Opinion ID: 1386321
Heading Depth: 3
Heading Rank: 1

Heading: The Efficient Proximate Cause of the Loss

Text: (1) As we explained in Garvey, supra, 48 Cal.3d at pages 406-407, the scope of coverage under an all-risk homeowner's policy includes all risks except those specifically excluded by the policy. When a loss is caused by a combination of a covered and specifically excluded risks, the loss is covered if the covered risk was the efficient proximate cause of the loss. ( Id. at p. 402.) As we further explained, the question of what caused the loss is generally a question of fact, and the loss is not covered if the covered risk was only a remote cause of the loss, or the excluded risk was the efficient proximate, or predominate cause. (See id. at p. 412.) Here, there were several causes of the loss: (i) earth movement caused by rising groundwater levels, and (ii) negligence of certain entities and parties in failing to take proper measures to preserve the mesa. (2a) Insureds first contend the Court of Appeal erroneously concluded that under Garvey, supra, 48 Cal.3d at pages 403-404, earth movement, an excluded cause, was the efficient proximate cause of the loss. In determining that earth movement resulting from the rising groundwater level on the mesa was the efficient proximate cause of the loss, the Court of Appeal relied on our observation in Garvey, supra, 48 Cal.3d at page 408, that remote causes of a loss should not amount to covered causes. Garvey reasoned that if the insurer is expected to cover claims that are outside the scope of the first party property loss policy, an `all risk' policy would become an `all loss' policy. [Citation]. In most instances, the insured can point to some arguably covered contributing factor.... The Court of Appeal relied on the above language to conclude that third party negligence was too remote a cause to give rise to coverage under insureds' homeowner's policy. In so doing, however, the court overlooked an important point regarding the scope of an all-risks homeowner's policy. (3) We emphasized in Garvey, supra, 48 Cal.3d at page 408, that if third party negligence is not excluded under such a policy, it is a covered peril. As we stated, third party negligence under a homeowner's policy is a risk of physical loss under the policy. ( Ibid. ) (2b) Moreover, the third party negligence that occurred here could not be considered a remote cause of the loss under either Garvey, supra, 48 Cal.3d 395, or Sabella, supra, 59 Cal.2d at pages 31-32. The expert testimony overwhelmingly supported the jury's determination that the predominating cause of the loss at Big Rock Mesa was third party negligence. By developing the hillside with septic tanks instead of sewers and failing to properly dewater the hillside, it was inevitable the ancient landslide would be reactivated, causing damage to a substantial number of properties on the mesa. In addition, the fact that the jury was instructed under Sabella's literal moving cause language rather than under Garvey's broader efficient proximate cause language ( Garvey, supra, 48 Cal.3d at pp. 403-404) is of no consequence. Based on the testimony, it is not reasonably probable a different result would have been reached under Garvey's definition of efficient proximate cause. ( Ibid. ) Accordingly, the Sabella, supra, 59 Cal.2d at page 31, instruction did not prejudice State Farm. The Court of Appeal and State Farm also rely on Finn v. Continental Ins. Co. (1990) 218 Cal. App.3d 69, 71 [267 Cal. Rptr. 22], to support the argument that coverage does not exist in this case. The Finn court upheld summary judgment for the insurer after determining that property loss attributed to leaking water caused by a broken sewer pipe was an excluded risk under the homeowner's policy provision excluding losses caused by Continuous or Repeated Seepage or Leakage. ( Ibid. ) The insured's claim, that the break in the pipe (a nonexcluded cause) rather than the leakage from the pipe was the cause of the loss, was rejected by the court on the ground that Leakage or seepage cannot occur without a rupture or incomplete joining of the pipes. ( Id. at p. 72.) Thus, whereas the Finn court made a coverage determination based on one cause of a loss, the present case involves several levels of causation  an unstable hillside, third party negligence, earth movement, and a rise in the groundwater level. This is not, as the insurer claims, a case in which the negligence cannot be separated from the earth movement, thus leaving only one cause of the loss. Although the causes may be distinct in origin, they were dependent causes in the sense that, but for the negligence in building the structures on an ancient landslide site without the proper sewer system or stabilization of the mesa, the landslides might not have occurred or damaged the property to the extent it was damaged. Unlike Finn, supra, 218 Cal. App.3d 69, this case presents the classic Garvey situation, in which the efficient proximate cause must be determined from a combination of covered and specifically excluded risks. ( Garvey, supra, 48 Cal.3d at pp. 402-404.) (4) In addition, the fact that the earth movement may have resulted from rising groundwater levels caused by the development on the mesa does not preclude coverage in this case. As insureds observe, the policy's groundwater exclusion applies to water damage caused by natural water below the surface of the ground and not to the artificially high level of groundwater that followed the housing development. Accordingly, we find the natural water exclusion does not preclude coverage here. (2c) We conclude the Court of Appeal erred in determining, as a matter of law, the damage suffered by insureds was not covered by their homeowner's policy. Instead, we hold the jury properly found on these facts that third party negligence was the efficient proximate cause of insureds' property loss, and was covered under their policy with State Farm.