The federal district court determined the insureds' arguments relying upon the efficient proximate cause doctrine were misguided and only a portion of the loss from fire and earth movement was covered. Stankova v. Metro. Prop. & Cas Ins Co., 2012 U.S. Dist. LEXIS 150900 (D. Ariz. Oct. 18, 2012).
The insureds' garage was destroyed by wildfire. Nearly two months later, their residence was destroyed by a mudslide following the fire. The garage and residence were insured under a homeowners policy that covered "sudden and direct physical loss" caused by fire. Loss caused by earth movement, including mudslides, was excluded. The earth movement exclusion included a concurrent causation clause that stated it applied whether or not the earth movement was combined or caused by any act of nature.
When coverage was denied, the insureds sued. The insureds argued they were entitled to coverage because the fire was a proximate - and therefore "direct" - cause of their loss. The insureds cited to California law which, by statute, made the insurer liable whenever a covered peril was the "efficient proximate cause" of the loss, regardless of other contributing causes.
The court noted, however, that unlike California, Arizona did not have a statute that mandated coverage for events that are the efficient proximate cause of a loss. Further, Arizona had never adopted the efficient proximate cause rule. Therefore, coverage for the residence was properly denied based upon the earth movement exclusion.
