Flood or Fire: The Montecito Claims
What is the Efficient Proximate Cause of the Devastating Mudslides in Southern California?
At first glance, the destruction in Montecito, California and other areas of Santa Barbara and Ventura Counties on Monday, January 9, 2018 appears to have been caused by the perils of flood, mudslide and/or mudflow. If so, such claims would be excluded under most homeowners/commercial property policies as coverage for that type of loss can be purchased from the National Flood Insurance Program. But before reaching a final conclusion, there are certain issues that may need to be considered.
Many of the buildings destroyed by mudflow on January 9, 2018 were in close proximity to the Thomas Fire, the largest wildfire in California history which began last month, and which technically is still burning. Where wildfires have occurred, vegetation may be burned away and soil properties may be altered (called a burn scar), leaving behind bare ground. The National Weather Service lists burn scars as flood-related hazards on its website. In some instances, when rain falls over a burn scar, the ground may be less able to absorb the moisture. The water may collect or run across the surface of the ground resulting in a flood, mudslide, mudflow and/or debris flow. In the absence of flood insurance, lawyers for insureds may assert such loss was caused by fire.
California utilizes the "efficient proximate cause" doctrine to determine whether a loss is covered. Where both covered and excluded perils have contributed to the loss, a proximate cause analysis ("efficient proximate cause") establishes the predominant or most important cause (Sabella v. Wisler (1963) 59 Cal.2d 21; Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal.3d 395, 403). If the predominant cause is a covered peril, the loss is covered by the policy, even if other non-covered causes contributed to it; if the predominant cause is an excluded peril, the loss is not covered (Garvey, supra, at pp. 412–413, 257 Cal.Rptr. 292, 770 P.2d 704.). See also, California Ins. Code, § 530 ("An insurer is liable for a loss of which a peril insured against was the proximate cause, although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss of which the peril insured against was only a remote cause."). As with causation questions generally, the trier of fact usually determines the efficient proximate cause of a loss; i.e., whether the excluded peril or the insured peril was "the most important cause" of the loss. Id.
When investigating coverage for the Montecito damage, insurers should look at the specific language of the policy, the amount of rain, the debris flow, the proximity to the fire, and/or historical factors, among other things. Experts who can assist with the investigation may include civil and geotechnical engineers, geologists, hydrologists, and meteorologists. Such an investigation will assist insurers in determining the proximate efficient cause, i.e. the most important, of the loss at issue in the future Montecito claims.
For more information about this issue or related first-party claims, please contact Meka Moore or Jennifer Revitz.