicable to the case at hand. The policies in question provide coverage against sudden and accidental loss and accidental direct physical loss to property. `Direct physical loss' provisions require only that a covered property be injured, not destroyed. Direct physical loss also may exist in the absence of structural damage to the insured property. Sentinel Management Co. v. New Hampshire Ins. Co., 563 N.W.2d 296, 300 (Minn. App.1997) (citations omitted). The properties insured by Allstate and State Farm in this case were homes, buildings normally thought of as a safe place in which to dwell or live. It seems undisputed from the record that on February 22, 1994 all three of the plaintiffs' homes became unsafe for habitation, and therefore suffered real damage when it became clear that rocks and boulders could come crashing down at any time. The record suggests that until the highwall on defendant Harris' property is stabilized, the plaintiffs' houses could scarcely be considered homes in the sense that rational persons would be content to reside there. [15] We therefore hold that an insurance policy provision providing coverage for a sudden and accidental loss or an accidental direct physical loss to insured property requires only that the property be damaged, not destroyed. Losses covered by the policy, including those rendering the insured property unusable or uninhabitable, may exist in the absence of structural damage to the insured property.