Most homeowners and commercial insurance policies contains exclusions for loss or damages caused by mudflow or other similar occurrences. An example of on such exclusion is included below:
b. Earth Movement and Settlement, meaning earthquake, which includes land shock wavers or tremors before, during or after a volcanic eruption; landslide; mudflow; sinkhole; earth sinking, rising or shifting; clay shrinkage or other expansion or contraction of soils or organic materials; decay of buried or organic materials; setline cracking or expansion of foundation;
Untold numbers of policyholders saw their property spared from the wildfires that recently devastated California only to have their property wiped out by mudslides shortly thereafter. Thankfully, those folks have hope now. On January 29, 2018, California Insurance Commissioner Dave Jones issued a notice to insurance carriers that mudflow exclusions are unenforceable where the “efficient proximate cause” of the mudslide was the wildfire. The notice provides:
Under the efficient proximate cause doctrine, ‘[W]hen 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, but 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.’ Julian v. Hartford Underwriters Ins. Co., at 750 (citing State Farm Fire & Casualty Co. v. von Der Lieth, 54 Cal.3d 1123, 1131-1132 (1991).
The notice further states:
Based on preliminary information evaluated ty the Department, there is a substantial basis to indicate that the Thomas fire was the efficient proximate cause of the flooding, mudflow, debris flow, mudslide, landslide, and other similar events in Santa Barbara County following the Thomas fire. If it is established that the Thomas fire or another peril covered by the applicable policy was the efficient proximate cause of the damage resulting from these mud slides and other similar events in Santa Barbara following the fire, such damage is covered by the policy regardless of any exclusion in the applicable policy. Once the insured shows that an event falls within the scope of basic coverage under the applicable policy, the burden is on the insurer to prove a claim is specifically excluded.
This is obviously great news for frightened policyholders. You can read the full text of the notice by clicking here.
Arguments related to efficient proximate cause are complicated. If you or someone you know suffered damage from wildfire, mudslides, or landslides in California, please feel free to contact us.