A general liability insurer had no duty to indemnify its insured for third-party property damage claims resulting from a landslide where the policy unambiguously barred coverage for all property damages arising out of land subsidence “for any reason whatsoever.” ( City of Carlsbad v. Insurance Company of the State of Pennsylvania(2009)180 Cal.App.4th 176)
Facts
Various homeowners sued the City of Carlsbad, alleging that the City had negligently maintained and repaired a water line, resulting in a landslide. The homeowners alleged that as a result of the landslide, they suffered both property damage and bodily injury.
The City sought defense and indemnity under its general liability policy with Insurance Company of the State of Pennsylvania (ISOP). ISOP agreed to defend the City under a reservation of rights and ultimately indemnified the City for the bodily injury claims. However, ISOP denied coverage for the property damage claims based on a policy exclusion which barred coverage for “any property damage arising out of land subsidence for any reason whatsoever .” The policy defined “land subsidence” as “movement of land or earth,” specifically including “landslide” as an example.
Following ISOP’s denial of coverage for the property damage claims, the City sued ISOP for breach of contract and breach of the implied covenant of good faith and fair dealing. The trial court ruled that the ISOP policy’s “land subsidence” exclusion barred coverage for any liability the City had on the property damage claims, and thus entered judgment in favor of ISOP.
Holding
The Court of Appeal affirmed. The Court ruled that an exclusion barring coverage for “any property damage arising out of land subsidence for any reason whatsoever” unambiguously barred coverage for any liability the City had for property damage arising out of the landslide – regardless of the cause of the landslide.
The Court rejected the City’s argument that the City was entitled to indemnification under the “efficient proximate cause” doctrine. Specifically, the City claimed that the “efficient proximate cause” of the property damage was not the landslide, but rather, the City’s earlier negligence in maintaining its water line. The Court disagreed, holding that the “efficient proximate cause” doctrine is limited to first party property insurance cases, and is not applicable in third party liability insurance cases.
The Court noted that the “concurrent proximate cause” doctrine might apply where the insured is seeking coverage for liability to a third party. However, in this case, the “concurrent proximate cause” doctrine was inapplicable because there were not two separate and independent causes that combined to cause the homeowners’ damages. Any negligence by the City in maintaining its water line only became actionable because of the subsequent landslide, which was clearly excluded from coverage.
Comment
In reaching its conclusion, the Court reiterated a seemingly obvious proposition, i.e., that the “efficient proximate cause” doctrine applies in first party property insurance cases and the “concurrent proximate cause” doctrine applies in third party liability insurance cases.
Note that the result in this case is consistent with an earlier case, Blackhawk Corp. v. Gotham Ins. Co. (1997) 54 Cal.App.4th 1090, in which another California Court of Appeal upheld a similar exclusion for “movement of land or earth.”