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Far from being a novelty, this principle of determining causation in property loss cases is used in most jurisdictions
AMONG the issues that most commonly arise in the evaluation of property insurance claims and the defense of insurers' non-coverage decisions is the effect of a combination of two recognized "causes" of the loss. One cause of loss usually is a peril excluded by the policy, while the other is either an enumerated peril or more commonly today a peril falling within the "all risk" coverage of "all risks of direct physical loss."
Defense counsel sometimes find it suggested, even by courts, that the resolution of the question of coverage of such a loss requires resort to a relatively novel doctrine of "efficient proximate causation." They also may find it suggested that this analysis was devised by California courts and that some more traditional analysis would result in a fairer interpretation of property insurance policies.
ORIGIN OF THE RULE
In fact, the efficient proximate cause rule is the all but universal method used in the United States for resolving coverage issues involving the concurrence of covered and excluded perils. The defense bar should not overlook a long train of case law applying this rule to the facts of claims, even when the policies themselves may have been drafted in terms significantly different from those employed today.
Schroeder v. State Farm Fire and Casualty Co.1 illustrates the typical misapprehension as to the source of the efficient proximate cause rule. There the U.S. District Court for the District of Nevada considered an insurance coverage dispute in which a city water service pipe ruptured from age, rust and corrosion, causing the soil under the insured's building to become saturated and settled, which resulted in damage to the building. The policy (apparently an all-risk policy) excluded coverage of damage caused by earth movement, but the insureds argued that the true cause of the damage was "water," a non-excluded peril.
The court concluded that the ruptured pipe and saturated soil caused earth movement below the plaintiffs' property, and added:
Plaintiffs argue that the "efficient proximate cause" doctrine allows them to recover in this case. That doctrine, developed in California, provides that when a loss is sustained by a sequence or...