Opinion ID: 1163289
Heading Depth: 3
Heading Rank: 2

Heading: The Earth Movement Exclusion is Enforceable.

Text: 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. [2] In holding that the earth movement exclusion was unenforceable, the superior court relied primarily on Safeco Insurance Co. v. Hirschmann, 112 Wash.2d 621, 773 P.2d 413 (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., 773 P.2d 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., 106 Wash.2d 806, 725 P.2d 957 (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. [3] See Cal. Ins.Code §§ 530, 532; Howell v. State Farm Fire & Cas. Co., 218 Cal. App.3d 1446, 267 Cal. Rptr. 708, 712 (1990). Neither Hirschmann nor Villella notes the unique statutory provision behind the California cases. [4] 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 Theatre, 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., 167 Ariz. 93, 804 P.2d 822, 826 (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., 212 A.D.2d 16, 628 N.Y.S.2d 988, 991 (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 § 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.