The applicability of a policy's land subsidence exclusion was considered by the court in City of Carlsbad v. Insurance Co. of the State of Pennsylvania, No. D053843, 2009 Cal. App. LEXIS 2025 (Cal. Ct. App. Dec. 17, 2009).
The insured City of Carlsbad negligently maintained and repaired a fire hydrant and water line located above a condominium complex. Consequently, the slope above the complex became saturated with water and failed, causing a landslide that damaged or destroyed 15 units and damaged the common areas.
The homeowners association sued the City, seeking damages for property damage and emotional distress suffered by the individuals. The insurer defended the City under a reservation of rights. The City settled for $12.6 million. The insurer indemnified for the bodily injury claims, but denied coverage for the property damage claims based on the subsidence exclusion. That exclusion barred coverage for "any property damage arising out of land subsidence for any reason whatsoever." The trial court granted the insurer's motion for summary judgment.
The Court of Appeal affirmed. The City argued the exclusion was not meant to apply to landslides caused by man-made forces such as negligent repairs to a fire hydrant. Examining the plain language of the exclusion, the court decided the broad term, "for any reason whatsoever," covered any cause, man-made or otherwise.
The Court next considered the City's argument that it was entitled to indemnification under the efficient proximate cause doctrine. Under the doctrine, when a loss is caused by a combination of covered and excluded risks, the loss is covered if the covered risk was the efficient proximate or predominant cause of the loss. The Court noted that the efficient proximate cause doctrine applied in first party cases. In third party cases such as this case, the concurrent proximate cause doctrine applied. The concurrent proximate cause doctrine was utilized only where there were two negligent acts or omissions by the insured, one of which, independent of the excluded cause, made the insured liable for the injury. Such a situation did not exist here. Given the language of the exclusion, the peril of land subsidence was not covered, regardless of the cause.
Thanks to my fellow Damon Key blogger, Robert Thomas (inversecondemnation.com), for alerting me of the City of Carlsbad decision.
