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Flood Insurance |
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Flood/Surface Water |
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Efficient Proximate Cause |
National Fire Insurance
Company of Hartford (National Fire) insured Northwest Bedding Co. (Northwest)
under an all-risk commercial property policy. It covered Northwest's buildings
and business personal property against "direct physical loss of or damage
to Covered Property…caused by or resulting from any Covered Cause Of Loss. The
Spokane, WA area experienced heavy snowfall during the winter of 2007-08. At
the end of February, the Washington State Department of Transportation and
others diverted snowmelt through trenches in Northwest's vicinity, several of
which ran through the area surrounding it. The water overflowed the trenches
onto Northwest's property, inundated its building, and damaged both the
building and business personal property inside it.
National Fire determined
that the loss was the result of surface water, was excluded from coverage, and
denied Northwest's claim. Northwest sued National Fire for damages and a
judicial declaration that the loss was covered. Both parties agreed that there
were no issues of material fact and filed cross-motions for summary judgment.
The trial court agreed with National Fire, granted its motion for summary
judgment, and denied Northwest's. Northwest appealed.
Northwest argued that the
loss resulted from an excluded peril, surface water, because it resulted from
third parties channeling water onto its property. National Fire contended that
the loss was clearly the direct or indirect result of surface water caused by
an unusually fast snowmelt. The fact that the water was channeled onto
Northwest's property by ditches did not change the fact that the loss resulted
from surface water. National Fire also argued that any claim that the loss was
due to diversion instead of surface water became untenable when the water
overflowed the ditches and returned to a state of surface water.
Northwest also argued that
the trial court failed to identify and give legal effect to the efficient
proximate cause of this loss. It is usually a question of fact for the fact
finder but is a question of law if the facts are undisputed and the inferences
from them are plain and incapable of reasonable doubt or difference of opinion.
In this case, both Northwest and National Fire agreed on the essential chain of
events that caused the damage. The dispute centered on whether the original
diversion of water by a third party was a distinct peril that was the efficient
cause of Northwest's loss.
The appellate court determined
that the efficient proximate cause is the predominant cause that sets the chain
of events that produces the loss into motion. If coverage applies to the
efficient proximate cause of loss, the loss is covered even if other events in
the chain are excluded. The efficient proximate cause rule applies when two or
more independent forces operate to cause a loss. It is applied only after
determining the single act or event that was the efficient proximate cause of
loss and that the efficient proximate cause of loss is a covered peril. In this
case, the court determined that the overflow of a drainage system constructed
or manipulated by other third parties was not a peril independent from the
snowmelt and surface water and flood that inundated Northwest's premises. It
stated that diversion of water flowing in a large area, whether from snowmelt
or not, is what the average person purchasing insurance would expect the words
"flood" and "surface water" to encompass. It affirmed the
trial court's summary dismissal of Northwest's suit.
Court of Appeals of
Washington, Division 3. Northwest Bedding Co., a Washington Corporation,
Appellant, v. National Fire Insurance Company of Hartford, a Foreign
Corporation; CNA Foundation Corp., a Foreign Corporation, Respondents. No.
28044-6-III. Feb 11, 2010. 154 Wash.App. 787, 225 P.3d 484