Although the Nevada Supreme Court adopted the efficient proximate cause doctrine, it determined it did not apply to salvage coverage under an all-risk policy for a rain-damaged building. Fourth Street Place, LLC v. The Travelers Indemn. Co., 2011 Nev LEXIS 114 (Nev. Dec. 29, 2011).
Fourth Street owned an office building which was insured by an all-risk policy issued by Travelers. Fourth Street hired Above It All Roofing to repair the roof of the office building. Above It All removed the waterproof membrane on the roof and prepared to replace the membrane the following week. Over the weekend, however, substantial rain hit. On Sunday, Above It All returned to cover the exposed portions of the roof with tarps, but wind later blew the tarps away. The building suffered significant interior damage as it continued to be exposed to the rain.
Fourth Street notified Travelers, who denied the claim. Fourth Street sued. The trial court granted Traveler's motion for summary judgment. The court found 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 before coverage of damage caused by rain was invoked. Further, the doctrine of efficient proximate cause did not apply because neither cause of loss - Above It All's faulty workmanship or the rain - was a covered cause of loss under the policy.
The Nevada Supreme Court affirmed. The Limitations section of the policy stated there was no coverage for damage to the interior of a building unless the building first sustained actual damage to the roof or walls by wind or hail. The tarps used to cover the building did not constitute a "roof" for purposes of the Policy's rain limitation.
Second, the policy excluded damage caused by or resulting from faulty workmanship, unless the faulty workmanship resulted in a covered cause of loss. Here, by leaving for the night without covering the exposed portions, Above It All allowed rainwater to damage the building. Because the building did not "first sustain actual damage to the roof . . . by wind or hail," the rain that caused the damage was not a covered cause of loss.
Finally, the court determined the efficient proximate cause doctrine was not applicable under these facts. Under the doctrine, 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" was deemed the efficient proximate cause or legal cause of the loss. Here, neither cause of loss (the rain and faulty workmanship) was a covered cause of loss. Accordingly, the doctrine did not provide relief here. Nevertheless, the court joined the majority of jurisdictions by adopting the doctrine of efficient proximate cause in Nevada.
